Question 1

When a firm sells a good or a service,the sale contributes to the nation's income

Accepted Answer

A) only if the buyer of the good or service is a household. 
B) only if the buyer of the good or service is a household or another firm. 
C) whether the buyer of the good or a service is a household, another firm, or the government. 
D) We have to know whether the item being sold is a good or a service in order to answer the question. 
A) only if the buyer of the good or service is a household. 
B) only if the buyer of the good or service is a household or another firm. 
C) whether the buyer of the good or a service is a household, another firm, or the government. 
D) We have to know whether the item being sold is a good or a service in order to answer the question.

Question 2

If a state made a previously-illegal activity such as gambling or prostitution legal,then,other things equal,GDP

Accepted Answer

A) necessarily decreases. 
B) necessarily increases. 
C) doesn't change because both legal and illegal production are included in GDP. 
D) doesn't change because these activities are never included in GDP. 
A) necessarily decreases. 
B) necessarily increases. 
C) doesn't change because both legal and illegal production are included in GDP. 
D) doesn't change because these activities are never included in GDP.

Question 3

Unlike national income,personal income

Accepted Answer

A) includes retained earnings, corporate income taxes and social insurance contributions, and excludes interest and transfer payments received by households from government. 
B) excludes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government. 
C) excludes retained earnings, corporate income taxes and social insurance contributions, and includes interest and transfer payments received by households from government. 
D) includes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government. 
A) includes retained earnings, corporate income taxes and social insurance contributions, and excludes interest and transfer payments received by households from government. 
B) excludes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government. 
C) excludes retained earnings, corporate income taxes and social insurance contributions, and includes interest and transfer payments received by households from government. 
D) includes retained earnings, corporate income taxes, social insurance contributions, and interest and transfer payments received by households from government.

Question 4

A country reported nominal GDP of $100 billion in 2006 and $75 billion in 2005;it reported a GDP deflator of 125 in 2006 and 120 in 2005.Between 2005 and 2006,

Accepted Answer

A) real output and the price level both rose. 
B) real output rose and the price level fell. 
C) real output fell and the price level rose. 
D) real output and the price level both fell. 
A) real output and the price level both rose. 
B) real output rose and the price level fell. 
C) real output fell and the price level rose. 
D) real output and the price level both fell.

Question 5

Steph buys a designer dress produced by an American-owned fashion shop in France.As a result,U.S.consumption increases,U.S.net exports

Accepted Answer

A) decrease, U.S.GDP is unaffected, and U.S.GNP increases. 
B) decrease, U.S.GDP increases, and U.S.GNP is unaffected. 
C) decrease, U.S.GNP increases, and French GDP is unaffected. 
D) are unaffected, U.S.GDP is unaffected, and French GDP increases. 
A) decrease, U.S.GDP is unaffected, and U.S.GNP increases. 
B) decrease, U.S.GDP increases, and U.S.GNP is unaffected. 
C) decrease, U.S.GNP increases, and French GDP is unaffected. 
D) are unaffected, U.S.GDP is unaffected, and French GDP increases.

Question 6

Which of the following items is counted in U.S.GDP?

Accepted Answer

A) final goods and services that are purchased by the U.S.federal government 
B) intermediate goods that are produced in the U.S.but which are unsold at the end of the GDP accounting period 
C) goods and services produced by foreign citizens working in the U.S. 
D) All of the above are included in U.S.GDP. 
A) final goods and services that are purchased by the U.S.federal government 
B) intermediate goods that are produced in the U.S.but which are unsold at the end of the GDP accounting period 
C) goods and services produced by foreign citizens working in the U.S. 
D) All of the above are included in U.S.GDP.

Question 7

In 2004,government purchases of goods and services were

Accepted Answer

A) larger than consumption, but smaller than investment. 
B) larger than investment, but smaller than consumption. 
C) smaller than both consumption and investment. 
D) larger than both consumption and investment. 
A) larger than consumption, but smaller than investment. 
B) larger than investment, but smaller than consumption. 
C) smaller than both consumption and investment. 
D) larger than both consumption and investment.

Question 8

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

Accepted Answer

A) longer life expectancy and a lower percentage of the population that is literate. 
B) longer life expectancy and a higher percentage of the population that is literate. 
C) very nearly the same life expectancy and a lower percentage of the population that is literate. 
D) very nearly the same life expectancy and a higher percentage of the population that is literate. 
A) longer life expectancy and a lower percentage of the population that is literate. 
B) longer life expectancy and a higher percentage of the population that is literate. 
C) very nearly the same life expectancy and a lower percentage of the population that is literate. 
D) very nearly the same life expectancy and a higher percentage of the population that is literate.

Question 9

Which of the following is included in the investment component of GDP?

Accepted Answer

A) households' purchases of newly constructed homes 
B) net additions to firms' inventories 
C) firms' purchases of capital equipment 
D) All of the above are correct. 
A) households' purchases of newly constructed homes 
B) net additions to firms' inventories 
C) firms' purchases of capital equipment 
D) All of the above are correct.

Question 10

Table 23-1. The data pertain to the nation of Simplia for the year 2006.
  
-Refer to Table 23-1.National income for this economy is

Accepted Answer

A) $96. 
B) $92. 
C) $90. 
D) $88. 
A) $96. 
B) $92. 
C) $90. 
D) $88.

Question 11

For an economy as a whole,

Accepted Answer

A) income is greater than expenditure 
B) expenditure is greater than income. 
C) income is equal to expenditure. 
D) GDP measures income more precisely than it measures expenditure. 
A) income is greater than expenditure 
B) expenditure is greater than income. 
C) income is equal to expenditure. 
D) GDP measures income more precisely than it measures expenditure.

Question 12

The income that households and noncorporate businesses receive is called

Accepted Answer

A) personal income. 
B) net national product. 
C) disposable personal income. 
D) national income. 
A) personal income. 
B) net national product. 
C) disposable personal income. 
D) national income.

Question 13

The information below was reported by the World Bank.On the basis of this information,which list below contains the correct ordering of GDP per person from highest to lowest?

Accepted Answer

A) Kenya, Tanzania, Zimbabwe 
B) Kenya, Zimbabwe, Tanzania 
C) Zimbabwe, Kenya, Tanzania 
D) Zimbabwe, Tanzania, Kenya 
A) Kenya, Tanzania, Zimbabwe 
B) Kenya, Zimbabwe, Tanzania 
C) Zimbabwe, Kenya, Tanzania 
D) Zimbabwe, Tanzania, Kenya

Question 14

Suppose that the country of Samiam produces only eggs and ham.In 2005 it produced 100 dozen eggs at $3 per dozen and 50 pounds of ham at $4 per pound.In 2004,the base year,eggs sold for $1.50 per dozen and ham sold for $5 per pound.For 2005,

Accepted Answer

A) nominal GDP is $500, real GDP is $400, and the GDP deflator is 80. 
B) nominal GDP is $500, real GDP is $400, and the GDP deflator is 125. 
C) nominal GDP is $400, real GDP is $400, and the GDP deflator is 100. 
D) nominal GDP is $400, real GDP is $500, and the GDP deflator is 125. 
A) nominal GDP is $500, real GDP is $400, and the GDP deflator is 80. 
B) nominal GDP is $500, real GDP is $400, and the GDP deflator is 125. 
C) nominal GDP is $400, real GDP is $400, and the GDP deflator is 100. 
D) nominal GDP is $400, real GDP is $500, and the GDP deflator is 125.

Question 15

A movie company makes 500,000 DVDs of one of its latest releases.It sells 300,000 of them before the end of the second quarter,and holds the others in its warehouse.How will the 200,000 unsold DVDs be treated in the GDP statistics?

Accepted Answer

A) Since the DVDs eventually will be bought by consumers, they are included as consumption in the second quarter. 
B) Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter GDP. 
C) The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP. 
D) The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise third-quarter GDP. 
A) Since the DVDs eventually will be bought by consumers, they are included as consumption in the second quarter. 
B) Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter GDP. 
C) The DVDs will be counted as a change in inventory in the second quarter and so will be included in second-quarter GDP. 
D) The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise third-quarter GDP.

Question 16

Which of the following transactions adds to U.S.GDP for 2006?

Accepted Answer

A) In 2006, Marvin Windows manufactures 20 windows that will eventually be installed in an office building in Minneapolis.The windows remain in Marvin's inventory at the end of 2006. 
B) An Irish marketing consultant works in Boston during the summer of 2006 and earns $30,000 during that time. 
C) When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent.John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month. 
D) All of the above transactions adds to GDP for 2006. 
A) In 2006, Marvin Windows manufactures 20 windows that will eventually be installed in an office building in Minneapolis.The windows remain in Marvin's inventory at the end of 2006. 
B) An Irish marketing consultant works in Boston during the summer of 2006 and earns $30,000 during that time. 
C) When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent.John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month. 
D) All of the above transactions adds to GDP for 2006.

Question 17

Changes in inventory are included in the investment component of GDP.

Accepted Answer

A) True 
 B)False

Question 18

One bag of flour is sold for $1.50 to a bakery,which uses the flour to bake bread that is sold for $4.00 to consumers.A second bag of flour is sold to a consumer in a grocery store for $2.00.Taking these three transactions into account,what is the effect on GDP?

Accepted Answer

A) GDP increases by $1.50. 
B) GDP increases by $3.50. 
C) GDP increases by $6.00. 
D) GDP increases by $7.50. 
A) GDP increases by $1.50. 
B) GDP increases by $3.50. 
C) GDP increases by $6.00. 
D) GDP increases by $7.50.

Question 19

If nominal GDP is $10 trillion and real GDP is $8 trillion,the GDP deflator is

Accepted Answer

A) 80, and this indicates that the price level has decreased by 20 percent since the base year. 
B) 80, and this indicates that the price level has increased by 80 percent since the base year. 
C) 125, and this indicates that the price level has increased by 25 percent since the base year. 
D) 125, and this indicates that the price level has increased by 125 percent since the base year. 
A) 80, and this indicates that the price level has decreased by 20 percent since the base year. 
B) 80, and this indicates that the price level has increased by 80 percent since the base year. 
C) 125, and this indicates that the price level has increased by 25 percent since the base year. 
D) 125, and this indicates that the price level has increased by 125 percent since the base year.

Question 20

A wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut.As a result,

Accepted Answer

A) U.S.investment, GDP, and GNP all increase by the same amount. 
B) U.S.investment increases, but GDP and GNP are unaffected by the purchase. 
C) U.S.investment and GDP increase by the same amount, but U.S.GNP increases by a smaller amount. 
D) U.S.investment and GNP increase by the same amount, but U.S.GDP increases by a smaller amount. 
A) U.S.investment, GDP, and GNP all increase by the same amount. 
B) U.S.investment increases, but GDP and GNP are unaffected by the purchase. 
C) U.S.investment and GDP increase by the same amount, but U.S.GNP increases by a smaller amount. 
D) U.S.investment and GNP increase by the same amount, but U.S.GDP increases by a smaller amount.

Exam 23: Measuring a Nations Income

When a firm sells a good or a service,the sale contributes to the nation's income

If a state made a previously-illegal activity such as gambling or prostitution legal,then,other things equal,GDP

Unlike national income,personal income

A country reported nominal GDP of $100 billion in 2006 and $75 billion in 2005;it reported a GDP deflator of 125 in 2006 and 120 in 2005.Between 2005 and 2006,

Steph buys a designer dress produced by an American-owned fashion shop in France.As a result,U.S.consumption increases,U.S.net exports

Which of the following items is counted in U.S.GDP?

In 2004,government purchases of goods and services were

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with

Which of the following is included in the investment component of GDP?

Table 23-1. The data pertain to the nation of Simplia for the year 2006. -Refer to Table 23-1.National income for this economy is

For an economy as a whole,

The income that households and noncorporate businesses receive is called

The information below was reported by the World Bank.On the basis of this information,which list below contains the correct ordering of GDP per person from highest to lowest?

Suppose that the country of Samiam produces only eggs and ham.In 2005 it produced 100 dozen eggs at $3 per dozen and 50 pounds of ham at $4 per pound.In 2004,the base year,eggs sold for $1.50 per dozen and ham sold for $5 per pound.For 2005,

A movie company makes 500,000 DVDs of one of its latest releases.It sells 300,000 of them before the end of the second quarter,and holds the others in its warehouse.How will the 200,000 unsold DVDs be treated in the GDP statistics?

Which of the following transactions adds to U.S.GDP for 2006?

Changes in inventory are included in the investment component of GDP.

One bag of flour is sold for $1.50 to a bakery,which uses the flour to bake bread that is sold for $4.00 to consumers.A second bag of flour is sold to a consumer in a grocery store for $2.00.Taking these three transactions into account,what is the effect on GDP?

If nominal GDP is $10 trillion and real GDP is $8 trillion,the GDP deflator is

A wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut.As a result,

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

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