Question 1

What should be subtracted from GDP to calculate national income?

Accepted Answer

A)  depreciation 
B)  indirect taxes 
C)  personal income taxes 
D)  net factor payments to the rest of the world 
A)  depreciation 
B)  indirect taxes 
C)  personal income taxes 
D)  net factor payments to the rest of the world

Question 2

If real GDP in 2016 using 2015 prices is lower than nominal GDP of 2016, then

Accepted Answer

A)  prices in 2016 are lower than prices in 2015. 
B)  nominal GDP in 2016 equals nominal GDP in 2015. 
C)  prices in 2016 are higher than prices in 2015. 
D)  real GDP in 2016 is larger than real GDP in 2015. 
A)  prices in 2016 are lower than prices in 2015. 
B)  nominal GDP in 2016 equals nominal GDP in 2015. 
C)  prices in 2016 are higher than prices in 2015. 
D)  real GDP in 2016 is larger than real GDP in 2015.

Question 3

By not counting the value of intermediate goods when calculating GDP, you avoid

Accepted Answer

A)  deficit spending. 
B)  double counting. 
C)  black-market accounting. 
D)  year-to-date calculations. 
A)  deficit spending. 
B)  double counting. 
C)  black-market accounting. 
D)  year-to-date calculations.

Question 4

Related to the Economics in Practice on p. 427: If a Swiss dealer sells a newly produced Swiss watch on eBay to a U.S. customer, the value of the watch is

Accepted Answer

A)  counted in U.S. GDP. 
B)  counted in U.S. GDP and Swiss GDP. 
C)  counted in Swiss GDP. 
D)  not counted in either U.S. or Swiss GDP. 
A)  counted in U.S. GDP. 
B)  counted in U.S. GDP and Swiss GDP. 
C)  counted in Swiss GDP. 
D)  not counted in either U.S. or Swiss GDP.

Question 5

If personal saving is -$10 billion and disposable personal income is $370 billion, then personal consumption spending

Accepted Answer

A)  is $360 billion. 
B)  is $380 billion. 
C)  is $390 billion. 
D)  cannot be determined from this information. 
A)  is $360 billion. 
B)  is $380 billion. 
C)  is $390 billion. 
D)  cannot be determined from this information.

Question 6

The informal economies of developing nations are generally larger than that of the United States.

Accepted Answer

A) True 
 B)False

Question 7

A decrease in crime would be reflected in a country's GDP.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not included in 2016's GDP?

Accepted Answer

A)  the value of a motorcycle produced in the United States and exported to Japan 
B)  the profit earned in 2016 from selling a stock that you purchased in 2008 
C)  the value of a motor that is used in the production of a lawn mower 
D)  the commission earned by a headhunter when she locates a job for a client 
A)  the value of a motorcycle produced in the United States and exported to Japan 
B)  the profit earned in 2016 from selling a stock that you purchased in 2008 
C)  the value of a motor that is used in the production of a lawn mower 
D)  the commission earned by a headhunter when she locates a job for a client

Question 9

A rancher raises alpaca. Once a year, he shears them and sells the raw wool to a processor who spins it into yarn. The yarn is then sold to a mill which produces and sells alpaca sweaters. In calculating GDP we would count

Accepted Answer

A)  the raw wool, the yarn and the sweaters. 
B)  only the yarn and the sweaters. 
C)  only the sweaters. 
D)  only the raw wool and the yarn. 
A)  the raw wool, the yarn and the sweaters. 
B)  only the yarn and the sweaters. 
C)  only the sweaters. 
D)  only the raw wool and the yarn.

Question 10

Proprietors' income includes all of the following except

Accepted Answer

A)  the income of unincorporated businesses. 
B)  the income of all businesses-incorporated and unincorporated. 
C)  the income of sole proprietorships. 
D)  the income of partnerships. 
A)  the income of unincorporated businesses. 
B)  the income of all businesses-incorporated and unincorporated. 
C)  the income of sole proprietorships. 
D)  the income of partnerships.

Question 11

If the GDP deflator next year is less than the GDP deflator this year, then the price level has fallen.

