Question 1

The income approach to measuring GDP involves adding the incomes earned by owners of all factors of production.

Accepted Answer

A) True 
 B)False

Question 2

The high point of a business cycle is called the:

Accepted Answer

A)  trough. 
B)  expansion. 
C)  recession. 
D)  peak. 
A)  trough. 
B)  expansion. 
C)  recession. 
D)  peak.

Question 3

Which of the following items is NOT included in gross private domestic investment?

Accepted Answer

A)  residential housing 
B)  new equipment purchased by businesses 
C)  purchases of common stock 
D)  increases in business inventories 
A)  residential housing 
B)  new equipment purchased by businesses 
C)  purchases of common stock 
D)  increases in business inventories

Question 4

If a wooden toy costs $15 to produce and is sold as a loss leader for $13, then the addition to GDP is $15.

Accepted Answer

A) True 
 B)False

Question 5

The sum of all income, including wages, salaries and benefits, profits, rental income, and interest, is called:

Accepted Answer

A)  labor income. 
B)  gross domestic income. 
C)  national income. 
D)  pretax income. 
A)  labor income. 
B)  gross domestic income. 
C)  national income. 
D)  pretax income.

Question 6

Karl's Keychain Company produces keychains that sell in its stores for $1 each. On January 1, 2015, the company had inventory of 10,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year on December 31, 2015, the company's inventory of keychains was 6,000. How much did Karl's output contribute to GDP in 2015?

Accepted Answer

A)  $900,000 
B)  $906,000 
C)  $896,000 
D)  $904,000 
A)  $900,000 
B)  $906,000 
C)  $896,000 
D)  $904,000

Question 7

Which of the following is NOT a concern regarding GDP as a measure of economic activity?

Accepted Answer

A)  the value of investments in the stock and bond markets 
B)  the value of nonmarket natural resources 
C)  the value of nonmarket work 
D)  the value of investments in human capital 
A)  the value of investments in the stock and bond markets 
B)  the value of nonmarket natural resources 
C)  the value of nonmarket work 
D)  the value of investments in human capital

Question 8

In a simple circular flow diagram, total spending on goods and services in the product market:

Accepted Answer

A)  is greater than the total income earned in the resource market. 
B)  is less than the total income earned in the resource market. 
C)  is done by the government. 
D)  equals the total income earned in the resource market. 
A)  is greater than the total income earned in the resource market. 
B)  is less than the total income earned in the resource market. 
C)  is done by the government. 
D)  equals the total income earned in the resource market.

Question 9

Net domestic product measures:

Accepted Answer

A)  C + I + G + (X - M). 
B)  GDP minus depreciation. 
C)  GDP plus income payments from the rest of the world minus income payments to the rest of the world. 
D)  national income plus income payments from the rest of the world minus income payments to the rest of the world. 
A)  C + I + G + (X - M). 
B)  GDP minus depreciation. 
C)  GDP plus income payments from the rest of the world minus income payments to the rest of the world. 
D)  national income plus income payments from the rest of the world minus income payments to the rest of the world.

Question 10

Gross private domestic investment is a key factor behind economic growth in the United States.

Accepted Answer

A) True 
 B)False

Question 11

If a business increases its inventories, the change is treated as an investment.

Accepted Answer

A) True 
 B)False

Question 12

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

Accepted Answer

A)  gross; net exports 
B)  gross; net imports 
C)  net; net exports 
D)  net; net imports 
A)  gross; net exports 
B)  gross; net imports 
C)  net; net exports 
D)  net; net imports

Question 13

The national income and product accounts allow economists to track the economy's condition over the course of the business cycle.

Accepted Answer

A) True 
 B)False

Question 14

A criticism of GDP per capita is that it:

Accepted Answer

A)  is hard to calculate. 
B)  might not fully reflect the standard of living of a typical citizen. 
C)  reduces the effect of outliers skewing averages. 
D)  is only a hypothetical concept that cannot be measured. 
A)  is hard to calculate. 
B)  might not fully reflect the standard of living of a typical citizen. 
C)  reduces the effect of outliers skewing averages. 
D)  is only a hypothetical concept that cannot be measured.

