Question 1

Which of the following will be included in the current year's gross domestic product (GDP)?

Accepted Answer

A) The sale price of equipment produced last year but sold this year 
B) The money spent by Kate on the purchase of new furniture 
C) The money spent by Barney on the purchase of his uncle's house 
D) The sale price of the stock purchased by John 
E) The opportunity cost of the time spent by Bruno cooking lunch for his neighbor 
A) The sale price of equipment produced last year but sold this year 
B) The money spent by Kate on the purchase of new furniture 
C) The money spent by Barney on the purchase of his uncle's house 
D) The sale price of the stock purchased by John 
E) The opportunity cost of the time spent by Bruno cooking lunch for his neighbor

Question 2

Gross domestic product (GDP)decreases if the quantity of illegal drugs sold decreases.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a leakage into the circular flow of income and expenditure?

Accepted Answer

A) Saving 
B) Exports 
C) Government expenditure on goods 
D) Transfer payments 
E) Investment by firms 
A) Saving 
B) Exports 
C) Government expenditure on goods 
D) Transfer payments 
E) Investment by firms

Question 4

Which of the following is true of exports and imports?

Accepted Answer

A) Both imports and exports are added to a nation's gross domestic product (GDP). 
B) Both imports and exports are subtracted from a nation's gross domestic product (GDP). 
C) Imports are added and exports are subtracted from a nation's gross domestic product (GDP). 
D) Exports are added and imports are subtracted from a nation's gross domestic product (GDP). 
E) Neither imports nor exports are included in a nation's gross domestic product (GDP). 
A) Both imports and exports are added to a nation's gross domestic product (GDP). 
B) Both imports and exports are subtracted from a nation's gross domestic product (GDP). 
C) Imports are added and exports are subtracted from a nation's gross domestic product (GDP). 
D) Exports are added and imports are subtracted from a nation's gross domestic product (GDP). 
E) Neither imports nor exports are included in a nation's gross domestic product (GDP).

Question 5

If real gross domestic product (GDP)for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal gross domestic product (GDP)for that year is _____.

Accepted Answer

A) $3.7 trillion 
B) $4 trillion 
C) $6.8 trillion 
D) $27 trillion 
E) $68 trillion 
A) $3.7 trillion 
B) $4 trillion 
C) $6.8 trillion 
D) $27 trillion 
E) $68 trillion

Question 6

Gross domestic product (GDP)is a poor measure of social well-being because:

Accepted Answer

A) the value of leisure time is included in GDP accounting. 
B) the revenue earned through exports is ignored. 
C) each dollar of government spending is valued at less than one-half of private spending. 
D) consumer spending is more important than business spending and should be considered more valuable. 
E) it values products at their market prices but ignores services produced. 
A) the value of leisure time is included in GDP accounting. 
B) the revenue earned through exports is ignored. 
C) each dollar of government spending is valued at less than one-half of private spending. 
D) consumer spending is more important than business spending and should be considered more valuable. 
E) it values products at their market prices but ignores services produced.

Question 7

If the consumer price index (CPI)is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately _____.

Accepted Answer

A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent 
A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent

Question 8

Imports are leakages from the circular flow of income and expenditure model.

Accepted Answer

A) True 
 B)False

Question 9

The table below shows the current and base-year prices of different goods in a market basket.
The table shows that the price of the market basket in the current year is _____ higher than the price of the market basket in the base year.
?
Table 6.2
?
?
$$\begin{array} { c c c c } 
\text { Product } & \begin{array} { c } 
\text { Quantity in } \
\text { market basket }
\end{array} & \begin{array} { c } 
\text { Price in } \
\text { base year } ( \$ )
\end{array} & \begin{array} { c } 
\text { Price in } \
\text { current year } ( \$ )
\end{array} \
\hline \text { Bread } & 10 & 1.00 & 1.50 \
\text { Milk } & 5 & 1.00 & 2.00 \
\text { Gum } & 50 & 0.20 & 0.50
\end{array}$$

Accepted Answer

A) 100 percent 
B) 50 percent 
C) 1 percent 
D) 200 percent 
A) 100 percent 
B) 50 percent 
C) 1 percent 
D) 200 percent

Question 10

Real gross domestic product (GDP)is measured in terms of _____.

