Question 1

GDP reflects many things; however,it does not reflect the depletion of natural resources,leisure,or many things we as individuals do for ourselves.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 7-3
  
-Refer to Exhibit 7-3.Between 2002 and 2005,real GDP for this nation

Accepted Answer

A)  increased more than $5 billion 
B)  decreased more than $5 billion 
C)  increased by less than $1 billion 
D)  decreased by less than $1 billion 
E)  cannot be determined from the information above 
A)  increased more than $5 billion 
B)  decreased more than $5 billion 
C)  increased by less than $1 billion 
D)  decreased by less than $1 billion 
E)  cannot be determined from the information above

Question 3

Which of the following is not a problem associated with GDP as a measure of social welfare?

Accepted Answer

A)  It excludes many nonmarket activities. 
B)  It values all types of output equally. 
C)  It excludes pollution damage. 
D)  It excludes intermediate goods as a separate entry. 
E)  It excludes the value of leisure time. 
A)  It excludes many nonmarket activities. 
B)  It values all types of output equally. 
C)  It excludes pollution damage. 
D)  It excludes intermediate goods as a separate entry. 
E)  It excludes the value of leisure time.

Question 4

Depreciation refers to a decrease in the value of a durable good caused by

Accepted Answer

A)  an increase in the price level 
B)  changes in the depreciation allowance 
C)  wear and tear over time 
D)  changes in tax law 
E)  a decrease in its resale value 
A)  an increase in the price level 
B)  changes in the depreciation allowance 
C)  wear and tear over time 
D)  changes in tax law 
E)  a decrease in its resale value

Question 5

Which of the following is an injection into the circular flow?

Accepted Answer

A)  government spending 
B)  imports 
C)  disposable income 
D)  taxes 
E)  saving 
A)  government spending 
B)  imports 
C)  disposable income 
D)  taxes 
E)  saving

Question 6

Marianne and Laura are both homemakers with children.Then Laura takes a volunteer (unpaid)job at a hospital and hires Marianne to care for her preschool-age child.What happens to GDP?

Accepted Answer

A)  GDP increases 
B)  GDP decreases 
C)  there is no change in GDP 
D)  GDP increases only if Marianne gives the child better care than Laura 
E)  GDP increases only if the patients receive better care now that Laura works in the hospital 
A)  GDP increases 
B)  GDP decreases 
C)  there is no change in GDP 
D)  GDP increases only if Marianne gives the child better care than Laura 
E)  GDP increases only if the patients receive better care now that Laura works in the hospital

Question 7

Which of the following is the largest component of GDP?

Accepted Answer

A)  investment (I) 
B)  government spending (G) 
C)  consumption (
C)  
D)  net exports (X - M) 
E)  taxes (T) 
A)  investment (I) 
B)  government spending (G) 
C)  consumption (
C)  
D)  net exports (X - M) 
E)  taxes (T)

Question 8

Which of the following is an injection into the circular flow?

Accepted Answer

A)  savings 
B)  taxes 
C)  government borrowing 
D)  investment 
E)  imports 
A)  savings 
B)  taxes 
C)  government borrowing 
D)  investment 
E)  imports

Question 9

The country of Fishland had a GDP of 1,000 doubloons (the monetary unit)in 2003 and 1,500 doubloons in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004 real GDP in Irishland

Accepted Answer

A)  increased by 500 doubloons 
B)  increased by 333 doubloons 
C)  increased by 50 doubloons 
D)  remained the same 
E)  decreased by 50 doubloons 
A)  increased by 500 doubloons 
B)  increased by 333 doubloons 
C)  increased by 50 doubloons 
D)  remained the same 
E)  decreased by 50 doubloons

Question 10

Which of the following transactions is not included in GDP?

Accepted Answer

A)  Someone sells drugs in a vacant lot. 
B)  Someone sells drugs in a pharmacy. 
C)  A doctor treats a patient for drug addiction. 
D)  A drug addict spends two months in a drug rehabilitation center. 
E)  The drug addict buys cough medicine. 
A)  Someone sells drugs in a vacant lot. 
B)  Someone sells drugs in a pharmacy. 
C)  A doctor treats a patient for drug addiction. 
D)  A drug addict spends two months in a drug rehabilitation center. 
E)  The drug addict buys cough medicine.

Question 11

In the resource market,

Accepted Answer

A)  businesses borrow money to buy the capital resources they need 
B)  businesses sell services to the households 
C)  firms provide the resources to the households 
D)  households sell the resources to firms in return for factor payments 
E)  resources flow from the business sector to the household sector 
A)  businesses borrow money to buy the capital resources they need 
B)  businesses sell services to the households 
C)  firms provide the resources to the households 
D)  households sell the resources to firms in return for factor payments 
E)  resources flow from the business sector to the household sector

Question 12

GDP fails to measure changes in

Accepted Answer

A)  the prices of products caused by inflation 
B)  the market value of goods and services since it uses market prices for valuation 
C)  the quality of existing products that do not cause a change in price 
D)  leisure time,since it is valued at the minimum wage and not the true opportunity cost of lost wages 
E)  the production of services that are produced in the economy 
A)  the prices of products caused by inflation 
B)  the market value of goods and services since it uses market prices for valuation 
C)  the quality of existing products that do not cause a change in price 
D)  leisure time,since it is valued at the minimum wage and not the true opportunity cost of lost wages 
E)  the production of services that are produced in the economy

Question 13

Which of the following would not be counted in this year's GDP?

