Question 1

Exhibit 7-3
  
-Refer to Exhibit 7-3.Between 2002 and 2003,real GDP for this nation

Accepted Answer

A)  decreased by slightly more than $5 billion 
B)  increased by slightly more than $4 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  cannot be determined from the information given 
A)  decreased by slightly more than $5 billion 
B)  increased by slightly more than $4 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  cannot be determined from the information given

Question 2

Which of the actions below will not increase GDP?

Accepted Answer

A)  Bears prowl suburban areas,overturning garbage cans so that the town must hire more sanitation workers to clean up. 
B)  Vandals spray paint all over brick buildings,increasing business for paint removal services. 
C)  An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood. 
D)  A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home. 
E)  A consumer has a tune-up done on his pick-up truck at the local garage. 
A)  Bears prowl suburban areas,overturning garbage cans so that the town must hire more sanitation workers to clean up. 
B)  Vandals spray paint all over brick buildings,increasing business for paint removal services. 
C)  An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood. 
D)  A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home. 
E)  A consumer has a tune-up done on his pick-up truck at the local garage.

Question 3

A chain-weighted index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 4

The circular flow model

Accepted Answer

A)  measures identical flows through the different markets 
B)  shows how firms maximize profits and minimize costs 
C)  shows how competitive markets interact with noncompetitive markets 
D)  measures the value of income earned by the public sector 
E)  measures the value added by the business sector as it uses funds 
A)  measures identical flows through the different markets 
B)  shows how firms maximize profits and minimize costs 
C)  shows how competitive markets interact with noncompetitive markets 
D)  measures the value of income earned by the public sector 
E)  measures the value added by the business sector as it uses funds

Question 5

The CPI overstates the true inflation rate because it does not fully incorporate the effects of quality improvements.

Accepted Answer

A) True 
 B)False

Question 6

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $5 trillion,then the GDP price index for that year is

Accepted Answer

A)  1.25 
B)  20 
C)  25 
D)  80 
E)  125 
A)  1.25 
B)  20 
C)  25 
D)  80 
E)  125

Question 7

Taxes are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

Question 8

Ann's Adventures,Inc.organizes and leads backpacking trips for $160.The business spends $30 on first aid equipment and $10 on maps.The amount of value added to GDP is

Accepted Answer

A)  $160 of backpacking trips 
B)  $200 of backpacking trips,$30 of first aid equipment,and $10 of maps 
C)  $160 of backpacking trips,$30 of first aid equipment,and $10 of maps 
D)  $120 of backpacking trips 
E)  $30 of first aid equipment and $10 of maps only 
A)  $160 of backpacking trips 
B)  $200 of backpacking trips,$30 of first aid equipment,and $10 of maps 
C)  $160 of backpacking trips,$30 of first aid equipment,and $10 of maps 
D)  $120 of backpacking trips 
E)  $30 of first aid equipment and $10 of maps only

Question 9

You could determine the value of the GDP price index if you knew

Accepted Answer

A)  current GDP at current- and base-year prices 
B)  base-year GDP at current- and base-year prices 
C)  current GDP at current prices and base-year GDP at base-year prices 
D)  current GDP at base-year prices only 
E)  current GDP at current prices only 
A)  current GDP at current- and base-year prices 
B)  base-year GDP at current- and base-year prices 
C)  current GDP at current prices and base-year GDP at base-year prices 
D)  current GDP at base-year prices only 
E)  current GDP at current prices only

Question 10

If the price index for 2008 was 100 and the price index for 2009 was 109,then how much did prices change between 2008 and 2009?

Accepted Answer

A)  1 percent increase 
B)  8 percent increase 
C)  9 percent increase 
D)  12 percent increase 
E)  12 percent decrease 
A)  1 percent increase 
B)  8 percent increase 
C)  9 percent increase 
D)  12 percent increase 
E)  12 percent decrease

Question 11

If the CPI this year is 162 and last year it was 170,what do we know about the inflation rate this year?

Accepted Answer

A)  It is positive. 
B)  It is negative. 
C)  It has decreased since last year. 
D)  It has increased since last year. 
E)  It is the same as last year. 
A)  It is positive. 
B)  It is negative. 
C)  It has decreased since last year. 
D)  It has increased since last year. 
E)  It is the same as last year.

Question 12

Which of the following is the best example of an intermediate good?

Accepted Answer

A)  the flowers Mr.Grover buys at a local nursery 
B)  the flowers that Timmy Grover,age three,brought Mrs.Grover after he picked them from a neighbor's garden 
C)  the flour Grandma Grover buys to make a birthday cake 
D)  the flour that Joe buys so that he can eat pizza three nights a week 
E)  the flour Amy orders each month for the bakery she manages 
A)  the flowers Mr.Grover buys at a local nursery 
B)  the flowers that Timmy Grover,age three,brought Mrs.Grover after he picked them from a neighbor's garden 
C)  the flour Grandma Grover buys to make a birthday cake 
D)  the flour that Joe buys so that he can eat pizza three nights a week 
E)  the flour Amy orders each month for the bakery she manages

Question 13

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $3 trillion,then the GDP price index is 133.