Accepted Answer

A) current-year prices 
B) base-year prices 
C) foreign currencies 
D) the quality of goods produced 
E) hours of employment 
A) current-year prices 
B) base-year prices 
C) foreign currencies 
D) the quality of goods produced 
E) hours of employment

Question 11

If the consumer price index (CPI)this year is 162 and last year it was 170,the inflation rate

Accepted Answer

A) is positive. 
B) is negative. 
C) has decreased since last year. 
D) has increased since last year. 
E) is the same as last year. 
A) is positive. 
B) is negative. 
C) has decreased since last year. 
D) has increased since last year. 
E) is the same as last year.

Question 12

In order to convert nominal gross domestic product (GDP)to real gross domestic product (GDP),we must divide:

Accepted Answer

A) real GDP by the price index. 
B) nominal GDP by the price index. 
C) the price index by nominal GDP. 
D) the price index by real GDP. 
E) nominal GDP by 100. 
A) real GDP by the price index. 
B) nominal GDP by the price index. 
C) the price index by nominal GDP. 
D) the price index by real GDP. 
E) nominal GDP by 100.

Question 13

Gross domestic product (GDP)is not a perfect measure of welfare because it:

Accepted Answer

A) treats a dollar spent on guns the same as a dollar spent on education. 
B) treats a dollar spent on exports the same as a dollar spent on imports. 
C) double counts the value of leisure time. 
D) double counts depreciation. 
E) counts illegal activities in the underground economy. 
A) treats a dollar spent on guns the same as a dollar spent on education. 
B) treats a dollar spent on exports the same as a dollar spent on imports. 
C) double counts the value of leisure time. 
D) double counts depreciation. 
E) counts illegal activities in the underground economy.

Question 14

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000 from another firm,earns profits of $500,and sells its output for $14,000,the value added by the firm is _____.

Accepted Answer

A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500 
A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500

Question 15

If the price index is 100 this year,then:

Accepted Answer

A) there has been no inflation during the year. 
B) the price level is thrice as it was in the base year. 
C) the price level is one hundred times what it was in the base year. 
D) the price level is double what it was in the base year. 
E) the inflation rate has been 100 percent since the base year. 
A) there has been no inflation during the year. 
B) the price level is thrice as it was in the base year. 
C) the price level is one hundred times what it was in the base year. 
D) the price level is double what it was in the base year. 
E) the inflation rate has been 100 percent since the base year.

Question 16

Depreciation refers to a decrease in the value of a durable good caused by:

Accepted Answer

A) an increase in the price level. 
B) changes in the interest rate. 
C) wear and tear over time. 
D) changes in tax laws. 
E) a decrease in its resale value. 
A) an increase in the price level. 
B) changes in the interest rate. 
C) wear and tear over time. 
D) changes in tax laws. 
E) a decrease in its resale value.

Question 17

The table below shows the price indexes and the nominal gross domestic product (GDP)for an economy from 2001 to 2005.The real GDP _____ between 2002 and 2005.
Table 6.3
?
$$\begin{array} { c c c } 
\text { Year } & \text { Price Index } & \text { Nominal GDP } \
\hline 2001 & 100 & \$ 95 \text { billion } \
2002 & 105 & \$ 110 \text { billion } \
2003 & 110 & \$ 120 \text { billion } \
2004 & 120 & \$ 125 \text { billion } \
2005 & 132 & \$ 137.5 \text { billion }
\end{array}$$

Accepted Answer

A) increased more than $5 billion 
B) decreased more than $5 billion 
C) increased by less than $1 billion 
D) decreased by less than $1 billion 
E) remained constant 
A) increased more than $5 billion 
B) decreased more than $5 billion 
C) increased by less than $1 billion 
D) decreased by less than $1 billion 
E) remained constant

Question 18

The gross domestic product (GDP)excludes:

Accepted Answer

A) the value of a new building. 
B) the value of new stocks and shares. 
C) the cost of a new vending machine. 
D) government expenditure on a new bridge. 
E) the money spent on the purchase of legal services by a household. 
A) the value of a new building. 
B) the value of new stocks and shares. 
C) the cost of a new vending machine. 
D) government expenditure on a new bridge. 
E) the money spent on the purchase of legal services by a household.

Question 19

If the consumer price index (CPI)is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately _____.

Accepted Answer

A) 103 percent 
B) 1 percent 
C) 6 percent 
D) 3 percent 
E) 206 percent 
A) 103 percent 
B) 1 percent 
C) 6 percent 
D) 3 percent 
E) 206 percent

Question 20

The nominal gross domestic product (GDP)for a country was $1,000 in 2003 and $1,500 in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004,real GDP _____.

Accepted Answer

A) increased by $500 
B) increased by $333 
C) increased by $50 
D) remained the same 
E) decreased by $50 
A) increased by $500 
B) increased by $333 
C) increased by $50 
D) remained the same 
E) decreased by $50

Which of the following will be included in the current year's gross domestic product (GDP)?

Gross domestic product (GDP)decreases if the quantity of illegal drugs sold decreases.

Which of the following is an example of a leakage into the circular flow of income and expenditure?

Which of the following is true of exports and imports?

If real gross domestic product (GDP)for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal gross domestic product (GDP)for that year is _____.

Gross domestic product (GDP)is a poor measure of social well-being because:

If the consumer price index (CPI)is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately _____.

Imports are leakages from the circular flow of income and expenditure model.

Real gross domestic product (GDP)is measured in terms of _____.

If the consumer price index (CPI)this year is 162 and last year it was 170,the inflation rate

In order to convert nominal gross domestic product (GDP)to real gross domestic product (GDP),we must divide:

Gross domestic product (GDP)is not a perfect measure of welfare because it:

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000 from another firm,earns profits of $500,and sells its output for $14,000,the value added by the firm is _____.

If the price index is 100 this year,then:

Depreciation refers to a decrease in the value of a durable good caused by:

The gross domestic product (GDP)excludes:

If the consumer price index (CPI)is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately _____.

The nominal gross domestic product (GDP)for a country was $1,000 in 2003 and $1,500 in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004,real GDP _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 6: Tracking the U S Economy

Which of the following will be included in the current year's gross domestic product (GDP)?

Gross domestic product (GDP)decreases if the quantity of illegal drugs sold decreases.

Which of the following is an example of a leakage into the circular flow of income and expenditure?

Which of the following is true of exports and imports?

If real gross domestic product (GDP)for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal gross domestic product (GDP)for that year is _____.

Gross domestic product (GDP)is a poor measure of social well-being because:

If the consumer price index (CPI)is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately _____.

Imports are leakages from the circular flow of income and expenditure model.

Real gross domestic product (GDP)is measured in terms of _____.

If the consumer price index (CPI)this year is 162 and last year it was 170,the inflation rate

In order to convert nominal gross domestic product (GDP)to real gross domestic product (GDP),we must divide:

Gross domestic product (GDP)is not a perfect measure of welfare because it:

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000 from another firm,earns profits of $500,and sells its output for $14,000,the value added by the firm is _____.

If the price index is 100 this year,then:

Depreciation refers to a decrease in the value of a durable good caused by:

The gross domestic product (GDP)excludes:

If the consumer price index (CPI)is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately _____.

The nominal gross domestic product (GDP)for a country was $1,000 in 2003 and $1,500 in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004,real GDP _____.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters