Question 1

Which of the following transactions is not included in GDP?

Accepted Answer

A) Someone sells drugs in a vacant lot. 
B) Someone sells drugs in a pharmacy. 
C) A doctor treats a patient for drug addiction. 
D) A drug addict spends two months in a drug rehabilitation center. 
E) The drug addict buys cough medicine. 
A) Someone sells drugs in a vacant lot. 
B) Someone sells drugs in a pharmacy. 
C) A doctor treats a patient for drug addiction. 
D) A drug addict spends two months in a drug rehabilitation center. 
E) The drug addict buys cough medicine.

Question 2

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

Accepted Answer

A) federal government purchases of automobiles 
B) a purchase of California wine by a Canadian firm 
C) employers' payments for employees' medical insurance 
D) a state government's purchase of personal computers 
E) transactions in the underground economy 
A) federal government purchases of automobiles 
B) a purchase of California wine by a Canadian firm 
C) employers' payments for employees' medical insurance 
D) a state government's purchase of personal computers 
E) transactions in the underground economy

Question 3

Exhibit 6-2
  
-Using the information in Exhibit 6-2, how much did the price index change from the base to the curtrent year?.

Accepted Answer

A) 100% 
B) 50% 
C) 0% 
D) -50% 
E) -100% 
A) 100% 
B) 50% 
C) 0% 
D) -50% 
E) -100%

Question 4

GDP reflects many things; however, it does not reflect the value of production that takes place in a nonmarket setting.

Accepted Answer

A) True 
 B)False

Question 5

The largest component of aggregate expenditure is

Accepted Answer

A) government purchases 
B) transfer payments 
C) imports 
D) consumption 
E) investment 
A) government purchases 
B) transfer payments 
C) imports 
D) consumption 
E) investment

Question 6

Suppose that 1986 is our base year (price index equals 100) and that the 2000 price index was 200. If nominal GDP was $6.2 trillion in 2000, what was real GDP that year (measured in 1986 dollars)?

Accepted Answer

A) $3.1 trillion 
B) $6.2 trillion 
C) $12.4 trillion 
D) $18.6 trillion 
E) $24.3 trillion 
A) $3.1 trillion 
B) $6.2 trillion 
C) $12.4 trillion 
D) $18.6 trillion 
E) $24.3 trillion

Question 7

Nominal GDP is a better measure of the growth in production than real GDP is.

Accepted Answer

A) True 
 B)False

Question 8

A fixed-weight price index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment. According to the circular flow model, the government's budget

Accepted Answer

A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a surplus 
A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a surplus

Question 10

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases, GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 11

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 12

The statement that "GDP values all output equally" means that

Accepted Answer

A) household production is treated the same as production by firms 
B) depreciation of manufactured capital is treated the same as depletion of natural resources 
C) the purchase of pollution control equipment is valued the same as the pollution itself 
D) leisure time is valued the same as time spent working at a job 
E) the market price of output is the measure of that output's value 
A) household production is treated the same as production by firms 
B) depreciation of manufactured capital is treated the same as depletion of natural resources 
C) the purchase of pollution control equipment is valued the same as the pollution itself 
D) leisure time is valued the same as time spent working at a job 
E) the market price of output is the measure of that output's value

Question 13

The Lee family won a $50 million jackpot and made several major purchases this year, listed below. Which of these would be counted as investment when calculating GDP by the expenditure approach?

Accepted Answer

A) the former Hollywood home of Gwyneth Paltrow that they bought for $5 million 
B) the villa they just built in the Swiss Alps for $2 million 
C) the secondhand yacht that Mr. Lee purchased for $1 million and expects to sell for a profit before year's end 
D) the vintage Rolls Royce that Mrs. Lee purchased in London for $500,000 
E) the new house that Mrs. Lee had built in Pittsburgh for $200,000 to serve as living quarters for her ten new servants 
A) the former Hollywood home of Gwyneth Paltrow that they bought for $5 million 
B) the villa they just built in the Swiss Alps for $2 million 
C) the secondhand yacht that Mr. Lee purchased for $1 million and expects to sell for a profit before year's end 
D) the vintage Rolls Royce that Mrs. Lee purchased in London for $500,000 
E) the new house that Mrs. Lee had built in Pittsburgh for $200,000 to serve as living quarters for her ten new servants

Question 14

Disposable income equals personal income minus indirect business taxes.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) investment 
B) imports 
C) government purchases 
D) government borrowing 
E) transfer payments 
A) investment 
B) imports 
C) government purchases 
D) government borrowing 
E) transfer payments

Question 16

Which of the following best describes an intermediate good?

Accepted Answer

A) It has no value to the seller. 
B) It has no value to the buyer. 
C) It is purchased by a household for future use. 
D) It helps produce another good. 
E) It is sold at a discounted price by middlemen. 
A) It has no value to the seller. 
B) It has no value to the buyer. 
C) It is purchased by a household for future use. 
D) It helps produce another good. 
E) It is sold at a discounted price by middlemen.

Question 17

Which of the following is the best indicator of the performance of the national economy?

Accepted Answer

A) the federal government budget deficit 
B) the stock of capital goods (machinery) in the nation 
C) the size of the nation's stock of money 
D) the balance of trade with other nations 
E) the flow of new goods and services produced in the nation 
A) the federal government budget deficit 
B) the stock of capital goods (machinery) in the nation 
C) the size of the nation's stock of money 
D) the balance of trade with other nations 
E) the flow of new goods and services produced in the nation

Question 18

If the CPI is 220 one year and 210 the next, the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A) -2.3 percent 
B) -4.6 percent 
C) 10 percent 
D) 4.8 percent 
E) 220 percent 
A) -2.3 percent 
B) -4.6 percent 
C) 10 percent 
D) 4.8 percent 
E) 220 percent

Question 19

The ultimate goal of studying the circular flow model is to understand the flow of

Accepted Answer

A) money through the market system 
B) consumer spending through the economy 
C) goods and services through the product market 
D) resources, goods, and money through the economy 
E) resources through the resource markets and their allocation in production 
A) money through the market system 
B) consumer spending through the economy 
C) goods and services through the product market 
D) resources, goods, and money through the economy 
E) resources through the resource markets and their allocation in production

Question 20

Exhibit 6-3
  
-Refer to Exhibit 6-3. Between 2002 and 2003, real GDP for this nation

Accepted Answer

A) decreased by slightly more than $5 billion 
B) increased by slightly more than $4 billion 
C) remained constant 
D) increased by only about $1 billion 
E) cannot be determined from the information given 
A) decreased by slightly more than $5 billion 
B) increased by slightly more than $4 billion 
C) remained constant 
D) increased by only about $1 billion 
E) cannot be determined from the information given

Exam 7: Tracking the Us Economy

Which of the following transactions is not included in GDP?

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

Exhibit 6-2 -Using the information in Exhibit 6-2, how much did the price index change from the base to the curtrent year?.

GDP reflects many things; however, it does not reflect the value of production that takes place in a nonmarket setting.

The largest component of aggregate expenditure is

Suppose that 1986 is our base year (price index equals 100) and that the 2000 price index was 200. If nominal GDP was $6.2 trillion in 2000, what was real GDP that year (measured in 1986 dollars)?

Nominal GDP is a better measure of the growth in production than real GDP is.

A fixed-weight price index recognizes the fact that the composition of output changes over time.

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment. According to the circular flow model, the government's budget

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases, GDP will decrease.

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

The statement that "GDP values all output equally" means that

The Lee family won a $50 million jackpot and made several major purchases this year, listed below. Which of these would be counted as investment when calculating GDP by the expenditure approach?

Disposable income equals personal income minus indirect business taxes.

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

Which of the following best describes an intermediate good?

Which of the following is the best indicator of the performance of the national economy?

If the CPI is 220 one year and 210 the next, the annual rate of inflation as measured by the CPI is approximately

The ultimate goal of studying the circular flow model is to understand the flow of

Exhibit 6-3 -Refer to Exhibit 6-3. Between 2002 and 2003, real GDP for this nation

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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