Question 1

Real GDP is nominal GDP

Accepted Answer

A)  Plus depreciation. 
B)  Adjusted for changes in the price level. 
C)  Minus depreciation. 
D)  Minus taxes. 
A)  Plus depreciation. 
B)  Adjusted for changes in the price level. 
C)  Minus depreciation. 
D)  Minus taxes. B

Question 2

In the circular-flow diagram, payments for labour, land, and capital flow from firms to households through the markets for the factors of production.

Accepted Answer

A) True 
 B)False  True

Question 3

Why is GDP per capita a good measure of economic well-being?

Accepted Answer

GDP per capita is a good measure of economic well-being because people prefer higher to lower incomes. Governments with a greater GDP per capita can also spend better education and health care. But it is not a perfect measure of well-being. For example, GDP excludes the value of leisure and the value of a clean environment.

Question 4

If your grandparents buy a newly built retirement home, this transaction would affect

Accepted Answer

A)  Investment. 
B)  Net exports. 
C)  Government purchases. 
D)  Consumption. 
E)  Disposable income. 
A)  Investment. 
B)  Net exports. 
C)  Government purchases. 
D)  Consumption. 
E)  Disposable income.

Question 5

Suppose that an economy produces 40,000 units of good A which sells at €4 a unit and 20,000 units of good B which sells at €5 per unit. Production of good A contributes

Accepted Answer

A)  2 times as much to GDP as the production of good B. 
B)  8/5 times as much to GDP as the production of good B. 
C)  5/4 times as much to GDP as the production of good B. 
D)  4/5 times as much to GDP as the production of good B. 
A)  2 times as much to GDP as the production of good B. 
B)  8/5 times as much to GDP as the production of good B. 
C)  5/4 times as much to GDP as the production of good B. 
D)  4/5 times as much to GDP as the production of good B.

Question 6

Which of the following would be counted in France's GDP?

Accepted Answer

A)  The purchase of an historic chateau 
B)  The purchase of a haircut 
C)  The purchase of a €1,000 government savings bond 
D)  The value generated when Pierre washes his car in his garden 
A)  The purchase of an historic chateau 
B)  The purchase of a haircut 
C)  The purchase of a €1,000 government savings bond 
D)  The value generated when Pierre washes his car in his garden

Question 7

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

Accepted Answer

A)  Saving per person. 
B)  GDP per person. 
C)  Government expenditures per person. 
D)  Investment per business firm. 
A)  Saving per person. 
B)  GDP per person. 
C)  Government expenditures per person. 
D)  Investment per business firm.

Question 8

Nominal GDP employs current prices to value output while real GDP employs constant base-year prices to value output.

Accepted Answer

A) True 
 B)False

Question 9

Expenditures on a nation's domestic production

Accepted Answer

A)  Is less than its domestic production. 
B)  are equal to its domestic production. 
C)  are greater than its domestic production. 
D)  could be less than, equal to, or greater than its domestic production. 
A)  Is less than its domestic production. 
B)  are equal to its domestic production. 
C)  are greater than its domestic production. 
D)  could be less than, equal to, or greater than its domestic production.

Question 10

Macroeconomists study

Accepted Answer

A)  The decisions of individual households and firms. 
B)  The interaction between households and firms. 
C)  Economy-wide phenomena. 
D)  Regulations imposed on firms and unions. 
A)  The decisions of individual households and firms. 
B)  The interaction between households and firms. 
C)  Economy-wide phenomena. 
D)  Regulations imposed on firms and unions.

Question 11

The three sources of income for the household are

Accepted Answer

A)  taxes, subsidies from the government, and rent. 
B)  wages, rent, and profit. 
C)  wages, rent, and subsidies from the government. 
D)  wages, rebates, and rent. 
A)  taxes, subsidies from the government, and rent. 
B)  wages, rent, and profit. 
C)  wages, rent, and subsidies from the government. 
D)  wages, rebates, and rent.

Question 12

Because every transaction has a buyer and a seller,

Accepted Answer

A)  GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B)  every transaction contributes equally to an economy's income and to its expenditure. 
C)  the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D)  firms' profits are necessarily zero in a simple circular-flow diagram. 
A)  GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B)  every transaction contributes equally to an economy's income and to its expenditure. 
C)  the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D)  firms' profits are necessarily zero in a simple circular-flow diagram.

Question 13

Which of the following statements about GDP is correct?

Accepted Answer

A)  GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. 
B)  Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. 
C)  GDP is generally regarded as the best single measure of a society's economic well-being. 
D)  All of the above are correct. 
A)  GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. 
B)  Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. 
C)  GDP is generally regarded as the best single measure of a society's economic well-being. 
D)  All of the above are correct.

Question 14

For an economy as a whole, income equals expenditure because the income of the seller must be equal to the expenditure of the buyer.

Accepted Answer

A) True 
 B)False

Question 15

Cigarettes should be valued in GDP at €7.50 per pack even though €5.00 of that price is tax because the buyers paid €7.50 per pack.

Accepted Answer

A) True 
 B)False

Question 16

The four categories of expenditures that make up GDP are consumption, investment,

Accepted Answer

A)  Exports, and government purchases. 
B)  Imports, and government purchases. 
C)  Net exports, and government purchases. 
D)  Net exports, and government transfer payments. 
A)  Exports, and government purchases. 
B)  Imports, and government purchases. 
C)  Net exports, and government purchases. 
D)  Net exports, and government transfer payments.

Question 17

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.

Accepted Answer

GDP excludes some products because they

Question 18

Which of the following would be excluded from UK GDP for 2014? The sale of

Accepted Answer

A)  a haircut. 
B)  the value of a lawyer's services. 
C)  a 2014 Honda made in the UK. 
D)  a loaf of bread 
E)  a home built in 2013 and first sold in 2014. 
A)  a haircut. 
B)  the value of a lawyer's services. 
C)  a 2014 Honda made in the UK. 
D)  a loaf of bread 
E)  a home built in 2013 and first sold in 2014.

Question 19

Identify the immediate effect of each of the following events on UK GDP and its components.
a. James receives a Social Security check.
b. John buys an Italian sports car.
c. Henry buys domestically produced tools for his construction company.

Accepted Answer

a. Since this is a transfer payment, the

Question 20

Suppose the government passes a law eliminating holidays resulting in increased, production of goods and services. Based on this scenario, which of the following statements is correct?

Accepted Answer

A)  GDP would definitely increase, despite the fact that GDP includes leisure. 
B)  GDP would definitely increase because GDP excludes leisure. 
C)  GDP could either increase or decrease because GDP includes leisure. 
D)  GDP could either increase or decrease because GDP excludes leisure. 
A)  GDP would definitely increase, despite the fact that GDP includes leisure. 
B)  GDP would definitely increase because GDP excludes leisure. 
C)  GDP could either increase or decrease because GDP includes leisure. 
D)  GDP could either increase or decrease because GDP excludes leisure.

Exam 20: Measuring a Nations Well-Being

Real GDP is nominal GDP

In the circular-flow diagram, payments for labour, land, and capital flow from firms to households through the markets for the factors of production.

Why is GDP per capita a good measure of economic well-being?

If your grandparents buy a newly built retirement home, this transaction would affect

Suppose that an economy produces 40,000 units of good A which sells at €4 a unit and 20,000 units of good B which sells at €5 per unit. Production of good A contributes

Which of the following would be counted in France's GDP?

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

Nominal GDP employs current prices to value output while real GDP employs constant base-year prices to value output.

Expenditures on a nation's domestic production

Macroeconomists study

The three sources of income for the household are

Because every transaction has a buyer and a seller,

Which of the following statements about GDP is correct?

For an economy as a whole, income equals expenditure because the income of the seller must be equal to the expenditure of the buyer.

Cigarettes should be valued in GDP at €7.50 per pack even though €5.00 of that price is tax because the buyers paid €7.50 per pack.

The four categories of expenditures that make up GDP are consumption, investment,

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.

Which of the following would be excluded from UK GDP for 2014? The sale of

Identify the immediate effect of each of the following events on UK GDP and its components. a. James receives a Social Security check. b. John buys an Italian sports car. c. Henry buys domestically produced tools for his construction company.

Suppose the government passes a law eliminating holidays resulting in increased, production of goods and services. Based on this scenario, which of the following statements is correct?

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

Filters