Question 1

The statement that "GDP values all output equally" means that

Accepted Answer

A)  household production is treated the same as production by firms 
B)  depreciation of manufactured capital is treated the same as depletion of natural resources 
C)  the purchase of pollution control equipment is valued the same as the pollution itself 
D)  leisure time is valued the same as time spent working at a job 
E)  the market price of output is the measure of that output's value 
A)  household production is treated the same as production by firms 
B)  depreciation of manufactured capital is treated the same as depletion of natural resources 
C)  the purchase of pollution control equipment is valued the same as the pollution itself 
D)  leisure time is valued the same as time spent working at a job 
E)  the market price of output is the measure of that output's value

Question 2

Exhibit 7-2
  
-Use the information in Exhibit 7-2 to calculate the consumer price index in the current year.

Accepted Answer

A)  CPI = 2 
B)  CPI = 50 
C)  CPI = 55 
D)  CPI = 182 
E)  CPI = 200 
A)  CPI = 2 
B)  CPI = 50 
C)  CPI = 55 
D)  CPI = 182 
E)  CPI = 200

Question 3

If nominal GDP increases by 3 percent from 2004 to 2005 and real GDP increases by 5 percent from 2004 to 2005,this indicates that

Accepted Answer

A)  depreciation occurred 
B)  taxes increased 
C)  the inflation rate decreased 
D)  the price level decreased 
E)  output decreased 
A)  depreciation occurred 
B)  taxes increased 
C)  the inflation rate decreased 
D)  the price level decreased 
E)  output decreased

Question 4

Limitations of the national income accounting system include

Accepted Answer

A)  valuing all output at its market price regardless of whether it contributes to a society's economic welfare 
B)  placing a market value on all positive externalities but ignoring negative externalities 
C)  accurate measurement of the value of leisure time 
D)  double counting food produced on a farm for family consumption 
E)  ignoring government production of goods and services 
A)  valuing all output at its market price regardless of whether it contributes to a society's economic welfare 
B)  placing a market value on all positive externalities but ignoring negative externalities 
C)  accurate measurement of the value of leisure time 
D)  double counting food produced on a farm for family consumption 
E)  ignoring government production of goods and services

Question 5

If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion,then the

Accepted Answer

A)  CPI is 125 
B)  economic activity has decreased 20 percent 
C)  GDP price index is 125 
D)  GDP price index is 80 
E)  economy has grown by 20 percent 
A)  CPI is 125 
B)  economic activity has decreased 20 percent 
C)  GDP price index is 125 
D)  GDP price index is 80 
E)  economy has grown by 20 percent

Question 6

Double counting in the value added approach to GDP refers to

Accepted Answer

A)  corporate income being taxed twice 
B)  the amount of income taxes paid to states that is taxable by the federal government 
C)  calculating GDP twice using the income and expenditures methods 
D)  adding the value of exports to GDP and subtracting the value of imports 
E)  counting the total value of a final output in addition to the value of the inputs used to make it 
A)  corporate income being taxed twice 
B)  the amount of income taxes paid to states that is taxable by the federal government 
C)  calculating GDP twice using the income and expenditures methods 
D)  adding the value of exports to GDP and subtracting the value of imports 
E)  counting the total value of a final output in addition to the value of the inputs used to make it

Question 7

Which of the following would not be included in the calculation of GDP?

Accepted Answer

A)  Jim purchases a new automobile. 
B)  Joe pays a plumber $100 to fix a broken pipe. 
C)  Sandy,who is on welfare,receives $100 in food stamps. 
D)  Kurt purchases an airline ticket for $500 just before a big reduction in fares. 
E)  Laurie pays $15 for a haircut. 
A)  Jim purchases a new automobile. 
B)  Joe pays a plumber $100 to fix a broken pipe. 
C)  Sandy,who is on welfare,receives $100 in food stamps. 
D)  Kurt purchases an airline ticket for $500 just before a big reduction in fares. 
E)  Laurie pays $15 for a haircut.

