Question 1

Which of the following is an example of an intermediate product?

Accepted Answer

A) A pair of skis sold by a sporting goods retailer to a skier 
B) A share of IBM stock 
C) The lumber produced by Boise Cascade and sold to a builder of old houses 
D) An antique car sold to the highest bidder 
A) A pair of skis sold by a sporting goods retailer to a skier 
B) A share of IBM stock 
C) The lumber produced by Boise Cascade and sold to a builder of old houses 
D) An antique car sold to the highest bidder C

Question 2

Payments to the owners of firms are included in aggregate accounting as:

Accepted Answer

A) profits. 
B) rents. 
C) employee compensation. 
D) interest. 
A) profits. 
B) rents. 
C) employee compensation. 
D) interest. A

Question 3

T-accounts reflects double-entry bookkeeping that keeps income and production equal.

Accepted Answer

A) True 
 B)False  True

Question 4

What is GDP using the information shown?

Accepted Answer

A) 6,400 
B) 7,500 
C) 9,400 
D) 10,470 
A) 6,400 
B) 7,500 
C) 9,400 
D) 10,470

Question 5

According to the aggregate accounting identity:

Accepted Answer

A) GNP equals GDP. 
B) aggregate income equals aggregate production. 
C) assets equal liabilities. 
D) supply equals demand. 
A) GNP equals GDP. 
B) aggregate income equals aggregate production. 
C) assets equal liabilities. 
D) supply equals demand.

Question 6

Real GDP can be used to accurately measure:

Accepted Answer

A) economic welfare over time. 
B) the size of an economy's underground economy. 
C) the change in market production over time. 
D) the change in market prices over time. 
A) economic welfare over time. 
B) the size of an economy's underground economy. 
C) the change in market production over time. 
D) the change in market prices over time.

Question 7

Comparisons of per capita gross domestic product across countries provide a very good measure of how similar living standards are across countries.

Accepted Answer

A) True 
 B)False

Question 8

The price index that measures the average rate of change in the prices received by domestic producers of goods and services is called the:

Accepted Answer

A) PCE deflator. 
B) CPI. 
C) GDP deflator. 
D) PPI. 
A) PCE deflator. 
B) CPI. 
C) GDP deflator. 
D) PPI.

Question 9

Gross domestic product (GDP) can be calculated using either the expenditure method or the income method.

Accepted Answer

A) True 
 B)False

Question 10

For the purposes of calculating GDP using the expenditure approach, which of the following is not included in the government purchases account?

Accepted Answer

A) Government purchases of pencils 
B) The payroll of the federal government 
C) Welfare payments to the poor 
D) The government's purchase of a computer 
A) Government purchases of pencils 
B) The payroll of the federal government 
C) Welfare payments to the poor 
D) The government's purchase of a computer

Question 11

When someone stops mowing his lawn and hires a teenager for cash that is unreported, what happens to GDP?

Accepted Answer

A) It rises because a non-market activity is now a legal market activity. 
B) It rises because GDP includes the value of the additional leisure time that dad gets by hiring a non-citizen. 
C) It falls because production by non-citizens is counted in their home country, not in the United States. 
D) It probably does not change.Production has shifted from non-market to the underground economy and neither is counted. 
A) It rises because a non-market activity is now a legal market activity. 
B) It rises because GDP includes the value of the additional leisure time that dad gets by hiring a non-citizen. 
C) It falls because production by non-citizens is counted in their home country, not in the United States. 
D) It probably does not change.Production has shifted from non-market to the underground economy and neither is counted.

Question 12

Refer to the table shown.   What is the economy's net domestic product?

Accepted Answer

A) $6.2 trillion 
B) $6.6 trillion 
C) $7.0 trillion 
D) Net domestic product cannot be computed without the data for net exports 
A) $6.2 trillion 
B) $6.6 trillion 
C) $7.0 trillion 
D) Net domestic product cannot be computed without the data for net exports

Question 13

Aggregate accounting enables us to measure and analyze how much a nation is producing and consuming.

Accepted Answer

A) True 
 B)False

Question 14

When someone stops mowing his own lawn and hires a lawn service to mow it for him, what happens to GDP? (Assume that the lawn service reports its income to the IRS.)