Accepted Answer

A) True 
 B)False

Question 14

Gross Domestic Product includes final goods and services,but not intermediate goods because

Accepted Answer

A)  intermediate goods are not part of investment spending 
B)  the value of the intermediate goods is already included in the value of the final goods 
C)  the value of the intermediate goods is already included as inventory investment 
D)  intermediate goods are only produced by government 
E)  intermediate goods are not current production 
A)  intermediate goods are not part of investment spending 
B)  the value of the intermediate goods is already included in the value of the final goods 
C)  the value of the intermediate goods is already included as inventory investment 
D)  intermediate goods are only produced by government 
E)  intermediate goods are not current production

Question 15

In GDP measurement,consumer spending includes

Accepted Answer

A)  spending by businesses on labor resources 
B)  spending by government on office buildings 
C)  spending by individual households on automobiles and durables 
D)  exchanges in business inventories 
E)  a firm's purchase of a radio made in Taiwan 
A)  spending by businesses on labor resources 
B)  spending by government on office buildings 
C)  spending by individual households on automobiles and durables 
D)  exchanges in business inventories 
E)  a firm's purchase of a radio made in Taiwan

Question 16

Aggregate income is defined as

Accepted Answer

A)  the sum of income earned by all laborers in the world economy 
B)  the sum of income earned by all workers in the private sector 
C)  the total income of all individuals who contribute resources to the market production of output 
D)  total income after all income taxes but before paying other payroll taxes 
E)  total income after purchases of necessities 
A)  the sum of income earned by all laborers in the world economy 
B)  the sum of income earned by all workers in the private sector 
C)  the total income of all individuals who contribute resources to the market production of output 
D)  total income after all income taxes but before paying other payroll taxes 
E)  total income after purchases of necessities

Question 17

Exports are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

Question 18

GDP is not a perfect measure of welfare because it

Accepted Answer

A)  treats a dollar spent on guns the same as a dollar spent on education 
B)  treats a dollar spent on exports the same as a dollar spent on imports 
C)  double counts the value of leisure time 
D)  double counts depreciation 
E)  counts illegal activities in the underground economy 
A)  treats a dollar spent on guns the same as a dollar spent on education 
B)  treats a dollar spent on exports the same as a dollar spent on imports 
C)  double counts the value of leisure time 
D)  double counts depreciation 
E)  counts illegal activities in the underground economy

Question 19

Net exports is the value of

Accepted Answer

A)  exports minus the value of imports 
B)  imports minus the value of exports 
C)  imports minus tariffs 
D)  exports minus tariffs 
E)  exports plus the value of imports minus depreciation 
A)  exports minus the value of imports 
B)  imports minus the value of exports 
C)  imports minus tariffs 
D)  exports minus tariffs 
E)  exports plus the value of imports minus depreciation

Question 20

Which of the following is not considered a component of investment when calculating GDP?

Accepted Answer

A)  new residential construction 
B)  construction of new factories 
C)  net increases in inventory 
D)  purchases of corporate stock 
E)  production of new equipment 
A)  new residential construction 
B)  construction of new factories 
C)  net increases in inventory 
D)  purchases of corporate stock 
E)  production of new equipment

Exam 7: Tracking the US Economy

Exhibit 7-3 -Refer to Exhibit 7-3.Between 2002 and 2003,real GDP for this nation

Which of the actions below will not increase GDP?

A chain-weighted index recognizes the fact that the composition of output changes over time.

The circular flow model

The CPI overstates the true inflation rate because it does not fully incorporate the effects of quality improvements.

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $5 trillion,then the GDP price index for that year is

Taxes are an injection into the circular flow.

Ann's Adventures,Inc.organizes and leads backpacking trips for $160.The business spends $30 on first aid equipment and $10 on maps.The amount of value added to GDP is

You could determine the value of the GDP price index if you knew

If the price index for 2008 was 100 and the price index for 2009 was 109,then how much did prices change between 2008 and 2009?

If the CPI this year is 162 and last year it was 170,what do we know about the inflation rate this year?

Which of the following is the best example of an intermediate good?

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $3 trillion,then the GDP price index is 133.

Gross Domestic Product includes final goods and services,but not intermediate goods because

In GDP measurement,consumer spending includes

Aggregate income is defined as

Exports are an injection into the circular flow.

GDP is not a perfect measure of welfare because it

Net exports is the value of

Which of the following is not considered a component of investment when calculating GDP?

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

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