Question 8

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

Accepted Answer

A)  triangular flow of output and income through different sectors of the economy 
B)  stock of precious metals accumulated in the public treasury 
C)  comparative advantage of crucial national industries 
D)  circular flow of output and income through different sectors of the economy 
E)  balance sheets of all a country's corporations 
A)  triangular flow of output and income through different sectors of the economy 
B)  stock of precious metals accumulated in the public treasury 
C)  comparative advantage of crucial national industries 
D)  circular flow of output and income through different sectors of the economy 
E)  balance sheets of all a country's corporations

Question 9

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that turns them into peanut butter,which is then sold for $45.Which of the following is true?

Accepted Answer

A)  Total value added is $65. 
B)  The value of final sales is $65. 
C)  The value of final sales is $25. 
D)  Total value added is $25. 
E)  Total value added is $45. 
A)  Total value added is $65. 
B)  The value of final sales is $65. 
C)  The value of final sales is $25. 
D)  Total value added is $25. 
E)  Total value added is $45.

Question 10

Gross Domestic Product measures the

Accepted Answer

A)  market value of all final goods and services produced by a nation's citizens,residents and firms of a nation regardless of the location of production 
B)  market value of all final goods and services produced by resources located within a nation regardless of who owns those resources 
C)  market value of all goods and services produced by resources located within a nation regardless of who owns those resources 
D)  market values of all goods and services produced by a nation's citizens and firms regardless of the location of production 
E)  market value of all goods and services produced within a nation by resources owned by residents and firms of that nation 
A)  market value of all final goods and services produced by a nation's citizens,residents and firms of a nation regardless of the location of production 
B)  market value of all final goods and services produced by resources located within a nation regardless of who owns those resources 
C)  market value of all goods and services produced by resources located within a nation regardless of who owns those resources 
D)  market values of all goods and services produced by a nation's citizens and firms regardless of the location of production 
E)  market value of all goods and services produced within a nation by resources owned by residents and firms of that nation

Question 11

Which of the following is not true about Gross Domestic Product?

Accepted Answer

A)  It includes only final goods and services. 
B)  It reflects production in a particular year. 
C)  Intermediate goods and services are excluded to prevent double counting. 
D)  It may be measured by totalling the spending by each group in society. 
E)  It includes transfer payments. 
A)  It includes only final goods and services. 
B)  It reflects production in a particular year. 
C)  Intermediate goods and services are excluded to prevent double counting. 
D)  It may be measured by totalling the spending by each group in society. 
E)  It includes transfer payments.

Question 12

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 13

Which of the following is not considered a component of government purchases in calculating GDP?

Accepted Answer

A)  the cost of a new federal prison 
B)  the cost of building a new road 
C)  unemployment compensation payments 
D)  payments made to plow public roads after a snowstorm 
E)  the cost of police protection 
A)  the cost of a new federal prison 
B)  the cost of building a new road 
C)  unemployment compensation payments 
D)  payments made to plow public roads after a snowstorm 
E)  the cost of police protection

Question 14

Which of the following would be included in this year's GDP?

Accepted Answer

A)  one hundred shares of IBM stock that Tony Hanks bought this May 
B)  the used car Tracey sold to Justin 
C)  George Garcia's purchase of a fishing rod and reel at a garage sale 
D)  the $20 Sharon Johnson gave Dennis O'Brien as a reward for finding her lost wedding ring 
E)  that bucket of Kentucky Fried Chicken you bought this July 
A)  one hundred shares of IBM stock that Tony Hanks bought this May 
B)  the used car Tracey sold to Justin 
C)  George Garcia's purchase of a fishing rod and reel at a garage sale 
D)  the $20 Sharon Johnson gave Dennis O'Brien as a reward for finding her lost wedding ring 
E)  that bucket of Kentucky Fried Chicken you bought this July

