Question 1

Refer to the above information.Negative net investment is occurring in:

Accepted Answer

A) economy A only. 
B) economy B only. 
C) economy C only. 
D) economies A and B only. 
A) economy A only. 
B) economy B only. 
C) economy C only. 
D) economies A and B only.

Question 2

The before-tax income received by resource suppliers is measured by disposable income.

Accepted Answer

A) True 
 B)False

Question 3

Assume a manufacturer of stereo speakers purchases $40 worth of components for each speaker.The completed speaker sells for $70.The value added by the manufacturer for each speaker is:

Accepted Answer

A) $110 
B) $30 
C) $40 
D) $70 
A) $110 
B) $30 
C) $40 
D) $70

Question 4

Which would be considered an investment according to economists?

Accepted Answer

A) the buying of shares of Janus mutual funds 
B) the purchase of a new machinery by Ford 
C) the purchase of stock of MacDonald's 
D) the selling of IBM corporate bonds 
A) the buying of shares of Janus mutual funds 
B) the purchase of a new machinery by Ford 
C) the purchase of stock of MacDonald's 
D) the selling of IBM corporate bonds

Question 5

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result:

Accepted Answer

A) real GDP will rise more rapidly than nominal GDP. 
B) GDP will tend to increasingly understate the level of output through time. 
C) GDP will tend to increasingly overstate the level of output through time. 
D) the accuracy of GDP will be unaffected through time. 
A) real GDP will rise more rapidly than nominal GDP. 
B) GDP will tend to increasingly understate the level of output through time. 
C) GDP will tend to increasingly overstate the level of output through time. 
D) the accuracy of GDP will be unaffected through time.

Question 6

Consider the following data for a hypothetical economy:   The economy's real GDP has declined between years:

Accepted Answer

A) 1 and 2. 
B) 2 and 3. 
C) 3 and 4. 
D) 4 and 5. 
A) 1 and 2. 
B) 2 and 3. 
C) 3 and 4. 
D) 4 and 5.

Question 7

The table below indicates the price and output data over a five-year period for an economy that produces only one good.   Refer to the above data.The nominal GDP for year 4:

Accepted Answer

A) is $90. 
B) is $55. 
C) is $40. 
D) is $35. 
A) is $90. 
B) is $55. 
C) is $40. 
D) is $35.

Question 8

Suppose Smith pays $100 to Jones.

Accepted Answer

A) We can say with certainty that the GDP has increased by $100. 
B) We can say with certainty that the GDP has increased, but we cannot determine the amount. 
C) We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. 
D) We need more information to determine whether GDP has changed. 
A) We can say with certainty that the GDP has increased by $100. 
B) We can say with certainty that the GDP has increased, but we cannot determine the amount. 
C) We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. 
D) We need more information to determine whether GDP has changed.

Question 9

Assume an economy which is producing only one product.Output and price data for a three-year period are as follows.   Refer to the above data.The nominal GDP for year 3 is:

Accepted Answer

A) 125 percent higher than the nominal GDP for year 1. 
B) 50 percent higher than the nominal GDP for year 1. 
C) 120 
D) 30 
A) 125 percent higher than the nominal GDP for year 1. 
B) 50 percent higher than the nominal GDP for year 1. 
C) 120 
D) 30

Question 10

The value added by firms A-E from the production of the product described below is:

Accepted Answer

A) $3,000 
B) $3,800 
C) $6,500 
D) $10,300 
A) $3,000 
B) $3,800 
C) $6,500 
D) $10,300

Question 11

The fact that nominal GDP has risen faster than real GDP:

Accepted Answer

A) suggests that the base year of the GDP price index has been shifted. 
B) tells us nothing about what has happened to the price level. 
C) suggests that the general price level has fallen. 
D) suggests that the general price level has risen. 
A) suggests that the base year of the GDP price index has been shifted. 
B) tells us nothing about what has happened to the price level. 
C) suggests that the general price level has fallen. 
D) suggests that the general price level has risen.

