Question 1

Using the expenditure approach, gross domestic product equals:

Accepted Answer

A) gross national product. 
B) gross national product minus net exports. 
C) the sum of consumption, investment, government purchases. 
D) the sum of consumption, investment, government purchases, and net exports. 
A) gross national product. 
B) gross national product minus net exports. 
C) the sum of consumption, investment, government purchases. 
D) the sum of consumption, investment, government purchases, and net exports.

Question 2

Aggregate income includes all of the following except:

Accepted Answer

A) employee compensation. 
B) interest. 
C) rent. 
D) transfer payments. 
A) employee compensation. 
B) interest. 
C) rent. 
D) transfer payments.

Question 3

Inflation is a sustained rise in the general price level.

Accepted Answer

A) True 
 B)False

Question 4

The size of underground economies differs across countries.In Greece it has been estimated to be as big as 30% of GDP, in Spain 25%, in Italy 20%, and in the United States, about 7%.Given this information, official GDP measures understate true economic activity the most in:

Accepted Answer

A) Greece. 
B) United States. 
C) Italy. 
D) Spain. 
A) Greece. 
B) United States. 
C) Italy. 
D) Spain.

Question 5

Which of the following is a part of GDP?

Accepted Answer

A) The value of a homemaker's services 
B) The value of a haircut 
C) The value of an old car purchased during a year 
D) The value of an existing house sold during a year 
A) The value of a homemaker's services 
B) The value of a haircut 
C) The value of an old car purchased during a year 
D) The value of an existing house sold during a year

Question 6

If there are only two goods in the economy, one whose price rises by 8% and one by 10%, it is possible that inflation is:

Accepted Answer

A) 2% 
B) 8% 
C) 10%. 
D) 9% 
A) 2% 
B) 8% 
C) 10%. 
D) 9%

Question 7

Suppose nominal GDP is $14 trillion and the GDP deflator is 122 .5.Given this information, what is real GDP?

Accepted Answer

A) $9.8 trillion 
B) $11.4 trillion 
C) $13.8 trillion 
D) $15.2 trillion 
A) $9.8 trillion 
B) $11.4 trillion 
C) $13.8 trillion 
D) $15.2 trillion

Question 8

Gross domestic product (GDP) is the total market value of the final goods and services produced by an economy in a one-year period.

Accepted Answer

A) True 
 B)False

Question 9

If the real interest rate is 2% and inflation rate is 1%, what is the nominal interest rate?

Accepted Answer

A) 0%. 
B) 1% 
C) 2%. 
D) 3%. 
A) 0%. 
B) 1% 
C) 2%. 
D) 3%.

Question 10

Negative net exports means:

Accepted Answer

A) GDP is lower than it would have been if net exports had equaled zero. 
B) GDP is higher than it would have been if net exports had equaled zero. 
C) exports exceed imports. 
D) depreciation exceed investment. 
A) GDP is lower than it would have been if net exports had equaled zero. 
B) GDP is higher than it would have been if net exports had equaled zero. 
C) exports exceed imports. 
D) depreciation exceed investment.

Question 11

If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3 billion to $4 billion, it follows that:

Accepted Answer

A) the price level and real output increased at the same rate. 
B) real output rose and price level fell. 
C) the price level increased at a faster rate than real output. 
D) the price level rose by 25%. 
A) the price level and real output increased at the same rate. 
B) real output rose and price level fell. 
C) the price level increased at a faster rate than real output. 
D) the price level rose by 25%.

Question 12

The World Values Survey, a group of international social scientists, who ranks the well-being of society based on social indicators ranks Puerto Rico higher than the U.S.This approach to measuring well-being is similar to the approach that the text calls:

Accepted Answer

A) nominal gross domestic product. 
B) real gross domestic product. 
C) disposable personal income. 
D) genuine progress indicator. 
A) nominal gross domestic product. 
B) real gross domestic product. 
C) disposable personal income. 
D) genuine progress indicator.

Question 13

Suppose real estate prices rise by 40% in a four-year period, while goods and services rise in price by 8% in the same time period.Population, the stock of houses, and other variables important to real estate prices have remained almost constant.Which of the following is most likely?

Accepted Answer

A) Real wealth has increased 
B) Nominal wealth has declined 
C) Asset inflation has occurred 
D) GDP has increased by about 40% over the four-year period 
A) Real wealth has increased 
B) Nominal wealth has declined 
C) Asset inflation has occurred 
D) GDP has increased by about 40% over the four-year period

Question 14

The base year is the year:

Accepted Answer

A) in which prices are unstable. 
B) in which prices are lowest. 
C) in which prices are highest. 
D) that serves as a reference point or benchmark. 
A) in which prices are unstable. 
B) in which prices are lowest. 
C) in which prices are highest. 
D) that serves as a reference point or benchmark.

Question 15

Net domestic product:

Accepted Answer

A) is a better measure of output than gross domestic product because it controls for depreciation. 
B) is a worse measure of output than gross domestic product because it is distorted by depreciation. 
C) cannot be computed since economists have no measure of depreciation. 
D) increases as depreciation increases. 
A) is a better measure of output than gross domestic product because it controls for depreciation. 
B) is a worse measure of output than gross domestic product because it is distorted by depreciation. 
C) cannot be computed since economists have no measure of depreciation. 
D) increases as depreciation increases.

Question 16

Net foreign factor income is:

Accepted Answer

A) the income earned from the domestic economy by foreign factors. 
B) the income earned abroad by domestic factors. 
C) the difference between the income earned abroad by domestic factors and the income earned domestically by foreign factors. 
D) the difference between the value of a country's exports and imports. 
A) the income earned from the domestic economy by foreign factors. 
B) the income earned abroad by domestic factors. 
C) the difference between the income earned abroad by domestic factors and the income earned domestically by foreign factors. 
D) the difference between the value of a country's exports and imports.

Question 17

Payments for the use of land and buildings are included in aggregate accounting as:

Accepted Answer

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

Question 18

The difference between gross domestic product (GDP) and gross national product (GNP) is that GDP:

Accepted Answer

A) measures the economic activity that occurs within a country while GNP measures the economic activity of all the people and businesses of a country. 
B) measures the economic activity of all the people and businesses of a country, while GNP measures the economic activity that occurs within a country 
C) excludes exports and imports while GNP does not. 
D) includes exports and imports while GNP does not. 
A) measures the economic activity that occurs within a country while GNP measures the economic activity of all the people and businesses of a country. 
B) measures the economic activity of all the people and businesses of a country, while GNP measures the economic activity that occurs within a country 
C) excludes exports and imports while GNP does not. 
D) includes exports and imports while GNP does not.

Question 19

Which of the following provides the closest measure of the rate of change in the prices paid by households?

Accepted Answer

A) PCE deflator 
B) BLS deflator 
C) GDP deflator 
D) PPI 
A) PCE deflator 
B) BLS deflator 
C) GDP deflator 
D) PPI

Question 20

If an economy produces 100 pencils valued at $0.25 each and 500 sheets of ruled paper at $0.01 each, using GDP as the measure of output:

Accepted Answer

A) pencils are weighted as being 25 times more important than ruled paper. 
B) pencils are weighted as being 5 times more important than ruled paper. 
C) ruled paper is weighted as being 25 times more important than pencils. 
D) ruled paper is weighted as being 5 times more important than pencils. 
A) pencils are weighted as being 25 times more important than ruled paper. 
B) pencils are weighted as being 5 times more important than ruled paper. 
C) ruled paper is weighted as being 25 times more important than pencils. 
D) ruled paper is weighted as being 5 times more important than pencils.

Exam 25: Measuring and Describing the Aggregate Economy

Using the expenditure approach, gross domestic product equals:

Aggregate income includes all of the following except:

Inflation is a sustained rise in the general price level.

The size of underground economies differs across countries.In Greece it has been estimated to be as big as 30% of GDP, in Spain 25%, in Italy 20%, and in the United States, about 7%.Given this information, official GDP measures understate true economic activity the most in:

Which of the following is a part of GDP?

If there are only two goods in the economy, one whose price rises by 8% and one by 10%, it is possible that inflation is:

Suppose nominal GDP is $14 trillion and the GDP deflator is 122 .5.Given this information, what is real GDP?

Gross domestic product (GDP) is the total market value of the final goods and services produced by an economy in a one-year period.

If the real interest rate is 2% and inflation rate is 1%, what is the nominal interest rate?

Negative net exports means:

If nominal GDP increased from $4 billion to $5 billion while real GDP increased from $3 billion to $4 billion, it follows that:

The World Values Survey, a group of international social scientists, who ranks the well-being of society based on social indicators ranks Puerto Rico higher than the U.S.This approach to measuring well-being is similar to the approach that the text calls:

Suppose real estate prices rise by 40% in a four-year period, while goods and services rise in price by 8% in the same time period.Population, the stock of houses, and other variables important to real estate prices have remained almost constant.Which of the following is most likely?

The base year is the year:

Net domestic product:

Net foreign factor income is:

Payments for the use of land and buildings are included in aggregate accounting as:

The difference between gross domestic product (GDP) and gross national product (GNP) is that GDP:

Which of the following provides the closest measure of the rate of change in the prices paid by households?

If an economy produces 100 pencils valued at $0.25 each and 500 sheets of ruled paper at $0.01 each, using GDP as the measure of output:

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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