Accepted Answer

A) Nothing; the same lawns are being mowed, so production has not changed. 
B) It rises because GDP includes the value of the additional leisure time that the person gets by hiring someone else. 
C) It rises because when the person mows his own lawn it is non-market production that is not counted. 
D) It falls because hiring a lawn service reduced the amount of other goods that the person could purchase. 
A) Nothing; the same lawns are being mowed, so production has not changed. 
B) It rises because GDP includes the value of the additional leisure time that the person gets by hiring someone else. 
C) It rises because when the person mows his own lawn it is non-market production that is not counted. 
D) It falls because hiring a lawn service reduced the amount of other goods that the person could purchase.

Question 15

Which of the following is most likely to be asset price inflation?

Accepted Answer

A) A rise in the current price of assets caused by expectation of higher asset prices in the future 
B) A rise in the current price of assets caused by an increase in the riskiness of financial assets 
C) A rise in the price of assets caused by an increase in the underlying productivity of those assets 
D) A rise in the current price of assets caused by a shift in people's time preference 
A) A rise in the current price of assets caused by expectation of higher asset prices in the future 
B) A rise in the current price of assets caused by an increase in the riskiness of financial assets 
C) A rise in the price of assets caused by an increase in the underlying productivity of those assets 
D) A rise in the current price of assets caused by a shift in people's time preference

Question 16

Refer to the table below.What is the economy's gross domestic product?

Accepted Answer

A) $10.5 trillion 
B) $11.1 trillion 
C) $11.7 trillion 
D) $12.3 trillion 
A) $10.5 trillion 
B) $11.1 trillion 
C) $11.7 trillion 
D) $12.3 trillion

Question 17

Double counting in the national income accounts will occur if GDP is computed by summing up:

Accepted Answer

A) final output sales. 
B) value added. 
C) all sales. 
D) the income earned by a country's residents. 
A) final output sales. 
B) value added. 
C) all sales. 
D) the income earned by a country's residents.

Question 18

To compute GDP, you must add up the value of all the goods and services produced in a country in a year.

Accepted Answer

A) True 
 B)False

Question 19

If the price of clothing (which accounts for 5% of total expenditures in the CPI basket), rises by 10% in one year while the prices of all other goods remain constant, by how much will the CPI rise?

Accepted Answer

A) 0.5% 
B) 5% 
C) 10% 
D) 50% 
A) 0.5% 
B) 5% 
C) 10% 
D) 50%

Question 20

If you know that a meal costing $40 in the United States would cost $2 in Bangladesh and this is representative of the relative prices of most goods, you also know that:

Accepted Answer

A) purchasing power parity would decrease comparative GDP for Bangladesh. 
B) purchasing power parity would increase comparative GDP for Bangladesh. 
C) GDP using market prices would overstate the value of output for Bangladesh. 
D) GDP using market prices would overstate the value of output for the United States. 
A) purchasing power parity would decrease comparative GDP for Bangladesh. 
B) purchasing power parity would increase comparative GDP for Bangladesh. 
C) GDP using market prices would overstate the value of output for Bangladesh. 
D) GDP using market prices would overstate the value of output for the United States.

Exam 25: Measuring and Describing the Aggregate Economy

Which of the following is an example of an intermediate product?

Payments to the owners of firms are included in aggregate accounting as:

T-accounts reflects double-entry bookkeeping that keeps income and production equal.

What is GDP using the information shown?

According to the aggregate accounting identity:

Real GDP can be used to accurately measure:

Comparisons of per capita gross domestic product across countries provide a very good measure of how similar living standards are across countries.

The price index that measures the average rate of change in the prices received by domestic producers of goods and services is called the:

Gross domestic product (GDP) can be calculated using either the expenditure method or the income method.

For the purposes of calculating GDP using the expenditure approach, which of the following is not included in the government purchases account?

When someone stops mowing his lawn and hires a teenager for cash that is unreported, what happens to GDP?

Refer to the table shown. What is the economy's net domestic product?

Aggregate accounting enables us to measure and analyze how much a nation is producing and consuming.

When someone stops mowing his own lawn and hires a lawn service to mow it for him, what happens to GDP? (Assume that the lawn service reports its income to the IRS.)

Which of the following is most likely to be asset price inflation?

Refer to the table below.What is the economy's gross domestic product?

Double counting in the national income accounts will occur if GDP is computed by summing up:

To compute GDP, you must add up the value of all the goods and services produced in a country in a year.

If the price of clothing (which accounts for 5% of total expenditures in the CPI basket), rises by 10% in one year while the prices of all other goods remain constant, by how much will the CPI rise?

If you know that a meal costing $40 in the United States would cost $2 in Bangladesh and this is representative of the relative prices of most goods, you also know that:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Economic Growth, Business Cycles, and Unemployment

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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