Question 1

Net taxes are indirect business taxes minus transfer payments.

Accepted Answer

A) True 
 B)False

Question 2

It is not possible for the government to spend more than it collects in taxes.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a loaf of bread sold for $3.00 in 2008.The price of bread then increases to $3.60 in 2009.The price index for bread is

Accepted Answer

A)  ($3.60/$3.00)= 1.20 
B)  ($3.00/$3.60)* 100 = 83.33 
C)  ($3.60/$3.00)* 100 = 120 
D)  ($3.00/$3.00)*100 = 100 
E)  ($0.60/$3.00)* 100 = 20 
A)  ($3.60/$3.00)= 1.20 
B)  ($3.00/$3.60)* 100 = 83.33 
C)  ($3.60/$3.00)* 100 = 120 
D)  ($3.00/$3.00)*100 = 100 
E)  ($0.60/$3.00)* 100 = 20

Question 4

Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that the economy is in equilibrium with the government budget in deficit and with exports greater than imports.According to the circular flow model,

Accepted Answer

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

Question 6

The value of the films produced in the United States starring Charlie Chaplin that still exist will not be included in this year's U.S.GDP because

Accepted Answer

A)  Charlie Chaplin was not an American citizen 
B)  Charlie Chaplin did not make the films this year 
C)  the films are no longer being shown and earning revenue 
D)  the films no longer have any value except for collectors 
E)  films are intermediate goods 
A)  Charlie Chaplin was not an American citizen 
B)  Charlie Chaplin did not make the films this year 
C)  the films are no longer being shown and earning revenue 
D)  the films no longer have any value except for collectors 
E)  films are intermediate goods

Question 7

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

Accepted Answer

A)  government purchases of goods and services 
B)  saving 
C)  transfer payments 
D)  exports 
E)  consumption expenditures 
A)  government purchases of goods and services 
B)  saving 
C)  transfer payments 
D)  exports 
E)  consumption expenditures

Question 8

Which of the following would not be included in GDP?

Accepted Answer

A)  you hire someone to fix a leaky faucet 
B)  you clean the house before relatives visit 
C)  the value of housing services if you own your own home 
D)  an unplanned drop in business inventories 
E)  the Federal government buys U.S.soybeans to ship to Russia 
A)  you hire someone to fix a leaky faucet 
B)  you clean the house before relatives visit 
C)  the value of housing services if you own your own home 
D)  an unplanned drop in business inventories 
E)  the Federal government buys U.S.soybeans to ship to Russia

Question 9

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases,GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 10

Assume the economy produces five goods.If the prices of three of the goods increase,then the price level must increase.

Accepted Answer

A) True 
 B)False

Question 11

If nominal GDP is $6 trillion in a particular year and base year GDP was $3 trillion,then the GDP price index is 167.

Accepted Answer

A) True 
 B)False

Question 12

Value added is

Accepted Answer

A)  the sum of all income earned by resource suppliers 
B)  actual investment minus planned investment 
C)  any payment of income that adds to the domestic spending stream 
D)  the value of a product minus the cost of materials 
E)  the increase in the value of a financial asset such as a stock or bond 
A)  the sum of all income earned by resource suppliers 
B)  actual investment minus planned investment 
C)  any payment of income that adds to the domestic spending stream 
D)  the value of a product minus the cost of materials 
E)  the increase in the value of a financial asset such as a stock or bond

Question 13

Which of the following would not be an expenditure on a final good or service?

Accepted Answer

A)  a farmer's purchase of a pound of hamburger 
B)  a medical clinic's purchase of flu vaccine 
C)  a factory's purchase of a spot welding machine 
D)  the purchase of a cup of coffee at a restaurant 
E)  a college student's purchase of a textbook for a medieval history class 
A)  a farmer's purchase of a pound of hamburger 
B)  a medical clinic's purchase of flu vaccine 
C)  a factory's purchase of a spot welding machine 
D)  the purchase of a cup of coffee at a restaurant 
E)  a college student's purchase of a textbook for a medieval history class

Question 14

Exhibit 7-1
  
-Given the data in Exhibit 7-1,calculate aggregate expenditure.