Question 15

The expenditures approach to calculating GDP sums consumer spending, gross private domestic investment, government spending, and:

Accepted Answer

A)  exports. 
B)  imports. 
C)  exports minus imports. 
D)  imports minus exports. 
A)  exports. 
B)  imports. 
C)  exports minus imports. 
D)  imports minus exports.

Question 16

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes _____ to U.S. GDP.

Accepted Answer

A)  $100 
B)  $200 
C)  $300 
D)  $400 
A)  $100 
B)  $200 
C)  $300 
D)  $400

Question 17

Business cycles are alternating increases and decreases in macroeconomic activity.

Accepted Answer

A) True 
 B)False

Question 18

GDP can be found either by adding up all of the _____ or all of the _____ in the economy.

Accepted Answer

A)  spending; taxes 
B)  spending; income 
C)  investment; income 
D)  net interest payments; taxes 
A)  spending; taxes 
B)  spending; income 
C)  investment; income 
D)  net interest payments; taxes

Question 19

The rental income component in the income approach to calculating GDP includes the incomes of real estate agents and brokers.

Accepted Answer

A) True 
 B)False

Question 20

The main purpose of the national income and product accounts is to provide information on the economy's overall performance.

Accepted Answer

A) True 
 B)False

The income approach to measuring GDP involves adding the incomes earned by owners of all factors of production.

The high point of a business cycle is called the:

Which of the following items is NOT included in gross private domestic investment?

If a wooden toy costs $15 to produce and is sold as a loss leader for $13, then the addition to GDP is $15.

The sum of all income, including wages, salaries and benefits, profits, rental income, and interest, is called:

Which of the following is NOT a concern regarding GDP as a measure of economic activity?

In a simple circular flow diagram, total spending on goods and services in the product market:

Net domestic product measures:

Gross private domestic investment is a key factor behind economic growth in the United States.

If a business increases its inventories, the change is treated as an investment.

The four types of spending in GDP are personal consumer spending, _ private domestic investment, government spending, and _.

The national income and product accounts allow economists to track the economy's condition over the course of the business cycle.

A criticism of GDP per capita is that it:

The expenditures approach to calculating GDP sums consumer spending, gross private domestic investment, government spending, and:

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes _____ to U.S. GDP.

Business cycles are alternating increases and decreases in macroeconomic activity.

GDP can be found either by adding up all of the _ or all of the _ in the economy.

The rental income component in the income approach to calculating GDP includes the incomes of real estate agents and brokers.

The main purpose of the national income and product accounts is to provide information on the economy's overall performance.

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 income approach to measuring GDP involves adding the incomes earned by owners of all factors of production.

The high point of a business cycle is called the:

Which of the following items is NOT included in gross private domestic investment?

If a wooden toy costs $15 to produce and is sold as a loss leader for $13, then the addition to GDP is $15.

The sum of all income, including wages, salaries and benefits, profits, rental income, and interest, is called:

Which of the following is NOT a concern regarding GDP as a measure of economic activity?

In a simple circular flow diagram, total spending on goods and services in the product market:

Net domestic product measures:

Gross private domestic investment is a key factor behind economic growth in the United States.

If a business increases its inventories, the change is treated as an investment.

The four types of spending in GDP are personal consumer spending, _____ private domestic investment, government spending, and _____.

The national income and product accounts allow economists to track the economy's condition over the course of the business cycle.

A criticism of GDP per capita is that it:

The expenditures approach to calculating GDP sums consumer spending, gross private domestic investment, government spending, and:

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes _____ to U.S. GDP.

Business cycles are alternating increases and decreases in macroeconomic activity.

GDP can be found either by adding up all of the _____ or all of the _____ in the economy.

The rental income component in the income approach to calculating GDP includes the incomes of real estate agents and brokers.

The main purpose of the national income and product accounts is to provide information on the economy's overall performance.

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

The four types of spending in GDP are personal consumer spending, _ private domestic investment, government spending, and _.

GDP can be found either by adding up all of the _ or all of the _ in the economy.