Question 12

In an economy experiencing a declining production capacity:

Accepted Answer

A) the nation's stock of capital goods is expanding. 
B) net exports are necessarily zero. 
C) Net Investment exceeds GDP. 
D) depreciation exceeds gross investment. 
A) the nation's stock of capital goods is expanding. 
B) net exports are necessarily zero. 
C) Net Investment exceeds GDP. 
D) depreciation exceeds gross investment.

Question 13

A price index can rise from one year to the next even though:

Accepted Answer

A) some individual prices in the economy fall. 
B) nominal GDP falls. 
C) real GDP falls. 
D) all of the above occur. 
A) some individual prices in the economy fall. 
B) nominal GDP falls. 
C) real GDP falls. 
D) all of the above occur.

Question 14

Refer to the information below.Personal income is: All figures are in billions of dollars.

Accepted Answer

A) $184 
B) $221 
C) $202 
D) $228 
A) $184 
B) $221 
C) $202 
D) $228

Question 15

Real GDP and nominal GDP differ because the real GDP:

Accepted Answer

A) is adjusted for changes in the volume of intermediate transactions. 
B) includes the economic effects of international trade. 
C) has been adjusted for changes in the price level. 
D) excludes depreciation charges. 
A) is adjusted for changes in the volume of intermediate transactions. 
B) includes the economic effects of international trade. 
C) has been adjusted for changes in the price level. 
D) excludes depreciation charges.

Question 16

Historically, real GDP has increased less rapidly than nominal GDP because:

Accepted Answer

A) price indices have not reflected improvements in product quality. 
B) the general price level has increased. 
C) technological progress has resulted in more efficient production. 
D) the general price level has declined. 
A) price indices have not reflected improvements in product quality. 
B) the general price level has increased. 
C) technological progress has resulted in more efficient production. 
D) the general price level has declined.

Question 17

Nominal GDP is less than real GDP in an economy in year 1 and year 2.In year 3, nominal GDP is equal to real GDP.In year 4, nominal GDP is slightly greater than real GDP.In year 5, nominal GDP is significantly greater than real GDP.Which year is most likely to be the base year being used to calculate the price index for this economy?

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
A) 2 
B) 3 
C) 4 
D) 5

Question 18

Net investment refers to:

Accepted Answer

A) the amount of machinery and equipment used up in producing GDP in a specific year. 
B) the difference between the market value and book value of outstanding capital stock. 
C) gross domestic investment less net exports. 
D) gross investment less consumption of fixed capital. 
A) the amount of machinery and equipment used up in producing GDP in a specific year. 
B) the difference between the market value and book value of outstanding capital stock. 
C) gross domestic investment less net exports. 
D) gross investment less consumption of fixed capital.

Question 19

The purchase of Wal-Mart stock is a part of gross, but not of net, private domestic investment.

Accepted Answer

A) True 
 B)False

Question 20

Welfare payments to families with dependent children are included in GDP.

Accepted Answer

A) True 
 B)False

Exam 7: Part B: Measuring the Economys Output

Refer to the above information.Negative net investment is occurring in:

The before-tax income received by resource suppliers is measured by disposable income.

Assume a manufacturer of stereo speakers purchases $40 worth of components for each speaker.The completed speaker sells for $70.The value added by the manufacturer for each speaker is:

Which would be considered an investment according to economists?

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result:

Consider the following data for a hypothetical economy: The economy's real GDP has declined between years:

The table below indicates the price and output data over a five-year period for an economy that produces only one good. Refer to the above data.The nominal GDP for year 4:

Suppose Smith pays $100 to Jones.

Assume an economy which is producing only one product.Output and price data for a three-year period are as follows. Refer to the above data.The nominal GDP for year 3 is:

The value added by firms A-E from the production of the product described below is:

The fact that nominal GDP has risen faster than real GDP:

In an economy experiencing a declining production capacity:

A price index can rise from one year to the next even though:

Refer to the information below.Personal income is: All figures are in billions of dollars.

Real GDP and nominal GDP differ because the real GDP:

Historically, real GDP has increased less rapidly than nominal GDP because:

Net investment refers to:

The purchase of Wal-Mart stock is a part of gross, but not of net, private domestic investment.

Welfare payments to families with dependent children are included in GDP.

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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