Accepted Answer

A)  $1,800 
B)  $1,900 
C)  $2,000 
D)  $2,200 
E)  $2,300 
A)  $1,800 
B)  $1,900 
C)  $2,000 
D)  $2,200 
E)  $2,300

Question 15

The gross domestic product does capture changes in the

Accepted Answer

A)  prices at which final goods are sold 
B)  availability of leisure time 
C)  quality of products when prices do not change 
D)  availability of new products 
E)  All of the answers are correct 
A)  prices at which final goods are sold 
B)  availability of leisure time 
C)  quality of products when prices do not change 
D)  availability of new products 
E)  All of the answers are correct

Question 16

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A)  exports 
B)  investment 
C)  imports 
D)  transfer payments 
E)  government purchases 
A)  exports 
B)  investment 
C)  imports 
D)  transfer payments 
E)  government purchases

Question 17

Which of the following is not an injection into the circular flow?

Accepted Answer

A)  saving 
B)  domestic exports 
C)  government expenditure on goods 
D)  transfer payments 
E)  investment by firms 
A)  saving 
B)  domestic exports 
C)  government expenditure on goods 
D)  transfer payments 
E)  investment by firms

Question 18

If nominal GDP for a particular year is $6 trillion and real GDP for that year is $5 trillion,then the GDP price index for that year is

Accepted Answer

A)  1.2 
B)  17 
C)  20 
D)  83 
E)  120 
A)  1.2 
B)  17 
C)  20 
D)  83 
E)  120

Question 19

The two basic markets in the simple circular flow model are the

Accepted Answer

A)  product and resource market 
B)  export and product market 
C)  export and import market 
D)  household market and the business market 
E)  business market and the government market 
A)  product and resource market 
B)  export and product market 
C)  export and import market 
D)  household market and the business market 
E)  business market and the government market

Question 20

A wholesale nursery purchases six dozen gladiolus bulbs for $5.The nursery sells the six dozen resulting flowers to a wholesale florist for $10.The wholesale florist delivers the flowers to a retail florist for $15.The flowers are sold by the retail florist for $75 to the bereaved Jones family to use at great-grandfather Jones's wake.What is the value added by the retail florist?

Accepted Answer

A)  $10 
B)  $15 
C)  $25 
D)  $60 
E)  $75 
A)  $10 
B)  $15 
C)  $25 
D)  $60 
E)  $75

Exam 7: Tracking the US Economy

Net taxes are indirect business taxes minus transfer payments.

It is not possible for the government to spend more than it collects in taxes.

Suppose a loaf of bread sold for $3.00 in 2008.The price of bread then increases to $3.60 in 2009.The price index for bread is

Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

Suppose that the economy is in equilibrium with the government budget in deficit and with exports greater than imports.According to the circular flow model,

The value of the films produced in the United States starring Charlie Chaplin that still exist will not be included in this year's U.S.GDP because

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

Which of the following would not be included in GDP?

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases,GDP will decrease.

Assume the economy produces five goods.If the prices of three of the goods increase,then the price level must increase.

If nominal GDP is $6 trillion in a particular year and base year GDP was $3 trillion,then the GDP price index is 167.

Value added is

Which of the following would not be an expenditure on a final good or service?

Exhibit 7-1 -Given the data in Exhibit 7-1,calculate aggregate expenditure.

The gross domestic product does capture changes in the

Which of the following is not a component of aggregate expenditure?

Which of the following is not an injection into the circular flow?

If nominal GDP for a particular year is $6 trillion and real GDP for that year is $5 trillion,then the GDP price index for that year is

The two basic markets in the simple circular flow model are the

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