Question 1

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

Accepted Answer

A) an increase in the price level 
B) changes in the depreciation allowance 
C) wear and tear over time 
D) changes in tax law 
E) a decrease in its resale value 
A) an increase in the price level 
B) changes in the depreciation allowance 
C) wear and tear over time 
D) changes in tax law 
E) a decrease in its resale value C

Question 2

If exports total $6.5 billion and imports total $8.0 billion in a year, then

Accepted Answer

A) together imports and exports add $1.5 billion to GDP 
B) together exports and imports add $6.5 billion to GDP 
C) together exports and imports subtract $1.5 billion from GDP 
D) together exports and imports subtract $8.0 billion from GDP 
E) together exports and imports add nothing to GDP 
A) together imports and exports add $1.5 billion to GDP 
B) together exports and imports add $6.5 billion to GDP 
C) together exports and imports subtract $1.5 billion from GDP 
D) together exports and imports subtract $8.0 billion from GDP 
E) together exports and imports add nothing to GDP C

Question 3

Aggregate income is defined as

Accepted Answer

A) the sum of income earned by all laborers in the world economy 
B) the sum of income earned by all workers in the private sector 
C) the total income of all individuals who contribute resources to the market production of output 
D) total income after all income taxes but before paying other payroll taxes 
E) total income after purchases of necessities 
A) the sum of income earned by all laborers in the world economy 
B) the sum of income earned by all workers in the private sector 
C) the total income of all individuals who contribute resources to the market production of output 
D) total income after all income taxes but before paying other payroll taxes 
E) total income after purchases of necessities C

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 the CPI overstated inflation by 1 percent per year, then the average real wage, instead of dropping by 2 percent in the last two decades, actually increased by about

Accepted Answer

A) 1 percent 
B) 2 percent 
C) 10 percent 
D) 20 percent 
E) 3 percent 
A) 1 percent 
B) 2 percent 
C) 10 percent 
D) 20 percent 
E) 3 percent

Question 6

Which of the following is true about the consumer price index (CPI) and the GDP price index?

Accepted Answer

A) Both measures weigh prices by the quantities consumed in some base year. 
B) Both yield identical numbers for price level changes for any two years. 
C) A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods. 
D) The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level. 
E) A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply. 
A) Both measures weigh prices by the quantities consumed in some base year. 
B) Both yield identical numbers for price level changes for any two years. 
C) A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods. 
D) The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level. 
E) A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply.

Question 7

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 8

In the resource market,

Accepted Answer

A) businesses borrow money to buy the capital resources they need 
B) businesses sell services to the households 
C) firms provide the resources to the households 
D) households sell the resources to firms in return for factor payments 
E) resources flow from the business sector to the household sector 
A) businesses borrow money to buy the capital resources they need 
B) businesses sell services to the households 
C) firms provide the resources to the households 
D) households sell the resources to firms in return for factor payments 
E) resources flow from the business sector to the household sector

Question 9

Which of the following is not true about Gross Domestic Product?

Accepted Answer

A) It includes only final goods and services. 
B) It reflects production in a particular year. 
C) Intermediate goods and services are excluded to prevent double counting. 
D) It may be measured by totalling the spending by each group in society. 
E) It includes transfer payments. 
A) It includes only final goods and services. 
B) It reflects production in a particular year. 
C) Intermediate goods and services are excluded to prevent double counting. 
D) It may be measured by totalling the spending by each group in society. 
E) It includes transfer payments.

Question 10

Chain-weighted indexes have less bias compared to fixed-weight indexes.

Accepted Answer

A) True 
 B)False

Question 11

If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000, earns profits of $500, and sells its output for $14,000, the firm's value added is

Accepted Answer

A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500 
A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500

Question 12

A farmer grows wheat and sells it to a bakery for $5. The bakery bakes the wheat into bread, which it sells to a distributor for $20. The distributor sells the bread to a supermarket for $30, which sells the bread to customers for $50. Which of the following is true?

