Question 1

Which of the following would not be counted in this year's GDP?

Accepted Answer

A) Midwest Tractor Company's inventory of brand new farm equipment, which will remain unsold by year's end 
B) the inventory of new baseballs ordered by the Detroit Tigers 
C) the new house the Barnabys had constructed this year 
D) the vacation that the Cartiers enjoyed in France this winter 
E) Bruno's meal at the local La Casa Caliente 
A) Midwest Tractor Company's inventory of brand new farm equipment, which will remain unsold by year's end 
B) the inventory of new baseballs ordered by the Detroit Tigers 
C) the new house the Barnabys had constructed this year 
D) the vacation that the Cartiers enjoyed in France this winter 
E) Bruno's meal at the local La Casa Caliente

Question 2

Suppose that storage costs increase, so that firms decide to hold less output in inventory, other things constant. Which of the following is true?

Accepted Answer

A) consumption spending will increase 
B) consumption spending will decrease 
C) investment will increase 
D) investment will decrease 
E) GDP for this year is not affected 
A) consumption spending will increase 
B) consumption spending will decrease 
C) investment will increase 
D) investment will decrease 
E) GDP for this year is not affected

Question 3

The CPI overstates the true inflation rate because it does not fully incorporate the effects of quality improvements.

Accepted Answer

A) True 
 B)False

Question 4

In the circular flow model,

Accepted Answer

A) the flow of expenditures measures the dollar value on purchases of resources in the product market 
B) the flow of expenditures measures the dollar value of purchases of both goods and services 
C) the flow of income to the owners of labor only 
D) the flow of expenditures as they move through the loanable funds market 
E) the flow of funds from the product to the resource market 
A) the flow of expenditures measures the dollar value on purchases of resources in the product market 
B) the flow of expenditures measures the dollar value of purchases of both goods and services 
C) the flow of income to the owners of labor only 
D) the flow of expenditures as they move through the loanable funds market 
E) the flow of funds from the product to the resource market

Question 5

The price index in the base year always equals

Accepted Answer

A) 0 
B) 1 
C) 100 
D) infinity 
E) 0.01 
A) 0 
B) 1 
C) 100 
D) infinity 
E) 0.01

Question 6

Which of the following is not an injection into the circular flow?

Accepted Answer

A) saving 
B) domestic exports 
C) government expenditure on goods 
D) transfer payments 
E) investment by firms 
A) saving 
B) domestic exports 
C) government expenditure on goods 
D) transfer payments 
E) investment by firms

Question 7

Katrina pays $40 for a meal at a fancy restaurant. The ingredients used in it probably cost the restaurant $10. The value added to GDP by the purchase of this meal is

Accepted Answer

A) $30 
B) $40 
C) $70 
D) $40 plus the wages paid the chef and waiters 
E) $40 plus the profit earned by the restaurant's owner 
A) $30 
B) $40 
C) $70 
D) $40 plus the wages paid the chef and waiters 
E) $40 plus the profit earned by the restaurant's owner

Question 8

If a firm hires labor for $6,000, pays rent of $2,000, buys raw materials for $10,000, earns profits of $800, and sells its output for $25,000, the firm's value added is

Accepted Answer

A) $6,200 
B) $9,000 
C) $15,000 
D) $18,000 
E) $18,800 
A) $6,200 
B) $9,000 
C) $15,000 
D) $18,000 
E) $18,800

Question 9

Imports are a leakage from the circular flow.

Accepted Answer

A) True 
 B)False

Question 10

If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly large number of them on hand at the end of the year, the value of the increased inventory of those toys will be counted as

Accepted Answer

A) investment in 2004 
B) investment in 2005 
C) consumption in 2004 
D) consumption in 2005 
E) part of GDP only when the toys are sold 
A) investment in 2004 
B) investment in 2005 
C) consumption in 2004 
D) consumption in 2005 
E) part of GDP only when the toys are sold

Question 11

Which of the following would be included in GDP?

Accepted Answer

A) payment of the monthly telephone bill by Mr. Laconic 
B) the purchase of corporate stock by Steven Jones 
C) the purchase of a used limousine by Harold Abel 
D) the value of a pair of mittens your mother knitted for you 
E) the $300 George saved because he painted his own garage 
A) payment of the monthly telephone bill by Mr. Laconic 
B) the purchase of corporate stock by Steven Jones 
C) the purchase of a used limousine by Harold Abel 
D) the value of a pair of mittens your mother knitted for you 
E) the $300 George saved because he painted his own garage

Question 12

Suppose that in year 1 the respective prices of yogurt, candy bars, and popcorn are $1, $2, and $3. In year 2 the unit prices of each are $2, $3, and $4, respectively. Which of the following statements is true of the price level between year 1 and year 2?

Accepted Answer

A) it doubled 
B) it increased by 33 percent 
C) it rose from $6 to $9 
D) it went up from 106 to 109 
E) it must have risen at a rate between 33 percent and 100 percent 
A) it doubled 
B) it increased by 33 percent 
C) it rose from $6 to $9 
D) it went up from 106 to 109 
E) it must have risen at a rate between 33 percent and 100 percent

Question 13

Which of the following would be included in this year's GDP?

Accepted Answer

A) one hundred shares of IBM stock that Tony Hanks bought this May 
B) the used car Tracey sold to Justin 
C) George Garcia's purchase of a fishing rod and reel at a garage sale 
D) the $20 Sharon Johnson gave Dennis O'Brien as a reward for finding her lost wedding ring 
E) that bucket of Kentucky Fried Chicken you bought this July 
A) one hundred shares of IBM stock that Tony Hanks bought this May 
B) the used car Tracey sold to Justin 
C) George Garcia's purchase of a fishing rod and reel at a garage sale 
D) the $20 Sharon Johnson gave Dennis O'Brien as a reward for finding her lost wedding ring 
E) that bucket of Kentucky Fried Chicken you bought this July

Question 14

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

Accepted Answer

A) True 
 B)False

Question 15

The base year for a price index is the year

Accepted Answer

A) in which prices are lowest 
B) in which prices are highest 
C) in which real output is largest 
D) in which prices were stable 
E) that serves as a reference point 
A) in which prices are lowest 
B) in which prices are highest 
C) in which real output is largest 
D) in which prices were stable 
E) that serves as a reference point

Question 16

Which of the following is true regarding Gross Domestic Product?

Accepted Answer

A) It can only be measured from the flow of total spending. 
B) It can only be measured from the flow of total income in the economy. 
C) It can be measured either from total spending or total expenditure. 
D) It is calculated by computing total spending and total income; the larger of the two figures is counted as GDP. 
E) It can only be measured from the stock of total wealth. 
A) It can only be measured from the flow of total spending. 
B) It can only be measured from the flow of total income in the economy. 
C) It can be measured either from total spending or total expenditure. 
D) It is calculated by computing total spending and total income; the larger of the two figures is counted as GDP. 
E) It can only be measured from the stock of total wealth.

Question 17

The national income accounting system measures economic activity based on the concept of the

Accepted Answer

A) triangular flow of output and income through different sectors of the economy 
B) stock of precious metals accumulated in the public treasury 
C) comparative advantage of crucial national industries 
D) circular flow of output and income through different sectors of the economy 
E) balance sheets of all a country's corporations 
A) triangular flow of output and income through different sectors of the economy 
B) stock of precious metals accumulated in the public treasury 
C) comparative advantage of crucial national industries 
D) circular flow of output and income through different sectors of the economy 
E) balance sheets of all a country's corporations

Question 18

The CPI overstates the true inflation rate because it ignores changes in consumers' purchasing patterns as relative prices change.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that the economy is in equilibrium with the government budget in surplus and with saving is greater than investment. According to the circular flow model,

Accepted Answer

A) imports must exceed exports 
B) imports must be less than exports 
C) imports must equal exports 
D) imports could be greater than or equal to exports 
E) it is impossible to determine anything about imports and exports using the given information 
A) imports must exceed exports 
B) imports must be less than exports 
C) imports must equal exports 
D) imports could be greater than or equal to exports 
E) it is impossible to determine anything about imports and exports using the given information

Question 20

If nominal GDP for a particular year is $6 trillion and real GDP for that year is $5 trillion, then the GDP price index for that year is

Accepted Answer

A) 1.2 
B) 17 
C) 20 
D) 83 
E) 120 
A) 1.2 
B) 17 
C) 20 
D) 83 
E) 120

Exam 7: Tracking the Us Economy

Which of the following would not be counted in this year's GDP?

Suppose that storage costs increase, so that firms decide to hold less output in inventory, other things constant. Which of the following is true?

The CPI overstates the true inflation rate because it does not fully incorporate the effects of quality improvements.

In the circular flow model,

The price index in the base year always equals

Which of the following is not an injection into the circular flow?

Katrina pays $40 for a meal at a fancy restaurant. The ingredients used in it probably cost the restaurant $10. The value added to GDP by the purchase of this meal is

If a firm hires labor for $6,000, pays rent of $2,000, buys raw materials for $10,000, earns profits of $800, and sells its output for $25,000, the firm's value added is

Imports are a leakage from the circular flow.

If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly large number of them on hand at the end of the year, the value of the increased inventory of those toys will be counted as

Which of the following would be included in GDP?

Suppose that in year 1 the respective prices of yogurt, candy bars, and popcorn are $1, $2, and $3. In year 2 the unit prices of each are $2, $3, and $4, respectively. Which of the following statements is true of the price level between year 1 and year 2?

Which of the following would be included in this year's GDP?

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

The base year for a price index is the year

Which of the following is true regarding Gross Domestic Product?

The national income accounting system measures economic activity based on the concept of the

The CPI overstates the true inflation rate because it ignores changes in consumers' purchasing patterns as relative prices change.

Suppose that the economy is in equilibrium with the government budget in surplus and with saving is greater than investment. According to the circular flow model,

If nominal GDP for a particular year is $6 trillion and real GDP for that year is $5 trillion, then the GDP price index for that year is

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

Filters