Question 1

Which of the following statements is true?

Accepted Answer

A)  National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received. 
B)  Net domestic product (NDP)is a smaller dollar amount than GDP. 
C)  Personal income includes transfer payments. 
D)  b and c 
E)  a,b,and c 
A)  National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received. 
B)  Net domestic product (NDP)is a smaller dollar amount than GDP. 
C)  Personal income includes transfer payments. 
D)  b and c 
E)  a,b,and c

Question 2

Describe the three different reasons that investment can rise.Explain how one of these three changes could be undesirable in terms of promoting the economic health and strength of the economy.

Accepted Answer

Investment can rise as a result of: (1)a

Question 3

Investment is equal to all purchases of newly produced capital goods

Accepted Answer

A)  minus changes in business inventories. 
B)  plus fixed investment minus inventory investment. 
C)  plus changes in business inventories. 
D)  plus changes in business inventories plus purchases of new residential housing. 
A)  minus changes in business inventories. 
B)  plus fixed investment minus inventory investment. 
C)  plus changes in business inventories. 
D)  plus changes in business inventories plus purchases of new residential housing.

Question 4

Which of the following is the correct equation for computing personal income?

Accepted Answer

A)  Personal income = National income + undistributed profits - social insurance taxes - corporate profits taxes + transfer payments. 
B)  Personal income = National income - undistributed profits - social insurance taxes + corporate profits taxes + transfer payments 
C)  Personal income = National income - taxes 
D)  Personal income = National income - undistributed corporate profits - social insurance taxes - corporate profits taxes + transfer payments 
E)  none of the above 
A)  Personal income = National income + undistributed profits - social insurance taxes - corporate profits taxes + transfer payments. 
B)  Personal income = National income - undistributed profits - social insurance taxes + corporate profits taxes + transfer payments 
C)  Personal income = National income - taxes 
D)  Personal income = National income - undistributed corporate profits - social insurance taxes - corporate profits taxes + transfer payments 
E)  none of the above

Question 5

Suppose that fixed investment is $480 billion and (total)investment is $630 billion.What does inventory investment equal?

Accepted Answer

A)  $150 billion 
B)  $550 billion 
C)  $630 billion 
D)  $1,110 billion 
E)  There is not enough information to answer this question. 
A)  $150 billion 
B)  $550 billion 
C)  $630 billion 
D)  $1,110 billion 
E)  There is not enough information to answer this question.

Question 6

Draw an appropriate diagram to represent the business cycle and label each of the five phases.Provide a brief description of each phase.

Accepted Answer

The five phases of the business cycle ar

Question 7

Which of the following statements is false?

Accepted Answer

A)  For purposes of computing GDP,the purchases of new residential housing are considered investment although it is undertaken by the household sector. 
B)  Consumption includes spending on durable goods but not spending on services. 
C)  Investment includes fixed investment but not inventory investment. 
D)  b and c 
A)  For purposes of computing GDP,the purchases of new residential housing are considered investment although it is undertaken by the household sector. 
B)  Consumption includes spending on durable goods but not spending on services. 
C)  Investment includes fixed investment but not inventory investment. 
D)  b and c

Question 8

In which phase of the business cycle does a recession occur?

Accepted Answer

A)  contraction 
B)  peak 
C)  recovery 
D)  expansion 
A)  contraction 
B)  peak 
C)  recovery 
D)  expansion

Question 9

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

Accepted Answer

A)  $4,252 
B)  $4,388 
C)  $5,072 
D)  $3,996 
E)  $4,207 
A)  $4,252 
B)  $4,388 
C)  $5,072 
D)  $3,996 
E)  $4,207

Question 10

Gross Domestic Product (GDP)is the total market value of all

Accepted Answer

A)  final goods and services produced annually within a country's borders. 
B)  final and intermediate goods and services produced annually within a country's borders. 
C)  intermediate goods and services produced annually within a country's borders. 
D)  final goods produced every month within a country's borders. 
A)  final goods and services produced annually within a country's borders. 
B)  final and intermediate goods and services produced annually within a country's borders. 
C)  intermediate goods and services produced annually within a country's borders. 
D)  final goods produced every month within a country's borders.

Question 11

Net interest is the interest paid out by US households and government minus the interest income they received.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  an increase in the price level. 
B)  a decrease in the price level. 
C)  "wear and tear" of capital goods over time. 
D)  the depreciation allowance. 
E)  a decrease in purchasing power. 
A)  an increase in the price level. 
B)  a decrease in the price level. 
C)  "wear and tear" of capital goods over time. 
D)  the depreciation allowance. 
E)  a decrease in purchasing power.