Accepted Answer

A) True 
 B)False

Question 12

The formula C + I + G + EX - IM is the ________ to calculating GDP.

Accepted Answer

A)  income approach 
B)  value-added approach 
C)  expenditure approach 
D)  only accurate approach 
A)  income approach 
B)  value-added approach 
C)  expenditure approach 
D)  only accurate approach

Question 13

GDP measures the total income of everyone and the total spending by everyone in the economy.

Accepted Answer

A) True 
 B)False

Question 14

A GDP deflator is real GDP divided by nominal GDP times 100.

Accepted Answer

A) True 
 B)False

Question 15

The year chosen for the weights in a fixed weight procedure is known as the

Accepted Answer

A)  base year. 
B)  nominal year. 
C)  fiscal year. 
D)  bilateral year. 
A)  base year. 
B)  nominal year. 
C)  fiscal year. 
D)  bilateral year.

Question 16

The personal saving rate is percentage of national income that is saved.

Accepted Answer

A) True 
 B)False

Question 17

If the GDP deflator is greater than 100, then

Accepted Answer

A)  nominal GDP is greater than real GDP. 
B)  nominal GDP is lower than real GDP. 
C)  nominal GDP equals real GDP. 
D)  prices decreased by more than half between the current and the base years. 
A)  nominal GDP is greater than real GDP. 
B)  nominal GDP is lower than real GDP. 
C)  nominal GDP equals real GDP. 
D)  prices decreased by more than half between the current and the base years.

Question 18

Interest paid by households and by the government is

Accepted Answer

A)  counted in national income, but not in GDP. 
B)  not counted in GDP because it is not assumed to flow from the production of goods and services. 
C)  not counted in GDP but is counted in GNP because it is paid by U.S. citizens to people living in the United States. 
D)  included in both GDP and GNP because it represents an expenditure by one group and a receipt of income by another group. 
A)  counted in national income, but not in GDP. 
B)  not counted in GDP because it is not assumed to flow from the production of goods and services. 
C)  not counted in GDP but is counted in GNP because it is paid by U.S. citizens to people living in the United States. 
D)  included in both GDP and GNP because it represents an expenditure by one group and a receipt of income by another group.

Question 19

Real GDP is gross domestic product measured

Accepted Answer

A)  at a constant output level but at current prices. 
B)  in current dollars. 
C)  in the prices of a base year. 
D)  as the difference between the current year's GDP and last year's GDP. 
A)  at a constant output level but at current prices. 
B)  in current dollars. 
C)  in the prices of a base year. 
D)  as the difference between the current year's GDP and last year's GDP.

Question 20

A weakness in the concept of GDP is that it ignores income distribution.

Accepted Answer

A) True 
 B)False

Exam 21: Measuring National Output and National Income

What should be subtracted from GDP to calculate national income?

If real GDP in 2016 using 2015 prices is lower than nominal GDP of 2016, then

By not counting the value of intermediate goods when calculating GDP, you avoid

Related to the Economics in Practice on p. 427: If a Swiss dealer sells a newly produced Swiss watch on eBay to a U.S. customer, the value of the watch is

If personal saving is -$10 billion and disposable personal income is $370 billion, then personal consumption spending

The informal economies of developing nations are generally larger than that of the United States.

A decrease in crime would be reflected in a country's GDP.

Which of the following is not included in 2016's GDP?

A rancher raises alpaca. Once a year, he shears them and sells the raw wool to a processor who spins it into yarn. The yarn is then sold to a mill which produces and sells alpaca sweaters. In calculating GDP we would count

Proprietors' income includes all of the following except

If the GDP deflator next year is less than the GDP deflator this year, then the price level has fallen.

The formula C + I + G + EX - IM is the ________ to calculating GDP.

GDP measures the total income of everyone and the total spending by everyone in the economy.

A GDP deflator is real GDP divided by nominal GDP times 100.

The year chosen for the weights in a fixed weight procedure is known as the

The personal saving rate is percentage of national income that is saved.

If the GDP deflator is greater than 100, then

Interest paid by households and by the government is

Real GDP is gross domestic product measured

A weakness in the concept of GDP is that it ignores income distribution.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

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