Question 1

The national income accounting system measures economic activity based on the concept of _____.

Accepted Answer

A)  absolute advantage of different industries in an economy 
B)  the circular flow of precious metal and money through the different sectors of an economy 
C)  comparative advantage of different industries in an economy 
D)  the circular flow of output and income through the different sectors of an economy 
E)  the circular flow of labor and other resources through the different sectors of an economy 
A)  absolute advantage of different industries in an economy 
B)  the circular flow of precious metal and money through the different sectors of an economy 
C)  comparative advantage of different industries in an economy 
D)  the circular flow of output and income through the different sectors of an economy 
E)  the circular flow of labor and other resources through the different sectors of an economy

Question 2

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

Accepted Answer

A)  Investment 
B)  Imports 
C)  Government purchases 
D)  Exports 
E)  Transfer payments 
A)  Investment 
B)  Imports 
C)  Government purchases 
D)  Exports 
E)  Transfer payments

Question 3

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 2003.

Accepted Answer

A)  decreased by slightly more than $5 billion 
B)  increased by slightly more than $4 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  decreased by $6 billion 
A)  decreased by slightly more than $5 billion 
B)  increased by slightly more than $4 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  decreased by $6 billion

Question 4

The gross domestic product (GDP) excludes:

Accepted Answer

A)  the increase in inventories during a given period. 
B)  the expenditures by government for newly produced goods and services during a given period. 
C)  the value of intermediate goods produced in an economy during a given period. 
D)  the value of final output during a given period. 
E)  household expenditure on durable goods. 
A)  the increase in inventories during a given period. 
B)  the expenditures by government for newly produced goods and services during a given period. 
C)  the value of intermediate goods produced in an economy during a given period. 
D)  the value of final output during a given period. 
E)  household expenditure on durable goods.

Question 5

The value of tires purchased by a company to use on its cars is not included when calculating the gross domestic product (GDP).

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The value of the films starring Charlie Chaplin produced in the United States that still exist will not be included in this year's U.S. gross domestic product (GDP) because:

Accepted Answer

A)  Charlie Chaplin was not an American citizen. 
B)  Charlie Chaplin did not make the films this year. 
C)  the films earn less revenue. 
D)  the films no longer have any value except to collectors. 
E)  films are intermediate goods. 
A)  Charlie Chaplin was not an American citizen. 
B)  Charlie Chaplin did not make the films this year. 
C)  the films earn less revenue. 
D)  the films no longer have any value except to collectors. 
E)  films are intermediate goods.

Question 8

If a firm hires labor for $8,000, pays rent of $4,000, buys raw materials for $13,000 from another firm, earns profits of $1,200, and sells its output for $31,000, the value added by the firm is _____.

Accepted Answer

A)  $4,800 
B)  $10,000 
C)  $18,000 
D)  $25,000 
E)  $26,200 
A)  $4,800 
B)  $10,000 
C)  $18,000 
D)  $25,000 
E)  $26,200

Question 9

Aggregate income equals:

Accepted Answer

A)  the sum of income earned by all laborers in the world economy. 
B)  the sum of income earned by all workers in the private sector. 
C)  the sum of the income earned by all the resource suppliers in an economy. 
D)  the total income of all employees after payment of income tax. 
E)  the total income of all employees after purchases of necessities. 
A)  the sum of income earned by all laborers in the world economy. 
B)  the sum of income earned by all workers in the private sector. 
C)  the sum of the income earned by all the resource suppliers in an economy. 
D)  the total income of all employees after payment of income tax. 
E)  the total income of all employees after purchases of necessities.

Question 10

The consumer price index (CPI) _____ inflation because it includes an item in the market basket only after the product becomes _____.

Accepted Answer

A)  overstates; unpopular 
B)  overstates; obsolete 
C)  overstates; widely used 
D)  understates; widely used 
E)  understates; obsolete 
A)  overstates; unpopular 
B)  overstates; obsolete 
C)  overstates; widely used 
D)  understates; widely used 
E)  understates; obsolete

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If an economy produces final output worth $5 trillion, then the aggregate income generated by that production:

Accepted Answer

A)  will be $5 trillion. 
B)  will be more than $5 trillion. 
C)  will be $5 trillion minus taxes. 
D)  will be less than $5 trillion. 
E)  will be $5 trillion plus transaction costs. 
A)  will be $5 trillion. 
B)  will be more than $5 trillion. 
C)  will be $5 trillion minus taxes. 
D)  will be less than $5 trillion. 
E)  will be $5 trillion plus transaction costs.

Question 13

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

Accepted Answer

A)  Net taxes 
B)  Saving 
C)  Transfer payments 
D)  Government borrowing 
E)  Disposable income 
A)  Net taxes 
B)  Saving 
C)  Transfer payments 
D)  Government borrowing 
E)  Disposable income

Question 14

The largest component of aggregate expenditure is _____.

Accepted Answer

A)  government purchases 
B)  transfer payments 
C)  imports 
D)  consumption 
E)  investment 
A)  government purchases 
B)  transfer payments 
C)  imports 
D)  consumption 
E)  investment

Question 15

Which of the following is reflected in the gross domestic product (GDP)?

Accepted Answer

A)  The value of leisure time 
B)  The value of illegal goods and services 
C)  The value of final goods produced by firms 
D)  The cost of depletion of natural resources 
E)  The value of house maintenance performed by homeowners 
A)  The value of leisure time 
B)  The value of illegal goods and services 
C)  The value of final goods produced by firms 
D)  The cost of depletion of natural resources 
E)  The value of house maintenance performed by homeowners

Question 16

Given the following hypothetical data where C = $3,000; I = $1,200; G = $2,000; X − M = −$500; depreciation = $200; transfer payments = $800, net domestic product is _____.

Accepted Answer

A)  $5,500 
B)  $5,700 
C)  $6,200 
D)  $6,400 
E)  $6,900 
A)  $5,500 
B)  $5,700 
C)  $6,200 
D)  $6,400 
E)  $6,900

Question 17

The GDP price index:

Accepted Answer

A)  measures the average price of final goods and services produced in an economy. 
B)  measures the quality of goods produced in an economy. 
C)  is derived using the prices of only imported and exported goods and services. 
D)  is derived using the implicit prices of goods and services produced by the government. 
E)  measures the value of all intermediate goods and services sold in an economy. 
A)  measures the average price of final goods and services produced in an economy. 
B)  measures the quality of goods produced in an economy. 
C)  is derived using the prices of only imported and exported goods and services. 
D)  is derived using the implicit prices of goods and services produced by the government. 
E)  measures the value of all intermediate goods and services sold in an economy.

Question 18

Suppose a loaf of bread sold for $3.00 in 2008. The price of bread then increases to $3.60 in 2009. The price index for bread considering 2008 as the base year is _____.

Accepted Answer

A)  1.20 
B)  83.33 
C)  120 
D)  100 
E)  20 
A)  1.20 
B)  83.33 
C)  120 
D)  100 
E)  20

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

Which of the following is the best indicator of the performance of the national economy?

Accepted Answer

A)  The budget deficit of the federal government 
B)  The stock of capital goods (machinery) in the nation 
C)  The nation's stock of money 
D)  The balance of trade with other nations 
E)  The value of the final goods and services produced in the nation 
A)  The budget deficit of the federal government 
B)  The stock of capital goods (machinery) in the nation 
C)  The nation's stock of money 
D)  The balance of trade with other nations 
E)  The value of the final goods and services produced in the nation

The national income accounting system measures economic activity based on the concept of _____.

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

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 2003.

The gross domestic product (GDP) excludes:

The value of tires purchased by a company to use on its cars is not included when calculating the gross domestic product (GDP).

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

The value of the films starring Charlie Chaplin produced in the United States that still exist will not be included in this year's U.S. gross domestic product (GDP) because:

If a firm hires labor for $8,000, pays rent of $4,000, buys raw materials for $13,000 from another firm, earns profits of $1,200, and sells its output for $31,000, the value added by the firm is _____.

Aggregate income equals:

The consumer price index (CPI) _ inflation because it includes an item in the market basket only after the product becomes _.

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

If an economy produces final output worth $5 trillion, then the aggregate income generated by that production:

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

The largest component of aggregate expenditure is _____.

Which of the following is reflected in the gross domestic product (GDP)?

Given the following hypothetical data where C = $3,000; I = $1,200; G = $2,000; X − M = −$500; depreciation = $200; transfer payments = $800, net domestic product is _____.

The GDP price index:

Suppose a loaf of bread sold for $3.00 in 2008. The price of bread then increases to $3.60 in 2009. The price index for bread considering 2008 as the base year is _____.

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 _____.

Which of the following is the best indicator of the performance of the national economy?

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

The national income accounting system measures economic activity based on the concept of _____.

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

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 2003.

The gross domestic product (GDP) excludes:

The value of tires purchased by a company to use on its cars is not included when calculating the gross domestic product (GDP).

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

The value of the films starring Charlie Chaplin produced in the United States that still exist will not be included in this year's U.S. gross domestic product (GDP) because:

If a firm hires labor for $8,000, pays rent of $4,000, buys raw materials for $13,000 from another firm, earns profits of $1,200, and sells its output for $31,000, the value added by the firm is _____.

Aggregate income equals:

The consumer price index (CPI) _____ inflation because it includes an item in the market basket only after the product becomes _____.

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

If an economy produces final output worth $5 trillion, then the aggregate income generated by that production:

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

The largest component of aggregate expenditure is _____.

Which of the following is reflected in the gross domestic product (GDP)?

Given the following hypothetical data where C = $3,000; I = $1,200; G = $2,000; X − M = −$500; depreciation = $200; transfer payments = $800, net domestic product is _____.

The GDP price index:

Suppose a loaf of bread sold for $3.00 in 2008. The price of bread then increases to $3.60 in 2009. The price index for bread considering 2008 as the base year is _____.

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 _____.

Which of the following is the best indicator of the performance of the national economy?

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

The consumer price index (CPI) _ inflation because it includes an item in the market basket only after the product becomes _.