Question 1

The size of the underground economy as a percent of GDP is larger in the United States as compared to poorer countries such as Zimbabwe.

Accepted Answer

A) True 
 B)False

Question 2

Economist Robert Higgs showed that World War II brought great increase in the number of consumer goods available to the typical person.

Accepted Answer

A) True 
 B)False

Question 3

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

Accepted Answer

A)  simply counts the total number of goods produced in the market place and then adds them up. 
B)  values goods at their market prices, multiplies them by the quantity produced, and then adds them up. 
C)  simply counts the total number of goods and services produced in the marketplace and then adds them up. 
D)  values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up. 
A)  simply counts the total number of goods produced in the market place and then adds them up. 
B)  values goods at their market prices, multiplies them by the quantity produced, and then adds them up. 
C)  simply counts the total number of goods and services produced in the marketplace and then adds them up. 
D)  values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

Question 4

If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.

Accepted Answer

A) True 
 B)False

Question 5

In the circular flow model, the value of total income for an economy ________ the value of total production.

Accepted Answer

A)  equals 
B)  is greater than 
C)  is less than 
D)  may be greater than or less than 
A)  equals 
B)  is greater than 
C)  is less than 
D)  may be greater than or less than

Question 6

Consumption expenditures do not include household purchases of

Accepted Answer

A)  medical care. 
B)  education. 
C)  new houses. 
D)  durable goods. 
A)  medical care. 
B)  education. 
C)  new houses. 
D)  durable goods.

Question 7

Which of the following transactions would take place in the "underground economy"?

Accepted Answer

A)  Elizabeth tells her mother she's going to work but really goes to see a movie. 
B)  Paul buys 15 gallons of gasoline for $3.29 a gallon, not realizing that $1.50 per gallon of that price goes to the government as tax revenue. 
C)  John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes. 
D)  Matt bought an iPad for $499 but decided to sell it on eBay instead of keeping it. 
A)  Elizabeth tells her mother she's going to work but really goes to see a movie. 
B)  Paul buys 15 gallons of gasoline for $3.29 a gallon, not realizing that $1.50 per gallon of that price goes to the government as tax revenue. 
C)  John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes. 
D)  Matt bought an iPad for $499 but decided to sell it on eBay instead of keeping it.

Question 8

Table 19-11
   Consider the following data for Tyrovia, a country that produces only two products: guns and butter.
-Refer to Table 19-11. Real GDP for Tyrovia for 2013 using 2005 as the base year equals

Accepted Answer

A)  $1,140. 
B)  $880. 
C)  $690. 
D)  $560. 
A)  $1,140. 
B)  $880. 
C)  $690. 
D)  $560.

Question 9

Total income in an economy is equal to

Accepted Answer

A)  GDP minus net exports. 
B)  income minus taxes. 
C)  the sum of wages, interest, rent, and profit. 
D)  firm revenues. 
A)  GDP minus net exports. 
B)  income minus taxes. 
C)  the sum of wages, interest, rent, and profit. 
D)  firm revenues.

Question 10

Disposable personal income equals personal income

Accepted Answer

A)  minus personal tax payments. 
B)  plus government transfer payments. 
C)  minus personal tax payments plus government transfer payments. 
D)  minus government transfer payments plus personal tax payments. 
A)  minus personal tax payments. 
B)  plus government transfer payments. 
C)  minus personal tax payments plus government transfer payments. 
D)  minus government transfer payments plus personal tax payments.

Question 11

The underground economy - the informal sector - can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector?

Accepted Answer

Entrepreneurs of the firms in the inform

Question 12

Table 19-27
   The components of national income for an economy are represented in Table 19-27 above. All values are in billions of dollars.
-Refer to Table 19-27. What is the level of disposable personal income for this economy?

Accepted Answer

A)  $1,080 billion 
B)  $1,010 billion 
C)  $980 billion 
D)  $860 billion 
A)  $1,080 billion 
B)  $1,010 billion 
C)  $980 billion 
D)  $860 billion

Question 13

Suppose that nominal GDP in 2013 was less than real GDP in 2013. Given this information, we know for certain that

Accepted Answer

A)  the price level in 2013 was greater than the price level in the base year. 
B)  the price level in 2013 was less than the price level in the base year. 
C)  real GDP in 2013 was less than real GDP in the base year. 
D)  real GDP in 2013 was greater than real GDP in the base year. 
A)  the price level in 2013 was greater than the price level in the base year. 
B)  the price level in 2013 was less than the price level in the base year. 
C)  real GDP in 2013 was less than real GDP in the base year. 
D)  real GDP in 2013 was greater than real GDP in the base year.

Question 14

Table 19-26
  
-A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

Accepted Answer

A)  GNP is much larger than GDP. 
B)  GDP is much larger than GNP. 
C)  GDP is equal to GNP. 
D)  GDP is not comparable to GDP. 
A)  GNP is much larger than GDP. 
B)  GDP is much larger than GNP. 
C)  GDP is equal to GNP. 
D)  GDP is not comparable to GDP.

Question 15

Which of the following is counted in GDP?

Accepted Answer

A)  the value of goods and services produced in the underground economy 
B)  the cost of a speed boat purchased by drug smugglers 
C)  the value of do-it-yourself work 
D)  the value of leisure 
A)  the value of goods and services produced in the underground economy 
B)  the cost of a speed boat purchased by drug smugglers 
C)  the value of do-it-yourself work 
D)  the value of leisure

Question 16

The GDP deflator is a measure of the

Accepted Answer

A)  total production of the economy adjusted for inflation. 
B)  total production of the economy unadjusted for inflation. 
C)  average level of prices of final goods and services in the economy. 
D)  average level of prices of intermediate goods and services in the economy. 
A)  total production of the economy adjusted for inflation. 
B)  total production of the economy unadjusted for inflation. 
C)  average level of prices of final goods and services in the economy. 
D)  average level of prices of intermediate goods and services in the economy.

Question 17

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

Accepted Answer

A) True 
 B)False

Question 18

If China decides to enact laws to clean up the environment, what would be the effect on GDP?

Accepted Answer

A)  GDP would increase reflecting the fact that the environment would be cleaner. 
B)  GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls. 
C)  GDP would increase as the citizens of China were made happier as the environment was cleaned up. 
D)  GDP would increase as the environmental costs of pollution were not included in the calculation of GDP. 
A)  GDP would increase reflecting the fact that the environment would be cleaner. 
B)  GDP would decrease if the pollution controls reduce productivity by more than the cost of the controls. 
C)  GDP would increase as the citizens of China were made happier as the environment was cleaned up. 
D)  GDP would increase as the environmental costs of pollution were not included in the calculation of GDP.

Question 19

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?

Accepted Answer

Nominal GDP can change because

Question 20

In 2013, the U.S. auto industry experienced rising sales. The automobile industry was experiencing the effects of

Accepted Answer

A)  inflation. 
B)  the underground economy. 
C)  the business cycle. 
D)  depreciation. 
A)  inflation. 
B)  the underground economy. 
C)  the business cycle. 
D)  depreciation.

Exam 19: GDP: Measuring Total Production and Income

The size of the underground economy as a percent of GDP is larger in the United States as compared to poorer countries such as Zimbabwe.

Economist Robert Higgs showed that World War II brought great increase in the number of consumer goods available to the typical person.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.

In the circular flow model, the value of total income for an economy ________ the value of total production.

Consumption expenditures do not include household purchases of

Which of the following transactions would take place in the "underground economy"?

Table 19-11 Consider the following data for Tyrovia, a country that produces only two products: guns and butter. -Refer to Table 19-11. Real GDP for Tyrovia for 2013 using 2005 as the base year equals

Total income in an economy is equal to

Disposable personal income equals personal income

The underground economy - the informal sector - can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector?

Table 19-27 The components of national income for an economy are represented in Table 19-27 above. All values are in billions of dollars. -Refer to Table 19-27. What is the level of disposable personal income for this economy?

Suppose that nominal GDP in 2013 was less than real GDP in 2013. Given this information, we know for certain that

Table 19-26 -A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

Which of the following is counted in GDP?

The GDP deflator is a measure of the

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

If China decides to enact laws to clean up the environment, what would be the effect on GDP?

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?

In 2013, the U.S. auto industry experienced rising sales. The automobile industry was experiencing the effects of

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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