Question 1

If the nominal interest rate is 5% and inflation is 3%, the real interest rate is:

Accepted Answer

A) 0%. 
B) 2% 
C) 8%. 
D) 15%. 
A) 0%. 
B) 2% 
C) 8%. 
D) 15%.

Question 2

Which of the following economic activities would be included in U.S.gross domestic product (GDP)?

Accepted Answer

A) Illegal drug sales 
B) Pure services, such as haircuts 
C) Illegal prostitution 
D) Work performed and paid for in cash to avoid income tax 
A) Illegal drug sales 
B) Pure services, such as haircuts 
C) Illegal prostitution 
D) Work performed and paid for in cash to avoid income tax

Question 3

In recent years, many environmentalists have proposed changes to GDP accounting that would take into account the impact of economic activity on the environment.Which of the following economic activities that affect the environment is currently included in GDP?

Accepted Answer

A) The effect of the depletion of oil reserves on energy expenditures 
B) The effect of deforestation on global climate change and the income of future generations 
C) The impact of corporate pollution on health care spending 
D) Expenditures on pollution control technology 
A) The effect of the depletion of oil reserves on energy expenditures 
B) The effect of deforestation on global climate change and the income of future generations 
C) The impact of corporate pollution on health care spending 
D) Expenditures on pollution control technology

Question 4

Gross domestic product equals the sum of consumption, investment, and government purchases.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that both nominal GDP and prices double.We can conclude that real output:

Accepted Answer

A) more than doubled. 
B) doubled. 
C) remained constant. 
D) fell. 
A) more than doubled. 
B) doubled. 
C) remained constant. 
D) fell.

Question 6

If U.S.net exports are positive, then U.S.:

Accepted Answer

A) GDP is less than the sum of consumption, investment, and government purchases. 
B) GDP exceeds the sum of consumption, investment, and government purchases. 
C) imports must exceed U.S.exports. 
D) GDP equals the sum of consumption, investment, and government purchases. 
A) GDP is less than the sum of consumption, investment, and government purchases. 
B) GDP exceeds the sum of consumption, investment, and government purchases. 
C) imports must exceed U.S.exports. 
D) GDP equals the sum of consumption, investment, and government purchases.

Question 7

Given the following information, aggregate income equals:

Accepted Answer

A) $2,900. 
B) $3,400. 
C) $3,900. 
D) $4,400. 
A) $2,900. 
B) $3,400. 
C) $3,900. 
D) $4,400.

Question 8

GDP is the:

Accepted Answer

A) market value of an economy's production of final goods and services in a one year period. 
B) sum of coins, bills, and demand deposits circulating in an economy one year period. 
C) total expenditures of the federal government over the period of one year. 
D) market value of an economy's production of all goods and services in a one year period. 
A) market value of an economy's production of final goods and services in a one year period. 
B) sum of coins, bills, and demand deposits circulating in an economy one year period. 
C) total expenditures of the federal government over the period of one year. 
D) market value of an economy's production of all goods and services in a one year period.

Question 9

Which of the following is a flow concept?

Accepted Answer

A) body weight 
B) wealth 
C) gallons of water in a pool 
D) expenditures 
A) body weight 
B) wealth 
C) gallons of water in a pool 
D) expenditures

Question 10

If the percent change in nominal GDP is 6% and the percent change in real GDP is 2%, inflation is:

Accepted Answer

A) 0%. 
B) 2% 
C) 4%. 
D) 6%. 
A) 0%. 
B) 2% 
C) 4%. 
D) 6%.

Question 11

The sum of the value added by all of a nation's individuals and businesses in a year equals:

Accepted Answer

A) the value of intermediate products. 
B) the value of investment goods. 
C) total profits. 
D) GDP. 
A) the value of intermediate products. 
B) the value of investment goods. 
C) total profits. 
D) GDP.

Question 12

Day laborers who are in the United States illegally and work off the books are:

Accepted Answer

A) part of the non-market transactions that are omitted from GDP. 
B) part of the underground economy which is not measured in GDP. 
C) one of the items included in the genuine progress indicator. 
D) production by non-citizens, which is included in GNP but not in GDP. 
A) part of the non-market transactions that are omitted from GDP. 
B) part of the underground economy which is not measured in GDP. 
C) one of the items included in the genuine progress indicator. 
D) production by non-citizens, which is included in GNP but not in GDP.

Question 13

If you decide not to spend $1,000 you earned at your summer job but instead intend to buy shares in a mutual fund, in terms of aggregate economic accounting you would be:

Accepted Answer

A) consuming. 
B) saving. 
C) investing. 
D) transferring. 
A) consuming. 
B) saving. 
C) investing. 
D) transferring.