Accepted Answer

A) The value added by the distributor is $30. 
B) The supermarket contributed more, in value added, than the bakery. 
C) As a result of this activity, GDP rises by $50 minus the value added at each stage of production. 
D) Counting the value added at each stage instead of the final selling price creates a serious problem of double counting. 
E) The value added by the farmer is $20 because the wheat, which is worth $5, is necessary for each of the three remaining stages of production. 
A) The value added by the distributor is $30. 
B) The supermarket contributed more, in value added, than the bakery. 
C) As a result of this activity, GDP rises by $50 minus the value added at each stage of production. 
D) Counting the value added at each stage instead of the final selling price creates a serious problem of double counting. 
E) The value added by the farmer is $20 because the wheat, which is worth $5, is necessary for each of the three remaining stages of production.

Question 13

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

Accepted Answer

A) the spark plugs you bought to tune up your car at home 
B) the government hiring a public relations consultant 
C) any improvements in product or service quality not reflected in a higher price 
D) winning a brand new Chevy truck in a contest 
E) sales of U.S. beef to Scotland 
A) the spark plugs you bought to tune up your car at home 
B) the government hiring a public relations consultant 
C) any improvements in product or service quality not reflected in a higher price 
D) winning a brand new Chevy truck in a contest 
E) sales of U.S. beef to Scotland

Question 14

The U.S. Department of Commerce has been developing so called "green accounting" to

Accepted Answer

A) focus attention to the money side of GDP 
B) reflect the impact of pollution and natural resource depletion 
C) properly value the output of very new firms 
D) illustrate the difference between GDP and real GDP 
E) measure the value of the output produced by inexperienced workers 
A) focus attention to the money side of GDP 
B) reflect the impact of pollution and natural resource depletion 
C) properly value the output of very new firms 
D) illustrate the difference between GDP and real GDP 
E) measure the value of the output produced by inexperienced workers

Question 15

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 16

GDP is not a perfect measure of material well-being because it ignores

Accepted Answer

A) production of goods and services by the government 
B) goods produced in the United States but shipped overseas 
C) negative externalities 
D) consumer spending on services 
E) business spending on equipment 
A) production of goods and services by the government 
B) goods produced in the United States but shipped overseas 
C) negative externalities 
D) consumer spending on services 
E) business spending on equipment

Question 17

If the CPI is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent 
A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent

Question 18

Which of the following would not increase U.S. GDP?

Accepted Answer

A) increased demand in Costa Rica for California-made personal computers 
B) increased demand in Alabama for California-made personal computers 
C) increased production of computers in California, but no increase in the number sold 
D) increased shipments of computers from the U.S. to Canada 
E) increased shipments of Ghanian cocoa to the United States on Greek vessels 
A) increased demand in Costa Rica for California-made personal computers 
B) increased demand in Alabama for California-made personal computers 
C) increased production of computers in California, but no increase in the number sold 
D) increased shipments of computers from the U.S. to Canada 
E) increased shipments of Ghanian cocoa to the United States on Greek vessels

Question 19

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 20

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

Exam 7: Tracking the Us Economy

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

If exports total $6.5 billion and imports total $8.0 billion in a year, then

Aggregate income is defined as

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

If the CPI overstated inflation by 1 percent per year, then the average real wage, instead of dropping by 2 percent in the last two decades, actually increased by about

Which of the following is true about the consumer price index (CPI) and the GDP price index?

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,

In the resource market,

Which of the following is not true about Gross Domestic Product?

Chain-weighted indexes have less bias compared to fixed-weight indexes.

If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000, earns profits of $500, and sells its output for $14,000, the firm's value added is

A farmer grows wheat and sells it to a bakery for $5. The bakery bakes the wheat into bread, which it sells to a distributor for $20. The distributor sells the bread to a supermarket for $30, which sells the bread to customers for $50. Which of the following is true?

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

The U.S. Department of Commerce has been developing so called "green accounting" to

Real GDP is measured in

GDP is not a perfect measure of material well-being because it ignores

If the CPI is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately

Which of the following would not increase U.S. GDP?

The gross domestic product does capture changes in the

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

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Agregate Demand

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

Economic Development

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