Question 1

The Council of Economic Advisers is responsible for defining the turning points in the economy.

Accepted Answer

A) True 
 B)False

Question 2

Macroeconomics studies economic activity from the level of one individual or firm.

Accepted Answer

A) True 
 B)False

Question 3

In the simple circular flow model:

Accepted Answer

A)  income is equal to spending. 
B)  saving is equal to consumer spending. 
C)  factor payments are equal to goods and services. 
D)  goods and services are equal to consumer spending. 
A)  income is equal to spending. 
B)  saving is equal to consumer spending. 
C)  factor payments are equal to goods and services. 
D)  goods and services are equal to consumer spending.

Question 4

The value of cars that the Ford Motor Company produces in a German plant:

Accepted Answer

A)  is a part of U.S. GDP. 
B)  is a part of U.S. GNP. 
C)  is a part of German GNP. 
D)  is not a part of German GDP. 
A)  is a part of U.S. GDP. 
B)  is a part of U.S. GNP. 
C)  is a part of German GNP. 
D)  is not a part of German GDP.

Question 5

Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stock broker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

Accepted Answer

A)  There is no change in GDP. 
B)  GDP rises by $5,000. 
C)  GDP rises by $5,050. 
D)  GDP rises by $50. 
A)  There is no change in GDP. 
B)  GDP rises by $5,000. 
C)  GDP rises by $5,050. 
D)  GDP rises by $50.

Question 6

To avoid double-counting output in GDP measures, _____ are excluded in GDP.

Accepted Answer

A)  services such as haircuts 
B)  exports 
C)  government spending 
D)  raw materials 
A)  services such as haircuts 
B)  exports 
C)  government spending 
D)  raw materials

Question 7

Net exports equal:

Accepted Answer

A)  all of the goods and services produced minus exports. 
B)  all of the goods and services produced plus imports. 
C)  exports plus imports. 
D)  exports minus imports. 
A)  all of the goods and services produced minus exports. 
B)  all of the goods and services produced plus imports. 
C)  exports plus imports. 
D)  exports minus imports.

Question 8

The _____ is (are) equal to the total market value of all final goods and services produced in the United States.

Accepted Answer

A)  national income and product accounts 
B)  GDP 
C)  consumer price index 
D)  the National Bureau of Economic Research 
A)  national income and product accounts 
B)  GDP 
C)  consumer price index 
D)  the National Bureau of Economic Research

Question 9

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _____ GDP, and its value should be counted in _____.

Accepted Answer

A)  2013's; inventory changes 
B)  2013's; durable goods 
C)  2014's; durable goods 
D)  2014's; personal consumption expenditures 
A)  2013's; inventory changes 
B)  2013's; durable goods 
C)  2014's; durable goods 
D)  2014's; personal consumption expenditures

Question 10

Income payments to the rest of the world are:

Accepted Answer

A)  zero. 
B)  added to the GDP. 
C)  subtracted from the GDP. 
D)  not included in the GDP. 
A)  zero. 
B)  added to the GDP. 
C)  subtracted from the GDP. 
D)  not included in the GDP.

Question 11

A recession is always followed by a depression.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a criticism of the national income and product accounts?

Accepted Answer

A)  They do not capture most nonmarket economic activity. 
B)  They are too cumbersome to use for policymaking. 
C)  They overstate the "green" impact of economic activity. 
D)  They are poorly correlated with the business cycle. 
A)  They do not capture most nonmarket economic activity. 
B)  They are too cumbersome to use for policymaking. 
C)  They overstate the "green" impact of economic activity. 
D)  They are poorly correlated with the business cycle.

Question 13

During a typical economic recovery:

Accepted Answer

A)  inflation declines. 
B)  people become pessimistic. 
C)  unemployment decreases. 
D)  incomes fall. 
A)  inflation declines. 
B)  people become pessimistic. 
C)  unemployment decreases. 
D)  incomes fall.