Question 15

If a firm hires labor for $8,000,pays rent of $4,000,buys raw materials for $13,000,earns profits of $1,200,and sells its output for $31,000,the firm's value added 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 16

In the circular flow model,

Accepted Answer

A)  the flow of expenditures measures the dollar value on purchases of resources in the product market 
B)  the flow of expenditures measures the dollar value of purchases of both goods and services 
C)  the flow of income to the owners of labor only 
D)  the flow of expenditures as they move through the loanable funds market 
E)  the flow of funds from the product to the resource market 
A)  the flow of expenditures measures the dollar value on purchases of resources in the product market 
B)  the flow of expenditures measures the dollar value of purchases of both goods and services 
C)  the flow of income to the owners of labor only 
D)  the flow of expenditures as they move through the loanable funds market 
E)  the flow of funds from the product to the resource market

Question 17

GDP is not a perfect measure of material well-being because it ignores

Accepted Answer

A)  production of goods and services by the government 
B)  goods produced in the United States but shipped overseas 
C)  negative externalities 
D)  consumer spending on services 
E)  business spending on equipment 
A)  production of goods and services by the government 
B)  goods produced in the United States but shipped overseas 
C)  negative externalities 
D)  consumer spending on services 
E)  business spending on equipment

Question 18

Which of the following would directly reduce GDP?

Accepted Answer

A)  An unscrupulous disposal company dumps barrels of toxic waste near a suburban water supply. 
B)  The switch from home-cooked meals to restaurant meals lowers the nutritional value of the average diet. 
C)  The town of Council Bluffs decides to fire the lifeguards at the local swimming pool. 
D)  Pollution of international waters increases. 
E)  Damage claims filed with auto insurance companies increase. 
A)  An unscrupulous disposal company dumps barrels of toxic waste near a suburban water supply. 
B)  The switch from home-cooked meals to restaurant meals lowers the nutritional value of the average diet. 
C)  The town of Council Bluffs decides to fire the lifeguards at the local swimming pool. 
D)  Pollution of international waters increases. 
E)  Damage claims filed with auto insurance companies increase.

Question 19

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

Accepted Answer

A) True 
 B)False

Question 20

GDP figures tend to understate the quantity of goods and services available because

Accepted Answer

A)  they ignore most household production 
B)  many items are counted twice or more in intermediate stages of production 
C)  more women are entering the labor force 
D)  firms often add less to inventories than they planned to 
E)  exports are subtracted from GDP but imports are not added back in 
A)  they ignore most household production 
B)  many items are counted twice or more in intermediate stages of production 
C)  more women are entering the labor force 
D)  firms often add less to inventories than they planned to 
E)  exports are subtracted from GDP but imports are not added back in

Exam 7: Tracking the US Economy

The statement that "GDP values all output equally" means that

Exhibit 7-2 -Use the information in Exhibit 7-2 to calculate the consumer price index in the current year.

If nominal GDP increases by 3 percent from 2004 to 2005 and real GDP increases by 5 percent from 2004 to 2005,this indicates that

Limitations of the national income accounting system include

If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion,then the

Double counting in the value added approach to GDP refers to

Which of the following would not be included in the calculation of GDP?

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

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that turns them into peanut butter,which is then sold for $45.Which of the following is true?

Gross Domestic Product measures the

Which of the following is not true about Gross Domestic Product?

The largest component of aggregate expenditure is

Which of the following is not considered a component of government purchases in calculating GDP?

Which of the following would be included in this year's GDP?

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

In the circular flow model,

GDP is not a perfect measure of material well-being because it ignores

Which of the following would directly reduce GDP?

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

GDP figures tend to understate the quantity of goods and services available because

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Productivity and Growth

Unemployment and Inflation

Aggregate Expenditure

Aggregate Expenditure and 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

Developing and Transitional Economies

Understanding Graphs

National Income Accounts

Variable Net Exports

Variable Net Exports Revisited

The Algebra of Income and Expenditure

The Algebra of Demand-Side Equilibrium

Filters