Question 1

Which of the following serves as an example of the underground or "shadow" economy?

Accepted Answer

A) A woman barters home repairs with her neighbor. 
B) A teenager babysits regularly and fails to report her income. 
C) A man sells illegal drugs and fails to report his income. 
D) All of the above are correct. 
A) A woman barters home repairs with her neighbor. 
B) A teenager babysits regularly and fails to report her income. 
C) A man sells illegal drugs and fails to report his income. 
D) All of the above are correct.

Question 2

If total spending rises from one year to the next,then

Accepted Answer

A) the economy must be producing a larger output of goods and services. 
B) prices at which goods and services are sold must be higher. 
C) either the economy must be producing a larger output of goods and services, or the prices at which goods and services are sold must be higher, or both. 
D) employment or productivity must be rising. 
A) the economy must be producing a larger output of goods and services. 
B) prices at which goods and services are sold must be higher. 
C) either the economy must be producing a larger output of goods and services, or the prices at which goods and services are sold must be higher, or both. 
D) employment or productivity must be rising.

Question 3

During the third quarter of 2006,a firm produces consumer goods and adds some of those goods to its inventory.During the fourth quarter of that year,the firm sells the goods at a retail outlet,with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter.These actions affect which component(s)of fourth-quarter GDP?

Accepted Answer

A) These actions affect only consumption, and they affect consumption positively. 
B) These actions affect only investment, and they affect investment positively. 
C) These actions affect consumption positively and investment negatively. 
D) These actions affect both consumption and investment positively. 
A) These actions affect only consumption, and they affect consumption positively. 
B) These actions affect only investment, and they affect investment positively. 
C) These actions affect consumption positively and investment negatively. 
D) These actions affect both consumption and investment positively.

Question 4

Over the last few decades,Americans have chosen to cook less at home and eat more at restaurants.This change in behavior,by itself,has

Accepted Answer

A) reduced measured GDP. 
B) not affected measured GDP. 
C) increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home. 
D) increased measured GDP by the full value of the restaurant meals. 
A) reduced measured GDP. 
B) not affected measured GDP. 
C) increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home. 
D) increased measured GDP by the full value of the restaurant meals.

Question 5

A farmer produces the same output in 2004 as in 2003.His input prices increase by 50 percent,but so does his product price.We can conclude that

Accepted Answer

A) the farmer is better off in 2004. 
B) the farmer was better off in 2004. 
C) the farmer is equally well off in 2004 as in 2003. 
D) we cannot tell whether the farmer is better off in 2004 or in 2003 without additional information. 
A) the farmer is better off in 2004. 
B) the farmer was better off in 2004. 
C) the farmer is equally well off in 2004 as in 2003. 
D) we cannot tell whether the farmer is better off in 2004 or in 2003 without additional information.

Question 6

A steel company sells some steel to a bicycle company for $100.The bicycle company uses the steel to produce a bicycle,which it sells for $200.Taken together,these two transactions contribute

Accepted Answer

A) $100 to GDP. 
B) $200 to GDP. 
C) between $200 and $300 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. 
D) $300 to GDP. 
A) $100 to GDP. 
B) $200 to GDP. 
C) between $200 and $300 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. 
D) $300 to GDP.

Question 7

A transfer payment is

Accepted Answer

A) a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location. 
B) a payment that is automatically transferred from your bank account to pay a bill or some other obligation. 
C) a form of government spending that is not made in exchange for a currently produced good or service. 
D) the benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that expenditure. 
A) a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location. 
B) a payment that is automatically transferred from your bank account to pay a bill or some other obligation. 
C) a form of government spending that is not made in exchange for a currently produced good or service. 
D) the benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that expenditure.

Question 8

Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?

