Question 1

Net exports is the value of

Accepted Answer

A) exports minus the value of imports 
B) imports minus the value of exports 
C) imports minus tariffs 
D) exports minus tariffs 
E) exports plus the value of imports minus depreciation 
A) exports minus the value of imports 
B) imports minus the value of exports 
C) imports minus tariffs 
D) exports minus tariffs 
E) exports plus the value of imports minus depreciation

Question 2

Which of the following is not a reason that the CPI may overstate the actual rate of inflation.

Accepted Answer

A) improvements in quality are difficult to incorporate in the calculation of the CPI 
B) expanded product variety is difficult to incorporate in the calculation of the CPI 
C) energy price increases are too heavily weighted in the calculation of the CPI 
D) calculation of the CPI does not adequately account for consumer responses to changes in relative prices 
E) calculation of the CPI does not adequately account for consumer shifts to discount stores like, Wal-Mart and Target 
A) improvements in quality are difficult to incorporate in the calculation of the CPI 
B) expanded product variety is difficult to incorporate in the calculation of the CPI 
C) energy price increases are too heavily weighted in the calculation of the CPI 
D) calculation of the CPI does not adequately account for consumer responses to changes in relative prices 
E) calculation of the CPI does not adequately account for consumer shifts to discount stores like, Wal-Mart and Target

Question 3

Other things equal, increased imports decrease GDP.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would not be included in GDP as government purchases?

Accepted Answer

A) The local township repairs the roads. 
B) The state government funds a state university. 
C) The federal government sends out Social Security checks. 
D) The federal government pays a lawyer as a public defender. 
E) The state government buys computer time. 
A) The local township repairs the roads. 
B) The state government funds a state university. 
C) The federal government sends out Social Security checks. 
D) The federal government pays a lawyer as a public defender. 
E) The state government buys computer time.

Question 5

Which of the following correctly states the leakages-injections approach to GDP?

Accepted Answer

A) DI + (NT) = C + I + G + (X - M) 
B) S + C + T = DI 
C) S + C + (NT) = I + G + (X - M) 
D) S + (NT) + M = I + G + X 
E) S + (NT) = I + G + (X - M) 
A) DI + (NT) = C + I + G + (X - M) 
B) S + C + T = DI 
C) S + C + (NT) = I + G + (X - M) 
D) S + (NT) + M = I + G + X 
E) S + (NT) = I + G + (X - M)

Question 6

Louis always knits ten sweaters a year to give as birthday gifts to his nephews. One year, instead of giving the sweaters as gifts, he sells them to a local store for $50 each; his nephews receive no gifts. What is the effect on GDP?

Accepted Answer

A) GDP increases 
B) GDP decreases 
C) there is no change in GDP 
D) GDP increases only if the $50 sweaters are comparable to store-bought sweaters 
E) GDP increases only if the $50 price is less than the cost of materials 
A) GDP increases 
B) GDP decreases 
C) there is no change in GDP 
D) GDP increases only if the $50 sweaters are comparable to store-bought sweaters 
E) GDP increases only if the $50 price is less than the cost of materials

Question 7

Which of the following would increase GDP?

Accepted Answer

A) More people walk to work rather than drive cars. 
B) Consumers in rural areas switch from buying home heating oil to burning wood they collect on their own land. 
C) Farm families grow more for themselves than for the market. 
D) Neither the price nor the quantity of television sets changes, but the quality of sets improves. 
E) The amount spent on vacuum cleaners does not change, but quality decreases so much that more is spent on their repair. 
A) More people walk to work rather than drive cars. 
B) Consumers in rural areas switch from buying home heating oil to burning wood they collect on their own land. 
C) Farm families grow more for themselves than for the market. 
D) Neither the price nor the quantity of television sets changes, but the quality of sets improves. 
E) The amount spent on vacuum cleaners does not change, but quality decreases so much that more is spent on their repair.

Question 8

If we knew that nominal GDP was currently $5.4 trillion, and that GDP in dollars of 1997 purchasing power was $3.6 trillion, what would we know about the GDP price index?

Accepted Answer

A) It would be 0.667. 
B) It would be 150. 
C) We would know nothing until we had current information on the price level. 
D) We would know only that a dollar buys more currently than it bought in 1997. 
E) It indicates that substantial deflation has occurred since 1997. 
A) It would be 0.667. 
B) It would be 150. 
C) We would know nothing until we had current information on the price level. 
D) We would know only that a dollar buys more currently than it bought in 1997. 
E) It indicates that substantial deflation has occurred since 1997.

Question 9

Exports are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

Question 10

If nominal GDP increases by 4 percent, then

Accepted Answer

A) real output has increased by 4 percent 
B) the price level has increased by 4 percent 
C) consumer spending must have increased by 4 percent 
D) it is possible that all of the increase was caused by an increase in the price level 
E) net exports increased by 4 percent 
A) real output has increased by 4 percent 
B) the price level has increased by 4 percent 
C) consumer spending must have increased by 4 percent 
D) it is possible that all of the increase was caused by an increase in the price level 
E) net exports increased by 4 percent

Question 11

If the CPI this year is 162 and last year it was 170, what do we know about the inflation rate this year?

Accepted Answer

A) It is positive. 
B) It is negative. 
C) It has decreased since last year. 
D) It has increased since last year. 
E) It is the same as last year. 
A) It is positive. 
B) It is negative. 
C) It has decreased since last year. 
D) It has increased since last year. 
E) It is the same as last year.

Question 12

U.S. imports are

Accepted Answer

A) not added to U.S. GDP because they are produced abroad 
B) added to U.S. GDP because they are consumed domestically 
C) added to U.S. GDP because they represent an increase in inventories 
D) added to U.S. GDP as government purchases because the government decides what goods may be imported 
E) not added to U.S. GDP because they are intermediate goods 
A) not added to U.S. GDP because they are produced abroad 
B) added to U.S. GDP because they are consumed domestically 
C) added to U.S. GDP because they represent an increase in inventories 
D) added to U.S. GDP as government purchases because the government decides what goods may be imported 
E) not added to U.S. GDP because they are intermediate goods

Question 13

Value added is

Accepted Answer

A) the sum of all income earned by resource suppliers 
B) actual investment minus planned investment 
C) any payment of income that adds to the domestic spending stream 
D) the value of a product minus the cost of materials 
E) the increase in the value of a financial asset such as a stock or bond 
A) the sum of all income earned by resource suppliers 
B) actual investment minus planned investment 
C) any payment of income that adds to the domestic spending stream 
D) the value of a product minus the cost of materials 
E) the increase in the value of a financial asset such as a stock or bond

Question 14

The economy's production possibilities depend on what happens to

Accepted Answer

A) fishing net investment 
B) gross investment 
C) net investment 
D) net domestic product 
E) computer network investment 
A) fishing net investment 
B) gross investment 
C) net investment 
D) net domestic product 
E) computer network investment

Question 15

GDP does not include the

Accepted Answer

A) increase in business inventories in the period 
B) expenditures by government for newly produced goods and services in a given period 
C) value of all transactions in the economy during a given period 
D) value of final output during a given period 
E) household spending on electricity 
A) increase in business inventories in the period 
B) expenditures by government for newly produced goods and services in a given period 
C) value of all transactions in the economy during a given period 
D) value of final output during a given period 
E) household spending on electricity

Question 16

Which of the following statements is true regarding leakages and injections?

Accepted Answer

A) Government transfer payments must equal taxes because one is a leakage and one is an injection. 
B) Imports must equal exports since both are leakages. 
C) Saving must equal investment for the economy to be in equilibrium. 
D) Since leakages equal injections, aggregate income equals aggregate expenditure. 
E) Net taxes are an injection into the circular flow; net exports are a leakage. 
A) Government transfer payments must equal taxes because one is a leakage and one is an injection. 
B) Imports must equal exports since both are leakages. 
C) Saving must equal investment for the economy to be in equilibrium. 
D) Since leakages equal injections, aggregate income equals aggregate expenditure. 
E) Net taxes are an injection into the circular flow; net exports are a leakage.

Question 17

The Consumer Price Index is a measure of the

Accepted Answer

A) cost of a market basket of consumer goods and services relative to its cost in some base year 
B) change in the average price of a market basket of "necessary" goods and services 
C) annual inflation rate in the producers' goods market 
D) change in the average price level of all final goods and services 
E) average price of all goods and services relative to their price last year 
A) cost of a market basket of consumer goods and services relative to its cost in some base year 
B) change in the average price of a market basket of "necessary" goods and services 
C) annual inflation rate in the producers' goods market 
D) change in the average price level of all final goods and services 
E) average price of all goods and services relative to their price last year

Question 18

Depreciation is subtracted from GDP to get NDP. Depreciation

Accepted Answer

A) represents the value of leisure goods 
B) measures changes in exchange rates 
C) represents income that we earn but do not receive 
D) represents investment undertaken merely to replace worn-out capital 
E) measures the effects of government subsidy programs 
A) represents the value of leisure goods 
B) measures changes in exchange rates 
C) represents income that we earn but do not receive 
D) represents investment undertaken merely to replace worn-out capital 
E) measures the effects of government subsidy programs

Question 19

Gross Domestic Product equals the

Accepted Answer

A) total output of all goods and services produced by resources located in the U.S. 
B) market value of all goods and services produced by resources located in the U.S. 
C) market value of all final goods and services produced by resources located in the U.S. 
D) value added to the economy by intermediate goods and services minus original cost 
E) value of total sales of goods and services produced in the U.S. 
A) total output of all goods and services produced by resources located in the U.S. 
B) market value of all goods and services produced by resources located in the U.S. 
C) market value of all final goods and services produced by resources located in the U.S. 
D) value added to the economy by intermediate goods and services minus original cost 
E) value of total sales of goods and services produced in the U.S.

Question 20

If nominal GDP is $6 trillion in a particular year and base year GDP was $3 trillion, then the GDP price index is 167.

Accepted Answer

A) True 
 B)False

Exam 7: Tracking the Us Economy

Net exports is the value of

Which of the following is not a reason that the CPI may overstate the actual rate of inflation.

Other things equal, increased imports decrease GDP.

Which of the following would not be included in GDP as government purchases?

Which of the following correctly states the leakages-injections approach to GDP?

Louis always knits ten sweaters a year to give as birthday gifts to his nephews. One year, instead of giving the sweaters as gifts, he sells them to a local store for $50 each; his nephews receive no gifts. What is the effect on GDP?

Which of the following would increase GDP?

If we knew that nominal GDP was currently $5.4 trillion, and that GDP in dollars of 1997 purchasing power was $3.6 trillion, what would we know about the GDP price index?

Exports are an injection into the circular flow.

If nominal GDP increases by 4 percent, then

If the CPI this year is 162 and last year it was 170, what do we know about the inflation rate this year?

U.S. imports are

Value added is

The economy's production possibilities depend on what happens to

GDP does not include the

Which of the following statements is true regarding leakages and injections?

The Consumer Price Index is a measure of the

Depreciation is subtracted from GDP to get NDP. Depreciation

Gross Domestic Product equals the

If nominal GDP is $6 trillion in a particular year and base year GDP was $3 trillion, then the GDP price index is 167.

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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