Question 1

Real GDP is measured in

Accepted Answer

A)  current-year prices 
B)  base-year prices 
C)  nominal dollars 
D)  quality of goods produced 
E)  hours of employment 
A)  current-year prices 
B)  base-year prices 
C)  nominal dollars 
D)  quality of goods produced 
E)  hours of employment

Question 2

Which of the following correctly states the leakages-injections approach to GDP?

Accepted Answer

A)  DI + (NT)= C + I + G + (X - M) 
B)  S + C + T = DI 
C)  S + C + (NT)= I + G + (X - M) 
D)  S + (NT)+ M = I + G + X 
E)  S + (NT)= I + G + (X - M) 
A)  DI + (NT)= C + I + G + (X - M) 
B)  S + C + T = DI 
C)  S + C + (NT)= I + G + (X - M) 
D)  S + (NT)+ M = I + G + X 
E)  S + (NT)= I + G + (X - M)

Question 3

If aggregate income equals aggregate expenditure,which of the following will not be true?

Accepted Answer

A)  Leakages from the circular flow must equal injections. 
B)  Consumption plus investment plus government spending plus net exports must equal disposable income plus net taxes. 
C)  Saving must equal investment. 
D)  Saving plus net taxes and imports must equal investment plus government purchases and exports. 
E)  Saving must equal investment if the government's budget is balanced and exports equal imports. 
A)  Leakages from the circular flow must equal injections. 
B)  Consumption plus investment plus government spending plus net exports must equal disposable income plus net taxes. 
C)  Saving must equal investment. 
D)  Saving plus net taxes and imports must equal investment plus government purchases and exports. 
E)  Saving must equal investment if the government's budget is balanced and exports equal imports.

Question 4

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

Accepted Answer

A)  consumption 
B)  exports 
C)  taxes 
D)  saving 
E)  government borrowing 
A)  consumption 
B)  exports 
C)  taxes 
D)  saving 
E)  government borrowing

Question 5

If real GDP for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal GDP for that year is

Accepted Answer

A)  $3.7 trillion 
B)  $4 trillion 
C)  $6.8 trillion 
D)  $27 trillion 
E)  $68 trillion 
A)  $3.7 trillion 
B)  $4 trillion 
C)  $6.8 trillion 
D)  $27 trillion 
E)  $68 trillion

Question 6

Which of the following is true regarding Gross Domestic Product?

Accepted Answer

A)  It can only be measured from the flow of total spending. 
B)  It can only be measured from the flow of total income in the economy. 
C)  It can be measured either from total spending or total expenditure. 
D)  It is calculated by computing total spending and total income; the larger of the two figures is counted as GDP. 
E)  It can only be measured from the stock of total wealth. 
A)  It can only be measured from the flow of total spending. 
B)  It can only be measured from the flow of total income in the economy. 
C)  It can be measured either from total spending or total expenditure. 
D)  It is calculated by computing total spending and total income; the larger of the two figures is counted as GDP. 
E)  It can only be measured from the stock of total wealth.

Question 7

Which of the following increases GDP?

Accepted Answer

A)  Workers take more vacation time. 
B)  The length of the average work week decreases. 
C)  Homeowners purchase lawn care services rather than maintain the lawns themselves. 
D)  Meals cooked at home at an average cost of $10 are replaced by restaurant meals at an average cost of $10. 
E)  More people wrap birthday presents in the Sunday newspaper's cartoon section. 
A)  Workers take more vacation time. 
B)  The length of the average work week decreases. 
C)  Homeowners purchase lawn care services rather than maintain the lawns themselves. 
D)  Meals cooked at home at an average cost of $10 are replaced by restaurant meals at an average cost of $10. 
E)  More people wrap birthday presents in the Sunday newspaper's cartoon section.

Question 8

If real GDP is $5 trillion for a particular year and the GDP price index is 140,then nominal GDP is $7 trillion.

Accepted Answer

A) True 
 B)False

Question 9

U.S.exports are

Accepted Answer

A)  not included in U.S.GDP because they are consumed abroad 
B)  included in U.S.GDP because they are produced domestically 
C)  included in U.S.GDP because they represent an increase in inventories 
D)  included in U.S.GDP as government purchases because the government decides what goods may be exported 
E)  not included in U.S.GDP because they are not subject to a tariff 
A)  not included in U.S.GDP because they are consumed abroad 
B)  included in U.S.GDP because they are produced domestically 
C)  included in U.S.GDP because they represent an increase in inventories 
D)  included in U.S.GDP as government purchases because the government decides what goods may be exported 
E)  not included in U.S.GDP because they are not subject to a tariff

Question 10

Which of the following is an injection into the spending stream?

Accepted Answer

A)  planned investment 
B)  imports 
C)  indirect business taxes 
D)  disposable income 
E)  interest on savings 
A)  planned investment 
B)  imports 
C)  indirect business taxes 
D)  disposable income 
E)  interest on savings

Question 11

A shortcoming of national income accounting is that it ignores

Accepted Answer

A)  the depreciation of manufactured capital 
B)  spending by poor households who are receiving government transfer payments 
C)  spending on items such as handguns and attack dogs,since they represent a decline in social well-being 
D)  the depletion of natural resources 
E)  U.S.production that is sold overseas 
A)  the depreciation of manufactured capital 
B)  spending by poor households who are receiving government transfer payments 
C)  spending on items such as handguns and attack dogs,since they represent a decline in social well-being 
D)  the depletion of natural resources 
E)  U.S.production that is sold overseas

Question 12

The value added at all production stages sums to the market value of the final good,and the value added for all final goods sums to GDP based on the income approach.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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

Question 14

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

Accepted Answer

A)  positive 
B)  equal to zero 
C)  less than 100 
D)  greater than 100 
E)  negative 
A)  positive 
B)  equal to zero 
C)  less than 100 
D)  greater than 100 
E)  negative

Question 15

How does net domestic product (NDP)differ from gross domestic product (GDP)?

Accepted Answer

A)  GDP includes expenditures for gross products that pollute the environment; NDP does not. 
B)  GDP is gross because it values spending on each good and service in dollar terms; NDP excludes taxes. 
C)  GDP includes exports; NDP omits exports. 
D)  GDP includes all government spending; NDP subtracts taxes. 
E)  GDP includes that part of the capital stock used up in the production process; NDP does not. 
A)  GDP includes expenditures for gross products that pollute the environment; NDP does not. 
B)  GDP is gross because it values spending on each good and service in dollar terms; NDP excludes taxes. 
C)  GDP includes exports; NDP omits exports. 
D)  GDP includes all government spending; NDP subtracts taxes. 
E)  GDP includes that part of the capital stock used up in the production process; NDP does not.

Question 16

When a refrigerator worth $1,000 is produced and sold,its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

Accepted Answer

A)  the wages earned by the workers in the firm that produced it 
B)  the wages earned by the workers and the profits earned by the owners of the firm that produced it 
C)  wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator 
D)  wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator,less taxes 
E)  wages,interest,and rent paid by the firm's owners,plus the profit they kept for themselves 
A)  the wages earned by the workers in the firm that produced it 
B)  the wages earned by the workers and the profits earned by the owners of the firm that produced it 
C)  wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator 
D)  wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator,less taxes 
E)  wages,interest,and rent paid by the firm's owners,plus the profit they kept for themselves

Question 17

U.S.imports are

Accepted Answer

A)  not added to U.S.GDP because they are produced abroad 
B)  added to U.S.GDP because they are consumed domestically 
C)  added to U.S.GDP because they represent an increase in inventories 
D)  added to U.S.GDP as government purchases because the government decides what goods may be imported 
E)  not added to U.S.GDP because they are intermediate goods 
A)  not added to U.S.GDP because they are produced abroad 
B)  added to U.S.GDP because they are consumed domestically 
C)  added to U.S.GDP because they represent an increase in inventories 
D)  added to U.S.GDP as government purchases because the government decides what goods may be imported 
E)  not added to U.S.GDP because they are intermediate goods

Question 18

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

Accepted Answer

A)  the index utilizes prices from the base year only 
B)  the index does not account for relative price changes over time 
C)  price distortions only decrease when there is a long time period covered 
D)  base year does not include new products which came into existence later 
E)  the price index does not take into consideration quality changes 
A)  the index utilizes prices from the base year only 
B)  the index does not account for relative price changes over time 
C)  price distortions only decrease when there is a long time period covered 
D)  base year does not include new products which came into existence later 
E)  the price index does not take into consideration quality changes

Question 19

If the CPI is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A)  103 percent 
B)  1 percent 
C)  6 percent 
D)  3 percent 
E)  206 percent 
A)  103 percent 
B)  1 percent 
C)  6 percent 
D)  3 percent 
E)  206 percent

Question 20

If toy stores overestimate the demand for a toy in 2004 and,as a result,have an unexpectedly large number of them on hand at the end of the year,the value of the increased inventory of those toys will be counted as

Accepted Answer

A)  investment in 2004 
B)  investment in 2005 
C)  consumption in 2004 
D)  consumption in 2005 
E)  part of GDP only when the toys are sold 
A)  investment in 2004 
B)  investment in 2005 
C)  consumption in 2004 
D)  consumption in 2005 
E)  part of GDP only when the toys are sold

Exam 7: Tracking the US Economy

Real GDP is measured in

Which of the following correctly states the leakages-injections approach to GDP?

If aggregate income equals aggregate expenditure,which of the following will not be true?

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

If real GDP for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal GDP for that year is

Which of the following is true regarding Gross Domestic Product?

Which of the following increases GDP?

If real GDP is $5 trillion for a particular year and the GDP price index is 140,then nominal GDP is $7 trillion.

U.S.exports are

Which of the following is an injection into the spending stream?

A shortcoming of national income accounting is that it ignores

The value added at all production stages sums to the market value of the final good,and the value added for all final goods sums to GDP based on the income approach.

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

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

How does net domestic product (NDP)differ from gross domestic product (GDP)?

When a refrigerator worth $1,000 is produced and sold,its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

U.S.imports are

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

If the CPI is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately

If toy stores overestimate the demand for a toy in 2004 and,as a result,have an unexpectedly large number of them on hand at the end of the year,the value of the increased inventory of those toys will be counted as

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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