Question 1

The base year for a price index is the year _____

Accepted Answer

A)  in which prices were lowest. 
B)  in which prices were highest. 
C)  in which real output was the largest. 
D)  in which prices were stable. 
E)  that serves as a reference point. 
A)  in which prices were lowest. 
B)  in which prices were highest. 
C)  in which real output was the largest. 
D)  in which prices were stable. 
E)  that serves as a reference point.

Question 2

If the nominal gross domestic product (GDP) for a year is $5.4 trillion, and the real gross domestic product (GDP) for the same year is $3.6 trillion, the GDP price index is _____

Accepted Answer

A)  0.667. 
B)  150. 
C)  66.67. 
D)  50. 
E)  33.33. 
A)  0.667. 
B)  150. 
C)  66.67. 
D)  50. 
E)  33.33.

Question 3

Which of the following correctly illustrates the leakages-injections approach to GDP?

Accepted Answer

A)  DI + (NT) = C + I + G + (X ‒ M) 
B)  S + C + NT = DI 
C)  S + C + (NT) = I + G + (X ‒ M) 
D)  S + (NT) + M = I + G + X 
E)  S + (NT) = I + G + (X ‒ M) 
A)  DI + (NT) = C + I + G + (X ‒ M) 
B)  S + C + NT = DI 
C)  S + C + (NT) = I + G + (X ‒ M) 
D)  S + (NT) + M = I + G + X 
E)  S + (NT) = I + G + (X ‒ M)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A fixed-weight price index uses a process that adjusts the weights continuously year by year.

Accepted Answer

A) True 
 B)False

Question 6

The value-added method to measure GDP does not avoid double-counting.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following actions will decrease the gross domestic product (GDP)?

Accepted Answer

A)  Tom's alarm clock breaks, so he buys a new one. 
B)  Tom buys a new alarm clock because he tends to sleep through the first alarm. 
C)  Tom's alarm clock breaks. He now oversleeps and has to buy a cup of coffee on the way to work instead of making it at home. 
D)  Tom gets fired for being late often after his alarm clock breaks. 
E)  Tom sells his broken alarm clock and uses the money to buy some French fries. 
A)  Tom's alarm clock breaks, so he buys a new one. 
B)  Tom buys a new alarm clock because he tends to sleep through the first alarm. 
C)  Tom's alarm clock breaks. He now oversleeps and has to buy a cup of coffee on the way to work instead of making it at home. 
D)  Tom gets fired for being late often after his alarm clock breaks. 
E)  Tom sells his broken alarm clock and uses the money to buy some French fries.

Question 8

The consumer price index (CPI) tends to understate the true rate of inflation.

Accepted Answer

A) True 
 B)False

Question 9

We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____

Accepted Answer

A)  10. 
B)  equal to zero. 
C)  20. 
D)  greater than 100. 
E)  negative. 
A)  10. 
B)  equal to zero. 
C)  20. 
D)  greater than 100. 
E)  negative.

Question 10

Net exports have averaged a minus 3 percent of GDP during the last decade. This means that _____

Accepted Answer

A)  the sum of exports exceeds GDP. 
B)  the sum of consumption and government purchases exceeds GDP. 
C)  consumption's share of total spending decreased and government purchases increased. 
D)  imports exceeded exports. 
E)  the sum of consumption, investment, and government purchases was less than GDP. 
A)  the sum of exports exceeds GDP. 
B)  the sum of consumption and government purchases exceeds GDP. 
C)  consumption's share of total spending decreased and government purchases increased. 
D)  imports exceeded exports. 
E)  the sum of consumption, investment, and government purchases was less than GDP.

Question 11

Which of the following would be excluded from the gross domestic product (GDP)?

Accepted Answer

A)  The mayor of a city hiring more workers to improve the sanitation of the city. 
B)  The sale of mobiles decreasing significantly. 
C)  The government reducing welfare benefits. 
D)  A homemaker spending $20 taking the family out to lunch instead of cooking food. 
E)  A consumer having his pickup truck tuned up at the local garage. 
A)  The mayor of a city hiring more workers to improve the sanitation of the city. 
B)  The sale of mobiles decreasing significantly. 
C)  The government reducing welfare benefits. 
D)  A homemaker spending $20 taking the family out to lunch instead of cooking food. 
E)  A consumer having his pickup truck tuned up at the local garage.

Question 12

Which of the following formulas is correct for aggregate income?