Question 13

Which of the following is a nonmarket good?

Accepted Answer

A)  the corn you grow in your home garden and consume 
B)  the clothes you sew and sell to a neighbor who pays you by writing you a check 
C)  the self-portrait hanging in your den 
D)  a and c 
E)  a,b,and c 
A)  the corn you grow in your home garden and consume 
B)  the clothes you sew and sell to a neighbor who pays you by writing you a check 
C)  the self-portrait hanging in your den 
D)  a and c 
E)  a,b,and c

Question 14

List and describe four of the six categories of economic exchanges that are omitted from GDP calculations.Explain why these transactions are not included in GDP and give an example of each to help support your answer.

Accepted Answer

Certain nonmarket goods and services are

Question 15

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

Accepted Answer

A)  a bill from a car mechanic 
B)  wages of a card dealer working in a Las Vegas casino 
C)  commissions of a stockbroker 
D)  the increased value of shares of stock 
E)  c and d 
A)  a bill from a car mechanic 
B)  wages of a card dealer working in a Las Vegas casino 
C)  commissions of a stockbroker 
D)  the increased value of shares of stock 
E)  c and d

Question 16

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?

Accepted Answer

A)  Yes,all of the components of national income are given. 
B)  No,since data on indirect business taxes are missing. 
C)  No,since data on corporate profits is missing. 
D)  No,since data on the capital consumption allowance is missing. 
E)  No,since net interest has not been adjusted for profits. 
A)  Yes,all of the components of national income are given. 
B)  No,since data on indirect business taxes are missing. 
C)  No,since data on corporate profits is missing. 
D)  No,since data on the capital consumption allowance is missing. 
E)  No,since net interest has not been adjusted for profits.

Question 17

Country A has a higher GDP than country B.What does this mean?

Accepted Answer

A)  It means that on a per-capita basis the residents of country A are relatively better off (in terms of the goods and services they have available to them)than the residents of country B. 
B)  It means that on a per-capita basis the residents of country A are richer than the residents of country B. 
C)  It means that more goods and services were produced in country A than country B. 
D)  It means that the total market value of the final goods and services produced in country A is greater than the total market value of the final goods and services produced in country B. 
E)  a and d 
A)  It means that on a per-capita basis the residents of country A are relatively better off (in terms of the goods and services they have available to them)than the residents of country B. 
B)  It means that on a per-capita basis the residents of country A are richer than the residents of country B. 
C)  It means that more goods and services were produced in country A than country B. 
D)  It means that the total market value of the final goods and services produced in country A is greater than the total market value of the final goods and services produced in country B. 
E)  a and d

Question 18

Purchases of new residential housing are considered investment,for purposes of computing GDP.

Accepted Answer

A) True 
 B)False

Question 19

GDP is computed using base-year dollars.

Accepted Answer

A) True 
 B)False

Question 20

In the United States,which is the largest dollar figure?

Accepted Answer

A)  disposable personal income 
B)  gross domestic product 
C)  per-capita GDP 
D)  personal income 
A)  disposable personal income 
B)  gross domestic product 
C)  per-capita GDP 
D)  personal income

Exam 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Which of the following statements is true?

Describe the three different reasons that investment can rise.Explain how one of these three changes could be undesirable in terms of promoting the economic health and strength of the economy.

Investment is equal to all purchases of newly produced capital goods

Which of the following is the correct equation for computing personal income?

Suppose that fixed investment is $480 billion and (total)investment is $630 billion.What does inventory investment equal?

Draw an appropriate diagram to represent the business cycle and label each of the five phases.Provide a brief description of each phase.

Which of the following statements is false?

In which phase of the business cycle does a recession occur?

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

Gross Domestic Product (GDP)is the total market value of all

Net interest is the interest paid out by US households and government minus the interest income they received.

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

Which of the following is a nonmarket good?

List and describe four of the six categories of economic exchanges that are omitted from GDP calculations.Explain why these transactions are not included in GDP and give an example of each to help support your answer.

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

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?

Country A has a higher GDP than country B.What does this mean?

Purchases of new residential housing are considered investment,for purposes of computing GDP.

GDP is computed using base-year dollars.

In the United States,which is the largest dollar figure?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

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