Accepted Answer

A)  Midwest Tractor Company's inventory of brand new farm equipment,which will remain unsold by year's end 
B)  the inventory of new baseballs ordered by the Detroit Tigers 
C)  the new house the Barnabys had constructed this year 
D)  the vacation that the Cartiers enjoyed in France this winter 
E)  Bruno's meal at the local La Casa Caliente 
A)  Midwest Tractor Company's inventory of brand new farm equipment,which will remain unsold by year's end 
B)  the inventory of new baseballs ordered by the Detroit Tigers 
C)  the new house the Barnabys had constructed this year 
D)  the vacation that the Cartiers enjoyed in France this winter 
E)  Bruno's meal at the local La Casa Caliente

Question 14

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000,earns profits of $500,and sells its output for $14,000,the firm's value added is

Accepted Answer

A)  $12,000 
B)  $8,000 
C)  $6,000 
D)  $2,000 
E)  $500 
A)  $12,000 
B)  $8,000 
C)  $6,000 
D)  $2,000 
E)  $500

Question 15

Which of the following is a leakage from the circular flow?

Accepted Answer

A)  government purchases of goods and services 
B)  taxes 
C)  investment 
D)  exports 
E)  consumption expenditures 
A)  government purchases of goods and services 
B)  taxes 
C)  investment 
D)  exports 
E)  consumption expenditures

Question 16

Suppose that the economy is in equilibrium with the government budget is in deficit and with saving is less than investment.According to the circular flow model,

Accepted Answer

A)  imports must exceed exports 
B)  imports must be less than exports 
C)  imports must equal exports 
D)  imports could be less than or equal to exports 
E)  it is impossible to determine anything about imports and exports with the given information 
A)  imports must exceed exports 
B)  imports must be less than exports 
C)  imports must equal exports 
D)  imports could be less than or equal to exports 
E)  it is impossible to determine anything about imports and exports with the given information

Question 17

If the CPI is 220 one year and 210 the next,the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A)  -2.3 percent 
B)  -4.6 percent 
C)  10 percent 
D)  4.8 percent 
E)  220 percent 
A)  -2.3 percent 
B)  -4.6 percent 
C)  10 percent 
D)  4.8 percent 
E)  220 percent

Question 18

Investment spending is a flow variable; inventories are a stock variable.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 7-3
  
-Refer to Exhibit 7-3.Between 2001 and 2002,real GDP for this nation

Accepted Answer

A)  increased by slightly less than $10 billion 
B)  decreased by slightly more than $5 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  cannot be determined from the information given 
A)  increased by slightly less than $10 billion 
B)  decreased by slightly more than $5 billion 
C)  remained constant 
D)  increased by only about $1 billion 
E)  cannot be determined from the information given

Question 20

If the CPI is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A)  4.5 percent 
B)  8.6 percent 
C)  9.4 percent 
D)  15 percent 
E)  175 percent 
A)  4.5 percent 
B)  8.6 percent 
C)  9.4 percent 
D)  15 percent 
E)  175 percent

Exam 7: Tracking the US Economy

GDP reflects many things; however,it does not reflect the depletion of natural resources,leisure,or many things we as individuals do for ourselves.

Exhibit 7-3 -Refer to Exhibit 7-3.Between 2002 and 2005,real GDP for this nation

Which of the following is not a problem associated with GDP as a measure of social welfare?

Depreciation refers to a decrease in the value of a durable good caused by

Which of the following is an injection into the circular flow?

Marianne and Laura are both homemakers with children.Then Laura takes a volunteer (unpaid)job at a hospital and hires Marianne to care for her preschool-age child.What happens to GDP?

Which of the following is the largest component of GDP?

Which of the following is an injection into the circular flow?

The country of Fishland had a GDP of 1,000 doubloons (the monetary unit)in 2003 and 1,500 doubloons in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004 real GDP in Irishland

Which of the following transactions is not included in GDP?

In the resource market,

GDP fails to measure changes in

Which of the following would not be counted in this year's GDP?

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000,earns profits of $500,and sells its output for $14,000,the firm's value added is

Which of the following is a leakage from the circular flow?

Suppose that the economy is in equilibrium with the government budget is in deficit and with saving is less than investment.According to the circular flow model,

If the CPI is 220 one year and 210 the next,the annual rate of inflation as measured by the CPI is approximately

Investment spending is a flow variable; inventories are a stock variable.

Exhibit 7-3 -Refer to Exhibit 7-3.Between 2001 and 2002,real GDP for this nation

If the CPI is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately

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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