Accepted Answer

A) the effect of taxes on the prices of airline tickets, the profitability of automobile-manufacturing firms, and employment trends in the food-service industry 
B) the price of beef, wage differences between genders, and antitrust laws 
C) how consumers maximize utility, and how prices are established in markets for agricultural products 
D) the percentage of the labor force that is out of work, and differences in average income from country to country 
A) the effect of taxes on the prices of airline tickets, the profitability of automobile-manufacturing firms, and employment trends in the food-service industry 
B) the price of beef, wage differences between genders, and antitrust laws 
C) how consumers maximize utility, and how prices are established in markets for agricultural products 
D) the percentage of the labor force that is out of work, and differences in average income from country to country

Question 9

GDP is defined as

Accepted Answer

A) the market value of all goods and services produced within a country in a given period of time. 
B) the market value of all goods and services produced by the citizens of a country, regardless of where they are living in a given period of time. 
C) the market value of all final goods and services produced within a country in a given period of time. 
D) the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 
A) the market value of all goods and services produced within a country in a given period of time. 
B) the market value of all goods and services produced by the citizens of a country, regardless of where they are living in a given period of time. 
C) the market value of all final goods and services produced within a country in a given period of time. 
D) the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

Question 10

In a certain economy in 2005,the value of imports amounted to 80 percent of the value of exports.Consumption,investment,and government purchases added up to $5,000.The market value of all final goods and services produced within the economy was $5,500.It follows that the economy exported

Accepted Answer

A) $500 worth of goods and services. 
B) $1,000 worth of goods and services. 
C) $1,500 worth of goods and services. 
D) $2,500 worth of goods and services. 
A) $500 worth of goods and services. 
B) $1,000 worth of goods and services. 
C) $1,500 worth of goods and services. 
D) $2,500 worth of goods and services.

Question 11

In a simple circular-flow diagram total income and total expenditure are

Accepted Answer

A) never equal because total income always exceeds total expenditure. 
B) seldom equal because of the ongoing changes in an economy's unemployment rate. 
C) equal only when one dollar is spent on goods for every dollar that is spent on services. 
D) always equal because every transaction has a buyer and a seller. 
A) never equal because total income always exceeds total expenditure. 
B) seldom equal because of the ongoing changes in an economy's unemployment rate. 
C) equal only when one dollar is spent on goods for every dollar that is spent on services. 
D) always equal because every transaction has a buyer and a seller.

Question 12

GDP does not reflect

Accepted Answer

A) the value of leisure. 
B) the value of goods and services produced at home. 
C) the quality of the environment. 
D) All of the above are correct. 
A) the value of leisure. 
B) the value of goods and services produced at home. 
C) the quality of the environment. 
D) All of the above are correct.

Question 13

Table 23-2. The information in the table pertains to the country of Ophir.
  
-Refer to Table 23-2.From this information we can conclude that

Accepted Answer

A) real GDP was higher in 2006 than in 2005, and real GDP was higher in 2005 than in 2004. 
B) real GDP was higher in 2005 than in 2004, and real GDP was higher in 2005 than in 2006. 
C) real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. 
D) real GDP was higher in 2004 than in 2006, and real GDP was higher in 2005 than in 2004. 
A) real GDP was higher in 2006 than in 2005, and real GDP was higher in 2005 than in 2004. 
B) real GDP was higher in 2005 than in 2004, and real GDP was higher in 2005 than in 2006. 
C) real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. 
D) real GDP was higher in 2004 than in 2006, and real GDP was higher in 2005 than in 2004.

Question 14

Many things that society values,such as good health,high-quality education,enjoyable recreation opportunities,and desirable moral attributes of the population,are not measured as part of GDP.

Accepted Answer

A) Therefore, GDP is not a useful measure of society's welfare. 
B) GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government. 
C) GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare. 
D) GDP is still the best measure of society's welfare because these other values cannot actually be measured. 
A) Therefore, GDP is not a useful measure of society's welfare. 
B) GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government. 
C) GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare. 
D) GDP is still the best measure of society's welfare because these other values cannot actually be measured.