Question 14

Transfers of assets, such as stock sales are:

Accepted Answer

A) included in GDP because they raise domestic production. 
B) included in GDP because they increase domestic wealth. 
C) not included in GDP because they do not increase domestic production. 
D) not included in GDP because they do not increase domestic wealth. 
A) included in GDP because they raise domestic production. 
B) included in GDP because they increase domestic wealth. 
C) not included in GDP because they do not increase domestic production. 
D) not included in GDP because they do not increase domestic wealth.

Question 15

A price index in its base year:

Accepted Answer

A) is always greater than100. 
B) is always equal to100. 
C) is always less than100. 
D) cannot be determined without knowing the price level in the base year. 
A) is always greater than100. 
B) is always equal to100. 
C) is always less than100. 
D) cannot be determined without knowing the price level in the base year.

Question 16

The distinction between consumption and investment is:

Accepted Answer

A) that only households consume and only businesses invest. 
B) somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity. 
C) that investment always increases future productive capacity, while consumption does not. 
D) arbitrary, since the same expenditure may be counted as a consumption item in one year and an investment in another. 
A) that only households consume and only businesses invest. 
B) somewhat arbitrary, since investment includes housing investment, which does not increase future productive capacity. 
C) that investment always increases future productive capacity, while consumption does not. 
D) arbitrary, since the same expenditure may be counted as a consumption item in one year and an investment in another.

Question 17

Value added is calculated by:

Accepted Answer

A) subtracting the cost of materials used in production from the value of sales. 
B) adding the cost of materials used in production to the value of sales. 
C) subtracting the value of sales from the cost of materials used in production. 
D) adding the value of output to the value of inputs. 
A) subtracting the cost of materials used in production from the value of sales. 
B) adding the cost of materials used in production to the value of sales. 
C) subtracting the value of sales from the cost of materials used in production. 
D) adding the value of output to the value of inputs.

Question 18

Depreciation:

Accepted Answer

A) estimates the decrease in value of capital goods due to wear and tear over the year. 
B) is the reduction in business inventories per year. 
C) represents a firm's expenditure to add to its capital stock. 
D) is the decline in the value of a firm's stock. 
A) estimates the decrease in value of capital goods due to wear and tear over the year. 
B) is the reduction in business inventories per year. 
C) represents a firm's expenditure to add to its capital stock. 
D) is the decline in the value of a firm's stock.

Question 19

Using purchasing power parity instead of exchange rates to calculate output will most likely:

Accepted Answer

A) increase the relative value of output in developing countries. 
B) lower the relative value of output in developing countries. 
C) leave the relative value of output in developing countries unchanged. 
D) show that prices in developing countries are higher than prices in developed countries. 
A) increase the relative value of output in developing countries. 
B) lower the relative value of output in developing countries. 
C) leave the relative value of output in developing countries unchanged. 
D) show that prices in developing countries are higher than prices in developed countries.

Question 20

If an economy produces 50 oranges sold at $1 each and 100 bananas at $0.50 each, using GDP as the measure of output:

Accepted Answer

A) oranges are weighted as being 2 times more important than bananas. 
B) oranges are weighted as being ½ as important as bananas. 
C) bananas are weighted as being 2 times more important than oranges. 
D) bananas are weighted as being ½ as important as oranges. 
A) oranges are weighted as being 2 times more important than bananas. 
B) oranges are weighted as being ½ as important as bananas. 
C) bananas are weighted as being 2 times more important than oranges. 
D) bananas are weighted as being ½ as important as oranges.

Exam 25: Measuring and Describing the Aggregate Economy

If the nominal interest rate is 5% and inflation is 3%, the real interest rate is:

Which of the following economic activities would be included in U.S.gross domestic product (GDP)?

In recent years, many environmentalists have proposed changes to GDP accounting that would take into account the impact of economic activity on the environment.Which of the following economic activities that affect the environment is currently included in GDP?

Gross domestic product equals the sum of consumption, investment, and government purchases.

Suppose that both nominal GDP and prices double.We can conclude that real output:

If U.S.net exports are positive, then U.S.:

Given the following information, aggregate income equals:

GDP is the:

Which of the following is a flow concept?

If the percent change in nominal GDP is 6% and the percent change in real GDP is 2%, inflation is:

The sum of the value added by all of a nation's individuals and businesses in a year equals:

Day laborers who are in the United States illegally and work off the books are:

If you decide not to spend $1,000 you earned at your summer job but instead intend to buy shares in a mutual fund, in terms of aggregate economic accounting you would be:

Transfers of assets, such as stock sales are:

A price index in its base year:

The distinction between consumption and investment is:

Value added is calculated by:

Depreciation:

Using purchasing power parity instead of exchange rates to calculate output will most likely:

If an economy produces 50 oranges sold at $1 each and 100 bananas at $0.50 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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