Question 1

Which of the following statements is true?

Accepted Answer

A)  Another name for capital consumption allowance is depreciation. 
B)  When there are two consecutive quarterly declines in Real GDP the economy is said to be in recession (based on the standard definition). 
C)  In the expansion phase of a business cycle,Real GDP rises beyond the recovery. 
D)  a and b 
E)  a,b,and c 
A)  Another name for capital consumption allowance is depreciation. 
B)  When there are two consecutive quarterly declines in Real GDP the economy is said to be in recession (based on the standard definition). 
C)  In the expansion phase of a business cycle,Real GDP rises beyond the recovery. 
D)  a and b 
E)  a,b,and c

Question 2

-Refer to Exhibit 7-1.What is the value of disposable income?

Accepted Answer

A)  $3,618 
B)  $4,795 
C)  $3,727 
D)  $4,207 
E)  $4,017 
A)  $3,618 
B)  $4,795 
C)  $3,727 
D)  $4,207 
E)  $4,017

Question 3

If in the process of calculating GDP,the market value of all intermediate goods is added to the market value of all final goods,this would

Accepted Answer

A)  overstate the actual value of GDP. 
B)  produce the correct value of GDP. 
C)  understate the actual value of GDP. 
D)  avoid the possible error of double counting. 
A)  overstate the actual value of GDP. 
B)  produce the correct value of GDP. 
C)  understate the actual value of GDP. 
D)  avoid the possible error of double counting.

Question 4

The expenditure approach to measuring GDP sums

Accepted Answer

A)  consumption,investment,government purchases,and net exports. 
B)  sales,revenues,income,and wages. 
C)  profits,compensation of employees,consumption,and investment. 
D)  net exports,consumption,wages,and salaries. 
E)  consumption,interest,net exports,and federal government purchases 
A)  consumption,investment,government purchases,and net exports. 
B)  sales,revenues,income,and wages. 
C)  profits,compensation of employees,consumption,and investment. 
D)  net exports,consumption,wages,and salaries. 
E)  consumption,interest,net exports,and federal government purchases

Question 5

Which of the following would definitely not be included in the measurement of GDP?

Accepted Answer

A)  value of the services of a painter who paints your garage 
B)  value of the services of a person who mows his or her own lawn 
C)  value of the services of a maid who cleans your house 
D)  value of the services of a plumber who fixes your kitchen sink 
A)  value of the services of a painter who paints your garage 
B)  value of the services of a person who mows his or her own lawn 
C)  value of the services of a maid who cleans your house 
D)  value of the services of a plumber who fixes your kitchen sink

Question 6

List and explain the two different approaches used to measure GDP.

Accepted Answer

The two different approaches are: the ex

Question 7

Refer to Exhibit 7-3.Consumption is equal to

Accepted Answer

A)  $3,700. 
B)  $9,000. 
C)  $10,150. 
D)  $8,200. 
E)  $9,700. 
A)  $3,700. 
B)  $9,000. 
C)  $10,150. 
D)  $8,200. 
E)  $9,700.

Question 8

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

Accepted Answer

A)  intermediate; that year's 
B)  intermediate; base-year 
C)  final; that year's 
D)  final; base-year 
A)  intermediate; that year's 
B)  intermediate; base-year 
C)  final; that year's 
D)  final; base-year

Question 9

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

Accepted Answer

A)  Per-capita GDP is necessarily higher in year 2 than year 1. 
B)  People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1. 
C)  Government transfer payments were higher in year 2 than in year 1. 
D)  a and b 
E)  none of the above 
A)  Per-capita GDP is necessarily higher in year 2 than year 1. 
B)  People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1. 
C)  Government transfer payments were higher in year 2 than in year 1. 
D)  a and b 
E)  none of the above

Question 10

Net exports equals

Accepted Answer

A)  exports divided by imports. 
B)  the sum of exports and imports. 
C)  exports minus imports. 
D)  exports during the year. 
E)  none of the above 
A)  exports divided by imports. 
B)  the sum of exports and imports. 
C)  exports minus imports. 
D)  exports during the year. 
E)  none of the above

Question 11

Which of the following goods is an intermediate good?

Accepted Answer

A)  lettuce that a restaurant buys to put on sandwiches 
B)  tires that a car company buys to put on the cars it produces 
C)  a television set that Mai buys to put in her college dorm room 
D)  a and b 
E)  b and c 
A)  lettuce that a restaurant buys to put on sandwiches 
B)  tires that a car company buys to put on the cars it produces 
C)  a television set that Mai buys to put in her college dorm room 
D)  a and b 
E)  b and c

Question 12

Investment equals inventory investment added to

Accepted Answer

A)  business purchases of new capital goods. 
B)  purchases of new residential housing. 
C)  fixed investment. 
D)  business purchases of new capital goods and purchases of new residential housing. 
E)  either c or d 
A)  business purchases of new capital goods. 
B)  purchases of new residential housing. 
C)  fixed investment. 
D)  business purchases of new capital goods and purchases of new residential housing. 
E)  either c or d

Question 13

A business cycle refers to the

Accepted Answer

A)  continued expansion in Real GDP. 
B)  recurrent swings (up and down)in Real GDP. 
C)  continued decline in Real GDP. 
D)  period when Real GDP grows at unusually high rates. 
E)  none of the above 
A)  continued expansion in Real GDP. 
B)  recurrent swings (up and down)in Real GDP. 
C)  continued decline in Real GDP. 
D)  period when Real GDP grows at unusually high rates. 
E)  none of the above

Question 14

-Refer to Exhibit 7-5.What was Country Z's economic growth rate between year 2 and year 3?

Accepted Answer

A)  -3.0% 
B)  2.6% 
C)  14.0% 
D)  -2.2% 
A)  -3.0% 
B)  2.6% 
C)  14.0% 
D)  -2.2%

Question 15

Disposable income is

Accepted Answer

A)  equal to GDP minus the capital consumption allowance. 
B)  that portion of personal income that can be used for consumption and saving. 
C)  the sum of all payments to suppliers of the factors of production. 
D)  equal to national income. 
E)  another term for personal income. 
A)  equal to GDP minus the capital consumption allowance. 
B)  that portion of personal income that can be used for consumption and saving. 
C)  the sum of all payments to suppliers of the factors of production. 
D)  equal to national income. 
E)  another term for personal income.

Question 16

Capital consumption allowance refers to

Accepted Answer

A)  capital goods being used up in production through natural wear,obsolescence,and accidental destruction. 
B)  people sending money between countries. 
C)  the purchase of used factories. 
D)  the purchase of goods that allow households to consume more services. 
A)  capital goods being used up in production through natural wear,obsolescence,and accidental destruction. 
B)  people sending money between countries. 
C)  the purchase of used factories. 
D)  the purchase of goods that allow households to consume more services.

Question 17

Suppose the total market value of all final goods and services produced in economy X this year is $4 million.Of the $4 million worth of goods and services,$3 million is sold and $1 million is held in inventory.For this year,the GDP for economy X is

Accepted Answer

A)  $4 million. 
B)  $3 million. 
C)  $1 million. 
D)  $7 million. 
E)  none of the above 
A)  $4 million. 
B)  $3 million. 
C)  $1 million. 
D)  $7 million. 
E)  none of the above

Question 18

Net exports must always be a positive amount.

Accepted Answer

A) True 
 B)False

Question 19

When computing national income,which of the following is included in compensation of employees?

Accepted Answer

A)  wages and salaries paid to employees 
B)  employers' contributions to Social Security and employee benefit plans 
C)  the monetary value of fringe benefits,tips,and paid vacations 
D)  all of the above 
A)  wages and salaries paid to employees 
B)  employers' contributions to Social Security and employee benefit plans 
C)  the monetary value of fringe benefits,tips,and paid vacations 
D)  all of the above

Question 20

The best reason economists take only final goods and services into account when calculating GDP is that

Accepted Answer

A)  this is the way things have always been done,but there is no particular reason why. 
B)  they want to avoid the problem of final counting. 
C)  they want to avoid the problem of double counting. 
D)  this is the only way it can be done. 
A)  this is the way things have always been done,but there is no particular reason why. 
B)  they want to avoid the problem of final counting. 
C)  they want to avoid the problem of double counting. 
D)  this is the only way it can be done.

Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Which of the following statements is true?

-Refer to Exhibit 7-1.What is the value of disposable income?

If in the process of calculating GDP,the market value of all intermediate goods is added to the market value of all final goods,this would

The expenditure approach to measuring GDP sums

Which of the following would definitely not be included in the measurement of GDP?

List and explain the two different approaches used to measure GDP.

Refer to Exhibit 7-3.Consumption is equal to

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

Net exports equals

Which of the following goods is an intermediate good?

Investment equals inventory investment added to

A business cycle refers to the

-Refer to Exhibit 7-5.What was Country Z's economic growth rate between year 2 and year 3?

Disposable income is

Capital consumption allowance refers to

Suppose the total market value of all final goods and services produced in economy X this year is $4 million.Of the $4 million worth of goods and services,$3 million is sold and $1 million is held in inventory.For this year,the GDP for economy X is

Net exports must always be a positive amount.

When computing national income,which of the following is included in compensation of employees?

The best reason economists take only final goods and services into account when calculating GDP is that

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

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Perfect Competition

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Government and Product Markets: Antitrust and Regulation

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Stocks,bonds,futures,and Options

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Real GDP is the value of all goods and services produced in a given year in prices.