Question 14

Net exports equal:

Accepted Answer

A)  imports minus exports. 
B)  imports plus exports. 
C)  exports minus imports. 
D)  zero, by definition. 
A)  imports minus exports. 
B)  imports plus exports. 
C)  exports minus imports. 
D)  zero, by definition.

Question 15

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:

Accepted Answer

A)  $10,000. 
B)  $40,000. 
C)  $50,000. 
D)  impossible to compute because there is negative profit. 
A)  $10,000. 
B)  $40,000. 
C)  $50,000. 
D)  impossible to compute because there is negative profit.

Question 16

Which of the following items would be included in the GDP accounts?

Accepted Answer

A)  personal time spent learning how to use accounting software 
B)  personally rotating the tires on your neighbor's car 
C)  caring for your aged grandmother at home 
D)  paying $50 consultation fee over the phone with a psychic adviser 
A)  personal time spent learning how to use accounting software 
B)  personally rotating the tires on your neighbor's car 
C)  caring for your aged grandmother at home 
D)  paying $50 consultation fee over the phone with a psychic adviser

Question 17

One important reason economists track business investment is that:

Accepted Answer

A)  it helps them decide which stocks to purchase. 
B)  it is a leading indicator of the business cycle. 
C)  business investment is an excellent proxy for government investment. 
D)  it shows where the economy has been. 
A)  it helps them decide which stocks to purchase. 
B)  it is a leading indicator of the business cycle. 
C)  business investment is an excellent proxy for government investment. 
D)  it shows where the economy has been.

Question 18

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____.

Accepted Answer

A)  increase; also increase 
B)  decrease; increase 
C)  increase; be unchanged 
D)  decrease; be unchanged 
A)  increase; also increase 
B)  decrease; increase 
C)  increase; be unchanged 
D)  decrease; be unchanged

Question 19

A major appliance is an example of a nondurable good.

Accepted Answer

A) True 
 B)False

Question 20

Changes in inventories are NOT included in the calculation of gross private domestic investment.

Accepted Answer

A) True 
 B)False

The Council of Economic Advisers is responsible for defining the turning points in the economy.

Macroeconomics studies economic activity from the level of one individual or firm.

In the simple circular flow model:

The value of cars that the Ford Motor Company produces in a German plant:

Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stock broker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

To avoid double-counting output in GDP measures, _____ are excluded in GDP.

Net exports equal:

The _____ is (are) equal to the total market value of all final goods and services produced in the United States.

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _ GDP, and its value should be counted in _.

Income payments to the rest of the world are:

A recession is always followed by a depression.

Which of the following is a criticism of the national income and product accounts?

During a typical economic recovery:

Net exports equal:

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:

Which of the following items would be included in the GDP accounts?

One important reason economists track business investment is that:

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _ and its real GDP will _.

A major appliance is an example of a nondurable good.

Changes in inventories are NOT included in the calculation of gross private domestic investment.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 5: Introduction to Macroeconomics

The Council of Economic Advisers is responsible for defining the turning points in the economy.

Macroeconomics studies economic activity from the level of one individual or firm.

In the simple circular flow model:

The value of cars that the Ford Motor Company produces in a German plant:

Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stock broker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

To avoid double-counting output in GDP measures, _____ are excluded in GDP.

Net exports equal:

The _____ is (are) equal to the total market value of all final goods and services produced in the United States.

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _____ GDP, and its value should be counted in _____.

Income payments to the rest of the world are:

A recession is always followed by a depression.

Which of the following is a criticism of the national income and product accounts?

During a typical economic recovery:

Net exports equal:

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:

Which of the following items would be included in the GDP accounts?

One important reason economists track business investment is that:

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____.

A major appliance is an example of a nondurable good.

Changes in inventories are NOT included in the calculation of gross private domestic investment.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _ GDP, and its value should be counted in _.

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _ and its real GDP will _.