Question 15

Social Security payments are

Accepted Answer

A) included in GDP because they represent payments for work performed in the past. 
B) included in GDP because they represent potential consumption. 
C) excluded from GDP because they are not private pensions. 
D) excluded from GDP because they do not represent current government purchases of goods and services. 
A) included in GDP because they represent payments for work performed in the past. 
B) included in GDP because they represent potential consumption. 
C) excluded from GDP because they are not private pensions. 
D) excluded from GDP because they do not represent current government purchases of goods and services.

Question 16

Suppose the government reports that U.S.GDP was about $13 trillion dollars in the most recent quarter.What is the correct interpretation of this number?

Accepted Answer

A) This number reflects the actual value of final goods and services produced in that quarter. 
B) This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value. 
C) This number was obtained by taking the actual value of final goods and services produced in that quarter, then multiplying that value by 4. 
D) This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value and multiplying it by 4. 
A) This number reflects the actual value of final goods and services produced in that quarter. 
B) This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value. 
C) This number was obtained by taking the actual value of final goods and services produced in that quarter, then multiplying that value by 4. 
D) This number was obtained by taking the actual value of final goods and services produced in that quarter, then seasonally adjusting that value and multiplying it by 4.

Question 17

Which of the following items is counted as part of government purchases?

Accepted Answer

A) The federal government pays the salary of a Navy officer. 
B) The state of Nevada pays a private firm to repair a Nevada state highway. 
C) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city. 
D) All of the above are correct. 
A) The federal government pays the salary of a Navy officer. 
B) The state of Nevada pays a private firm to repair a Nevada state highway. 
C) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city. 
D) All of the above are correct.

Question 18

If nominal GDP is $10,000 and real GDP is $8,000,then the GDP deflator is 125.

Accepted Answer

A) True 
 B)False

Question 19

U.S.real GDP is substantially higher today than it was 60 years ago.What does this tell us,and what does it not tell us,about the well-being of U.S.residents?

Accepted Answer

Since this is in real terms,it tells us

Question 20

The component of GDP called consumption consists of

Accepted Answer

A) household spending on durable goods, but not household spending on nondurable goods or on services. 
B) household spending on durable and nondurable goods, but not household spending on services. 
C) household spending on durable and nondurable goods as well as household spending on services. 
D) spending by households and business firms on durable and nondurable goods as well as spending by households and business firms on services. 
A) household spending on durable goods, but not household spending on nondurable goods or on services. 
B) household spending on durable and nondurable goods, but not household spending on services. 
C) household spending on durable and nondurable goods as well as household spending on services. 
D) spending by households and business firms on durable and nondurable goods as well as spending by households and business firms on services.

Exam 23: Measuring a Nations Income

Which of the following serves as an example of the underground or "shadow" economy?

If total spending rises from one year to the next,then

Over the last few decades,Americans have chosen to cook less at home and eat more at restaurants.This change in behavior,by itself,has

A farmer produces the same output in 2004 as in 2003.His input prices increase by 50 percent,but so does his product price.We can conclude that

A steel company sells some steel to a bicycle company for $100.The bicycle company uses the steel to produce a bicycle,which it sells for $200.Taken together,these two transactions contribute

A transfer payment is

Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?

GDP is defined as

In a certain economy in 2005,the value of imports amounted to 80 percent of the value of exports.Consumption,investment,and government purchases added up to $5,000.The market value of all final goods and services produced within the economy was $5,500.It follows that the economy exported

In a simple circular-flow diagram total income and total expenditure are

GDP does not reflect

Table 23-2. The information in the table pertains to the country of Ophir. -Refer to Table 23-2.From this information we can conclude that

Many things that society values,such as good health,high-quality education,enjoyable recreation opportunities,and desirable moral attributes of the population,are not measured as part of GDP.

Social Security payments are

Suppose the government reports that U.S.GDP was about $13 trillion dollars in the most recent quarter.What is the correct interpretation of this number?

Which of the following items is counted as part of government purchases?

If nominal GDP is $10,000 and real GDP is $8,000,then the GDP deflator is 125.

U.S.real GDP is substantially higher today than it was 60 years ago.What does this tell us,and what does it not tell us,about the well-being of U.S.residents?

The component of GDP called consumption consists of

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters