Question 1

Private investment plays a crucial role in the macroeconomy because it is:

Accepted Answer

A)  the largest expenditure component of GDP. 
B)  the smallest expenditure component of GDP. 
C)  an expenditure that adds to the economy's productive capacity. 
D)  undertaken by the government and must be funded by tax revenue. 
A)  the largest expenditure component of GDP. 
B)  the smallest expenditure component of GDP. 
C)  an expenditure that adds to the economy's productive capacity. 
D)  undertaken by the government and must be funded by tax revenue.

Question 2

Which of the following is an example of a flow variable?

Accepted Answer

A)  The balance in your checking account 
B)  The value of your stock portfolio 
C)  The amount of cash you have in your safe 
D)  The interest amount you pay on your auto loan 
A)  The balance in your checking account 
B)  The value of your stock portfolio 
C)  The amount of cash you have in your safe 
D)  The interest amount you pay on your auto loan

Question 3

Real GDP per capita measures

Accepted Answer

A)  GDP less depreciation. 
B)  the average income of households. 
C)  the annual wages of laborers minus income tax. 
D)  average output per person. 
A)  GDP less depreciation. 
B)  the average income of households. 
C)  the annual wages of laborers minus income tax. 
D)  average output per person.

Question 4

Value added is defined as:

Accepted Answer

A)  the value of productivity gains that arise when a firm increases its capital-labor ratio. 
B)  the difference between the total cost of production of a product and the total revenues earned from the sale of the product. 
C)  the amount by which the value of a firm's final output exceeds the total value of the intermediate goods and services used to produce the good. 
D)  the cost savings that a firm enjoys when it reduces the cost of its resources by employing a more efficient production method. 
A)  the value of productivity gains that arise when a firm increases its capital-labor ratio. 
B)  the difference between the total cost of production of a product and the total revenues earned from the sale of the product. 
C)  the amount by which the value of a firm's final output exceeds the total value of the intermediate goods and services used to produce the good. 
D)  the cost savings that a firm enjoys when it reduces the cost of its resources by employing a more efficient production method.

Question 5

If a farmer grows crops and keeps that for domestic consumption, then the value of the produced is included in the GDP of the economy.

Accepted Answer

A) True 
 B)False

Question 6

In each of the following cases, indicate if GDP is affected, under what category and what happens to GDP. 
a. You buy a used textbook from one of your classmates. 
b. You buy a new umbrella. 
c. Ella, a French tourist, has a haircut in a salon in San Francisco. 
d. New Orleans cleans up after a devastating hurricane. 
e. Avon Barksdale buys a shipment of cocaine from Colombia. 
f. You pay a monthly rent to Mrs. Wong, your landlady. 
g. Kiyah spends two hours baby-sitting her little brother. 
h. You hire Bruce Tree Service to mow your lawn every week. 
i. Jodi purchases her first home, a 1980s fixer-upper. 
j. The president of Ohio State University is given a salary increase.

Accepted Answer

In each of the following cases, I will i

Question 7

The purchases of U.S. products by the citizens of Mexico are:

Accepted Answer

A)  counted as U.S. exports. 
B)  counted as U.S. imports. 
C)  considered Mexico's exports. 
D)  considered as an income transfer from the U.S. to Mexico. 
A)  counted as U.S. exports. 
B)  counted as U.S. imports. 
C)  considered Mexico's exports. 
D)  considered as an income transfer from the U.S. to Mexico.

Question 8

Which of the following would not be included in the measurement of GDP?

Accepted Answer

A)  federal government payments for Jeeps 
B)  a purchase of California wine by a Canadian firm 
C)  employers' payments for employees' medical insurance 
D)  transactions in the underground economy 
A)  federal government payments for Jeeps 
B)  a purchase of California wine by a Canadian firm 
C)  employers' payments for employees' medical insurance 
D)  transactions in the underground economy

Question 9

The value of GDP differs from the value of GNP because:

Accepted Answer

A)  net exports are excluded from GDP but included in GNP. 
B)  production in a country usually employs factors of production owned by residents of other countries. 
C)  production in a country employs only factors of production owned by its residents. 
D)  government purchases are excluded from GDP but included in GNP. 
A)  net exports are excluded from GDP but included in GNP. 
B)  production in a country usually employs factors of production owned by residents of other countries. 
C)  production in a country employs only factors of production owned by its residents. 
D)  government purchases are excluded from GDP but included in GNP.

Question 10

The components of gross domestic income include:

Accepted Answer

A)  employee compensation, profits, transfer payments, and net interest. 
B)  employee compensation, profits, rental income, and net interest. 
C)  wages and salaries, interest income, gross private investment, and depreciation. 
D)  wages and salaries, interest income, transfer payments, and indirect business taxes. 
A)  employee compensation, profits, transfer payments, and net interest. 
B)  employee compensation, profits, rental income, and net interest. 
C)  wages and salaries, interest income, gross private investment, and depreciation. 
D)  wages and salaries, interest income, transfer payments, and indirect business taxes.

Question 11

Government purchases are defined as:

Accepted Answer

A)  the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. 
B)  the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. 
C)  the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. 
D)  the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies. 
A)  the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. 
B)  the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. 
C)  the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. 
D)  the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies.

Question 12

What is a value-added tax (VAT)?

Accepted Answer

A)  It is essentially a tax on profits earned by firms from the sale of goods and services. 
B)  It is a tax placed on a product whenever value is added at a stage of production and at final sale. 
C)  It is a tax imposed on those who supply factors of production, such as the payroll tax. 
D)  It is a tax imposed on luxury goods to generate additional revenue for the government. 
A)  It is essentially a tax on profits earned by firms from the sale of goods and services. 
B)  It is a tax placed on a product whenever value is added at a stage of production and at final sale. 
C)  It is a tax imposed on those who supply factors of production, such as the payroll tax. 
D)  It is a tax imposed on luxury goods to generate additional revenue for the government.

Question 13

As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value of GDP?

Accepted Answer

A)  The value of GDP is likely to decrease. 
B)  The value of GDP is likely to increase. 
C)  GDP will not be affected because there is no net increase in the output of goods and services. 
D)  GDP will not be affected because there is no net increase in the output of goods and services but GDI will increase. 
A)  The value of GDP is likely to decrease. 
B)  The value of GDP is likely to increase. 
C)  GDP will not be affected because there is no net increase in the output of goods and services. 
D)  GDP will not be affected because there is no net increase in the output of goods and services but GDI will increase.

Question 14

Which of the following is an example of income earned but not received?

Accepted Answer

A)  Social security payroll taxes 
B)  Farm subsidies 
C)  Net factor earnings from abroad 
D)  Disposable income 
A)  Social security payroll taxes 
B)  Farm subsidies 
C)  Net factor earnings from abroad 
D)  Disposable income

Question 15

Use the following to answer questions .
Exhibit: Stages of Production of Toy Model Airplanes
  
-(Exhibit: Stages of Production of Toy Model Airplanes) The total value added in the production of a model airplane is _____.

Accepted Answer

A)  $16 
B)  $17 
C)  $21 
D)  $77 
A)  $16 
B)  $17 
C)  $21 
D)  $77

Question 16

A Canadian resident runs a corner store in New York, U.S. His monthly income from the store is included in the Canadian GNP.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions .
Exhibit: Circular Flow Model  
-(Exhibit Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. Suppose you have been hired by an electronics store as a salesperson. Which of the following flows represents this transaction?

Accepted Answer

A)  A and B 
B)  B and C 
C)  A and D 
D)  C and D 
A)  A and B 
B)  B and C 
C)  A and D 
D)  C and D

Question 18

Goods and services produced abroad and sold in the domestic economy are called _____.

Accepted Answer

A)  net exports 
B)  exports 
C)  imports 
D)  transfer payments 
A)  net exports 
B)  exports 
C)  imports 
D)  transfer payments

Question 19

Use the following to answer questions .
Exhibit: Circular Flow Model  
-(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "D" represents the flow of:

Accepted Answer

A)  factors of production. 
B)  factor incomes. 
C)  personal consumption expenditures. 
D)  consumer goods and services. 
A)  factors of production. 
B)  factor incomes. 
C)  personal consumption expenditures. 
D)  consumer goods and services.

Question 20

The smallest component of income generated in the production of U.S. GDP is:

Accepted Answer

A)  depreciation. 
B)  net interest. 
C)  rental income. 
D)  employee compensation. 
A)  depreciation. 
B)  net interest. 
C)  rental income. 
D)  employee compensation.

Private investment plays a crucial role in the macroeconomy because it is:

Which of the following is an example of a flow variable?

Real GDP per capita measures

Value added is defined as:

If a farmer grows crops and keeps that for domestic consumption, then the value of the produced is included in the GDP of the economy.

The purchases of U.S. products by the citizens of Mexico are:

Which of the following would not be included in the measurement of GDP?

The value of GDP differs from the value of GNP because:

The components of gross domestic income include:

Government purchases are defined as:

What is a value-added tax (VAT)?

As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value of GDP?

Which of the following is an example of income earned but not received?

Use the following to answer questions . Exhibit: Stages of Production of Toy Model Airplanes -(Exhibit: Stages of Production of Toy Model Airplanes) The total value added in the production of a model airplane is _____.

A Canadian resident runs a corner store in New York, U.S. His monthly income from the store is included in the Canadian GNP.

Goods and services produced abroad and sold in the domestic economy are called _____.

Use the following to answer questions . Exhibit: Circular Flow Model -(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "D" represents the flow of:

The smallest component of income generated in the production of U.S. GDP is:

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters

Exam 6: Measuring Total Output and Income

Private investment plays a crucial role in the macroeconomy because it is:

Which of the following is an example of a flow variable?

Real GDP per capita measures

Value added is defined as:

If a farmer grows crops and keeps that for domestic consumption, then the value of the produced is included in the GDP of the economy.

The purchases of U.S. products by the citizens of Mexico are:

Which of the following would not be included in the measurement of GDP?

The value of GDP differs from the value of GNP because:

The components of gross domestic income include:

Government purchases are defined as:

What is a value-added tax (VAT)?

As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value of GDP?

Which of the following is an example of income earned but not received?

Use the following to answer questions . Exhibit: Stages of Production of Toy Model Airplanes -(Exhibit: Stages of Production of Toy Model Airplanes) The total value added in the production of a model airplane is _____.

A Canadian resident runs a corner store in New York, U.S. His monthly income from the store is included in the Canadian GNP.

Goods and services produced abroad and sold in the domestic economy are called _____.

Use the following to answer questions . Exhibit: Circular Flow Model -(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "D" represents the flow of:

The smallest component of income generated in the production of U.S. GDP is:

Economics: the Study of Choice

Demand and Supply

Applications of Supply and Demand

Macroeconomics: the Big Picture

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Inflation and Unemployment

A Brief History of Macroeconomic Thought and Policy

Inequality, Poverty, and Discrimination

Filters