Accepted Answer

A)  Aggregate income = DI - NT 
B)  Aggregate income = DI + NT 
C)  Aggregate income = C+S 
D)  Aggregate income = C+I 
E)  Aggregate income = C + S - NT 
A)  Aggregate income = DI - NT 
B)  Aggregate income = DI + NT 
C)  Aggregate income = C+S 
D)  Aggregate income = C+I 
E)  Aggregate income = C + S - NT

Question 13

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

Accepted Answer

A)  government spending 
B)  imports 
C)  disposable income 
D)  net taxes 
E)  savings 
A)  government spending 
B)  imports 
C)  disposable income 
D)  net taxes 
E)  savings

Question 14

The circular-flow model shows that _____

Accepted Answer

A)  households are on the demand side of the resource market. 
B)  firms are on the demand side of both the product and resource markets. 
C)  for each flow of money, there is an equal and opposite flow of products or resources. 
D)  firms and governments are on the supply side of the loanable funds market. 
E)  governments are on the demand side of the product market and the supply side of the resource market. 
A)  households are on the demand side of the resource market. 
B)  firms are on the demand side of both the product and resource markets. 
C)  for each flow of money, there is an equal and opposite flow of products or resources. 
D)  firms and governments are on the supply side of the loanable funds market. 
E)  governments are on the demand side of the product market and the supply side of the resource market.

Question 15

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  consumption 
B)  exports 
C)  taxes 
D)  saving 
E)  government borrowing 
A)  consumption 
B)  exports 
C)  taxes 
D)  saving 
E)  government borrowing

Question 17

Problems with CPI do not include _____

Accepted Answer

A)  a quality bias. 
B)  not adjusting for the fact that households shift away from goods that have become more costly. 
C)  failing to keep up with the consumer shift toward discount stores. 
D)  that it does not allow for some substitution within narrow categories. 
E)  that it can distort other measures, such as wages, that use the CPI to adjust for inflation. 
A)  a quality bias. 
B)  not adjusting for the fact that households shift away from goods that have become more costly. 
C)  failing to keep up with the consumer shift toward discount stores. 
D)  that it does not allow for some substitution within narrow categories. 
E)  that it can distort other measures, such as wages, that use the CPI to adjust for inflation.

Question 18

Nominal gross domestic product (GDP) is measured in terms of the _____

Accepted Answer

A)  current-year prices. 
B)  base-year prices. 
C)  export of goods and services. 
D)  amount of taxes collected. 
E)  hours of employment. 
A)  current-year prices. 
B)  base-year prices. 
C)  export of goods and services. 
D)  amount of taxes collected. 
E)  hours of employment.

Question 19

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 20

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

Accepted Answer

A)  government purchases of goods and services 
B)  taxes 
C)  investment 
D)  exports 
E)  consumption expenditures 
A)  government purchases of goods and services 
B)  taxes 
C)  investment 
D)  exports 
E)  consumption expenditures

The base year for a price index is the year _____

If the nominal gross domestic product (GDP) for a year is $5.4 trillion, and the real gross domestic product (GDP) for the same year is $3.6 trillion, the GDP price index is _____

Which of the following correctly illustrates the leakages-injections approach to GDP?

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

A fixed-weight price index uses a process that adjusts the weights continuously year by year.

The value-added method to measure GDP does not avoid double-counting.

Which of the following actions will decrease the gross domestic product (GDP)?

The consumer price index (CPI) tends to understate the true rate of inflation.

We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____

Net exports have averaged a minus 3 percent of GDP during the last decade. This means that _____

Which of the following would be excluded from the gross domestic product (GDP)?

Which of the following formulas is correct for aggregate income?

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

The circular-flow model shows that _____

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

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

Problems with CPI do not include _____

Nominal gross domestic product (GDP) is measured in terms of the _____

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

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

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 6: Tracking the U. S. Economy.

The base year for a price index is the year _____

If the nominal gross domestic product (GDP) for a year is $5.4 trillion, and the real gross domestic product (GDP) for the same year is $3.6 trillion, the GDP price index is _____

Which of the following correctly illustrates the leakages-injections approach to GDP?

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

A fixed-weight price index uses a process that adjusts the weights continuously year by year.

The value-added method to measure GDP does not avoid double-counting.

Which of the following actions will decrease the gross domestic product (GDP)?

The consumer price index (CPI) tends to understate the true rate of inflation.

We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____

Net exports have averaged a minus 3 percent of GDP during the last decade. This means that _____

Which of the following would be excluded from the gross domestic product (GDP)?

Which of the following formulas is correct for aggregate income?

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

The circular-flow model shows that _____

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

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

Problems with CPI do not include _____

Nominal gross domestic product (GDP) is measured in terms of the _____

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

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

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Unemployment and Inflation.

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.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters