Question 1

The business cycle describes

Accepted Answer

A) the change in potential GDP over time. 
B) the change in the standard of living across countries. 
C) the behavior of real GDP over time. 
D) the behavior of nominal GDP over time. 
E) the behavior of GNP over time. 
A) the change in potential GDP over time. 
B) the change in the standard of living across countries. 
C) the behavior of real GDP over time. 
D) the behavior of nominal GDP over time. 
E) the behavior of GNP over time.

Question 2

$$\begin{array} { l r } 
 { \text { Item } } & \text { Billions of dollars } \
\hline \text { Wages } & 5,000 \
\text { Consumption expenditure } & 3,500 \
\text { Interest, rent, and profit } & 1,500 \
\text { Investment } & 1,200 \
\text { Statistical discrepancy } & 0 \
\text { Net exports } & - 300 \
\text { Indirect taxes minus subsidies } & 500 \
\text { Depreciation } & 800
\end{array}$$
-The table above has information about an economy. Using this information, GDP equals

Accepted Answer

A) $6,500 billion. 
B) $7,800 billion. 
C) $7,000 billion. 
D) $8,500 billion. 
E) some amount that cannot be calculated without information on the amount of government expenditures. 
A) $6,500 billion. 
B) $7,800 billion. 
C) $7,000 billion. 
D) $8,500 billion. 
E) some amount that cannot be calculated without information on the amount of government expenditures.

Question 3

A new technology is discovered which results in all new cars producing 50 percent less pollution. Which of the following is true?

Accepted Answer

A) GDP will increase to reflect the fact that the air we breathe is cleaner. 
B) GDP will increase if there is an increase in the production cost and price of the car. 
C) GDP increases anytime pollution is reduced. 
D) GDP will decrease. 
E) Real GDP increases because the air is cleaner, but nominal GDP does not change since air is free. 
A) GDP will increase to reflect the fact that the air we breathe is cleaner. 
B) GDP will increase if there is an increase in the production cost and price of the car. 
C) GDP increases anytime pollution is reduced. 
D) GDP will decrease. 
E) Real GDP increases because the air is cleaner, but nominal GDP does not change since air is free.

Question 4

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

Accepted Answer

A) does not change, because the car was not produced this year. 
B) increases, because the car is a durable good and increases consumption. 
C) increases, because the car is a durable good and increases investment. 
D) does not change, because Jamie did not buy the car from a dealership. 
E) increases, because this expenditure decreases saving. 
A) does not change, because the car was not produced this year. 
B) increases, because the car is a durable good and increases consumption. 
C) increases, because the car is a durable good and increases investment. 
D) does not change, because Jamie did not buy the car from a dealership. 
E) increases, because this expenditure decreases saving.

Question 5

What must be done to net domestic product at factor cost in order to transform it to gross domestic product?
 Explain why these adjustments are necessary.

Accepted Answer

Several adjustments must be made to net

Question 6

Investment is the expenditure done by

Accepted Answer

A) savers. 
B) firms. 
C) governments. 
D) the rest of the world. 
E) Both answers A and B are correct. 
A) savers. 
B) firms. 
C) governments. 
D) the rest of the world. 
E) Both answers A and B are correct.

Question 7

One reason the total sum of the income categories does not equal GDP is that

Accepted Answer

A) GDP values goods and services at market prices and the income approach values them at factor cost. 
B) GDP values goods and services at retail prices and the income approach values them at wholesale cost. 
C) taxes are generally larger than subsidies and the depreciation of capital is negligible. 
D) GDP does not include depreciation, which is part of the income categories. 
E) people do not spend all their income, so the value of consumption expenditure is less than the value of wages. 
A) GDP values goods and services at market prices and the income approach values them at factor cost. 
B) GDP values goods and services at retail prices and the income approach values them at wholesale cost. 
C) taxes are generally larger than subsidies and the depreciation of capital is negligible. 
D) GDP does not include depreciation, which is part of the income categories. 
E) people do not spend all their income, so the value of consumption expenditure is less than the value of wages.

Question 8

When measuring GDP by the income approach, wage income includes i) health-care insurance paid for by the firm for its employees.
Ii) Social Security contributions made by the firm.
Iii) wages paid during a worker's vacation time.

Accepted Answer

A) i, ii and iii 
B) i and ii only 
C) i only 
D) ii only 
E) ii and iii only 
A) i, ii and iii 
B) i and ii only 
C) i only 
D) ii only 
E) ii and iii only

Question 9

In 2011, U.S. GDP was

Accepted Answer

A) $15 trillion using the expenditure approach. 
B) $15 trillion using the income approach. 
C) $15 trillion using the expenditure approach and $14 trillion using the income approach. 
D) $16 trillion using the income approach and $14 trillion using the expenditure approach. 
E) both A and B are correct. 
A) $15 trillion using the expenditure approach. 
B) $15 trillion using the income approach. 
C) $15 trillion using the expenditure approach and $14 trillion using the income approach. 
D) $16 trillion using the income approach and $14 trillion using the expenditure approach. 
E) both A and B are correct.

Question 10

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

Accepted Answer

A) $900,000. 
B) $945,000. 
C) $1,000,000. 
D) $1,050,000. 
E) an amount that cannot be determined without information about nominal GDP in 2008. 
A) $900,000. 
B) $945,000. 
C) $1,000,000. 
D) $1,050,000. 
E) an amount that cannot be determined without information about nominal GDP in 2008.

Question 11

A new technology is discovered that results in all new cars producing 50 percent less pollution. The technology costs nothing to produce and cars do not change in price. As a result of the technology, there is a reduction in the number of visits people make to the doctor to complain of breathing difficulties. Which of the following is true?

Accepted Answer

A) Real GDP decreases as a result of fewer doctor services being provided. 
B) Real GDP is not affected. 
C) Nominal GDP increases to reflect the improvement in the health of the population. 
D) Real GDP decreases to reflect the decrease in pollution. 
E) Nominal GDP does not change and real GDP increases. 
A) Real GDP decreases as a result of fewer doctor services being provided. 
B) Real GDP is not affected. 
C) Nominal GDP increases to reflect the improvement in the health of the population. 
D) Real GDP decreases to reflect the decrease in pollution. 
E) Nominal GDP does not change and real GDP increases.

Question 12

Expenditures on U.S. produced steaks, shoes, and doctor visits are most likely classified as

Accepted Answer

A) consumption expenditure. 
B) investment. 
C) government expenditure on goods and services. 
D) net exports of goods and services. 
E) net imports of goods and services. 
A) consumption expenditure. 
B) investment. 
C) government expenditure on goods and services. 
D) net exports of goods and services. 
E) net imports of goods and services.

Question 13

$\begin{array}{lc}
{\text { Item }} & \text { Billions of dollars } \
\hline \text { Wages } & 300 \
\text { Consumption expenditure } & 350 \
\text { Interest, rent, and profit } & 50 \
\text { Statistical discrepancy } & 0 \
\text { Government expenditure } & 300 \
\text { Indirect taxes minus subsidies } & 15 \
\text { Net exports of goods and services } & -11 \
\text { Depredation } & 15
\end{array}$
-Using the information in the table above, what does GDP equal?

Accepted Answer

A) $365 billion 
B) $350 billion 
C) $650 billion 
D) $380 billion 
E) GDP cannot be calculated without information on the amount of investment. 
A) $365 billion 
B) $350 billion 
C) $650 billion 
D) $380 billion 
E) GDP cannot be calculated without information on the amount of investment.

Question 14

Which of the following is NOT included in measured U.S. GDP?

Accepted Answer

A) the value of the pizzas produced at Pizza Hut in Kansas City 
B) the value of leisure time 
C) the value of the goods produced at a French owned plant in Atlanta, GA 
D) the value of the services produced by a lawyer in Tampa, FL 
E) the value of a plane produced by Boeing in Washington and sold to Air France 
A) the value of the pizzas produced at Pizza Hut in Kansas City 
B) the value of leisure time 
C) the value of the goods produced at a French owned plant in Atlanta, GA 
D) the value of the services produced by a lawyer in Tampa, FL 
E) the value of a plane produced by Boeing in Washington and sold to Air France

Question 15

Last year in a nation to the south, net domestic product at factor cost equaled $3,300 billion. Indirect taxes minus subsidies equaled $200 billion, depreciation equaled $800 billion, the statistical discrepancy equaled zero, and net operating surplus equaled $150 billion. The country's GDP was

Accepted Answer

A) $2,300 billion. 
B) $3,500 billion. 
C) $4,300 billion. 
D) $4,450 billion. 
E) $4,150 billion. 
A) $2,300 billion. 
B) $3,500 billion. 
C) $4,300 billion. 
D) $4,450 billion. 
E) $4,150 billion.

Question 16

The business cycle is defined as

Accepted Answer

A) changes in the stock market. 
B) changes in financial markets. 
C) persistent growth in potential GDP. 
D) irregular ups and downs in production and jobs. 
E) the period of time during which the unemployment rate is rising. 
A) changes in the stock market. 
B) changes in financial markets. 
C) persistent growth in potential GDP. 
D) irregular ups and downs in production and jobs. 
E) the period of time during which the unemployment rate is rising.

Question 17

The largest expenditure category in the United States is

Accepted Answer

A) consumption expenditure. 
B) investment. 
C) government expenditure on goods and services. 
D) net exports of goods and services. 
E) wages. 
A) consumption expenditure. 
B) investment. 
C) government expenditure on goods and services. 
D) net exports of goods and services. 
E) wages.

Question 18

The base year is 2010. A country only produces MP3 players. The price of an MP3 player in 2008 was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3 players produced in 2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals

Accepted Answer

A) $1,000,000. 
B) $500,000 
C) $600,000. 
D) $200,000 
E) an amount that cannot be determined without information about real GDP in 2010. 
A) $1,000,000. 
B) $500,000 
C) $600,000. 
D) $200,000 
E) an amount that cannot be determined without information about real GDP in 2010.

Question 19

Which of the following is NOT included in the income approach to calculating GDP?

Accepted Answer

A) interest 
B) wages 
C) net exports of goods and services 
D) profits 
E) rent 
A) interest 
B) wages 
C) net exports of goods and services 
D) profits 
E) rent

Question 20

Which of the following are included in interest income?
i. payments made for the use of land
ii. income paid to households for loans they make
iii. payments made by households for their borrowing

Accepted Answer

A) i, ii and iii 
B) ii and iii only 
C) i and ii only 
D) ii only 
E) iii only 
A) i, ii and iii 
B) ii and iii only 
C) i and ii only 
D) ii only 
E) iii only

The business cycle describes

Item Billions of dollars Wages 5,000 Consumption expenditure 3,500 Interest, rent, and profit 1,500 Investment 1,200 Statistical discrepancy 0 Net exports -300 Indirect taxes minus subsidies 500 Depreciation 800 -The table above has information about an economy. Using this information, GDP equals

A new technology is discovered which results in all new cars producing 50 percent less pollution. Which of the following is true?

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

What must be done to net domestic product at factor cost in order to transform it to gross domestic product? Explain why these adjustments are necessary.

Investment is the expenditure done by

One reason the total sum of the income categories does not equal GDP is that

When measuring GDP by the income approach, wage income includes i) health-care insurance paid for by the firm for its employees. Ii) Social Security contributions made by the firm. Iii) wages paid during a worker's vacation time.

In 2011, U.S. GDP was

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

Expenditures on U.S. produced steaks, shoes, and doctor visits are most likely classified as

Item Billions of dollars Wages 300 Consumption expenditure 350 Interest, rent, and profit 50 Statistical discrepancy 0 Government expenditure 300 Indirect taxes minus subsidies 15 Net exports of goods and services -11 Depredation 15 -Using the information in the table above, what does GDP equal?

Which of the following is NOT included in measured U.S. GDP?

Last year in a nation to the south, net domestic product at factor cost equaled $3,300 billion. Indirect taxes minus subsidies equaled $200 billion, depreciation equaled $800 billion, the statistical discrepancy equaled zero, and net operating surplus equaled $150 billion. The country's GDP was

The business cycle is defined as

The largest expenditure category in the United States is

The base year is 2010. A country only produces MP3 players. The price of an MP3 player in 2008 was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3 players produced in 2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals

Which of the following is NOT included in the income approach to calculating GDP?

Which of the following are included in interest income? i. payments made for the use of land ii. income paid to households for loans they make iii. payments made by households for their borrowing

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 14: Gdp: a Measure of Total Production and Income

The business cycle describes

Item Billions of dollars Wages 5,000 Consumption expenditure 3,500 Interest, rent, and profit 1,500 Investment 1,200 Statistical discrepancy 0 Net exports -300 Indirect taxes minus subsidies 500 Depreciation 800 -The table above has information about an economy. Using this information, GDP equals

A new technology is discovered which results in all new cars producing 50 percent less pollution. Which of the following is true?

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

What must be done to net domestic product at factor cost in order to transform it to gross domestic product? Explain why these adjustments are necessary.

Investment is the expenditure done by

One reason the total sum of the income categories does not equal GDP is that

When measuring GDP by the income approach, wage income includes i) health-care insurance paid for by the firm for its employees. Ii) Social Security contributions made by the firm. Iii) wages paid during a worker's vacation time.

In 2011, U.S. GDP was

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

Expenditures on U.S. produced steaks, shoes, and doctor visits are most likely classified as

Item Billions of dollars Wages 300 Consumption expenditure 350 Interest, rent, and profit 50 Statistical discrepancy 0 Government expenditure 300 Indirect taxes minus subsidies 15 Net exports of goods and services -11 Depredation 15 -Using the information in the table above, what does GDP equal?

Which of the following is NOT included in measured U.S. GDP?

Last year in a nation to the south, net domestic product at factor cost equaled $3,300 billion. Indirect taxes minus subsidies equaled $200 billion, depreciation equaled $800 billion, the statistical discrepancy equaled zero, and net operating surplus equaled $150 billion. The country's GDP was

The business cycle is defined as

The largest expenditure category in the United States is

The base year is 2010. A country only produces MP3 players. The price of an MP3 player in 2008 was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3 players produced in 2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals

Which of the following is NOT included in the income approach to calculating GDP?

Which of the following are included in interest income? i. payments made for the use of land ii. income paid to households for loans they make iii. payments made by households for their borrowing

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters