Question 1

The value added at all production stages sums to the market value of the final good, and the value added for all final goods sums to GDP based on the income approach.

Accepted Answer

A) True 
 B)False

Question 2

If a firm hires labor for $20,000, pays rent of $12,000, buys raw materials for $6,000, earns profits of $3,000, and sells its output for $41,000, the firm's value added is

Accepted Answer

A) $0 
B) $15,000 
C) $35,000 
D) $38,000 
E) $41,000 
A) $0 
B) $15,000 
C) $35,000 
D) $38,000 
E) $41,000

Question 3

In double-entry GDP accounting,

Accepted Answer

A) the value of output produced must equal the value of resource payments generated in producing that output 
B) government is not counted because most of government spending is for transfer payments 
C) payments to resources must equal the value of goods sold to households 
D) inventories are counted twice, once as investment and once as output 
E) intermediate goods are counted twice, once as a type of output themselves and once as part of final output 
A) the value of output produced must equal the value of resource payments generated in producing that output 
B) government is not counted because most of government spending is for transfer payments 
C) payments to resources must equal the value of goods sold to households 
D) inventories are counted twice, once as investment and once as output 
E) intermediate goods are counted twice, once as a type of output themselves and once as part of final output

Question 4

If a firm's inventory decreases, the GDP counts the net decrease as a reduction in investment.

Accepted Answer

A) True 
 B)False

Question 5

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

Accepted Answer

A) GDP = $2,720 
B) GDP = $3,060 
C) GDP = $3,140 
D) GDP = $3,400 
E) GDP cannot be determined due to insufficient data 
A) GDP = $2,720 
B) GDP = $3,060 
C) GDP = $3,140 
D) GDP = $3,400 
E) GDP cannot be determined due to insufficient data

Question 6

In order to convert nominal GDP to real GDP, we must divide

Accepted Answer

A) real GDP by the price index 
B) nominal GDP by the price index 
C) the price index by nominal GDP 
D) the price index by real GDP 
E) nominal GDP by real GDP 
A) real GDP by the price index 
B) nominal GDP by the price index 
C) the price index by nominal GDP 
D) the price index by real GDP 
E) nominal GDP by real GDP

Question 7

Which of the following is reflected in GDP?

Accepted Answer

A) the value of leisure time 
B) the value of illegal goods and services 
C) emotional and psychological well-being 
D) costs of cleaning up after pollution 
E) the value of house maintenance performed by homeowners 
A) the value of leisure time 
B) the value of illegal goods and services 
C) emotional and psychological well-being 
D) costs of cleaning up after pollution 
E) the value of house maintenance performed by homeowners

Question 8

Nominal GDP is measured in

Accepted Answer

A) current-year prices 
B) base-year prices 
C) real dollars 
D) quantity of goods produced 
E) hours of employment 
A) current-year prices 
B) base-year prices 
C) real dollars 
D) quantity of goods produced 
E) hours of employment

Question 9

If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion, then the

Accepted Answer

A) CPI is 125 
B) economic activity has decreased 20 percent 
C) GDP price index is 125 
D) GDP price index is 80 
E) economy has grown by 20 percent 
A) CPI is 125 
B) economic activity has decreased 20 percent 
C) GDP price index is 125 
D) GDP price index is 80 
E) economy has grown by 20 percent

Question 10

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

Accepted Answer

A) positive 
B) equal to zero 
C) less than 100 
D) greater than 100 
E) negative 
A) positive 
B) equal to zero 
C) less than 100 
D) greater than 100 
E) negative

Question 11

If real GDP increased by 3 percent, then

Accepted Answer

A) real output has increased by 3 percent 
B) the price level has increased by 3 percent 
C) consumer spending increased by 3 percent 
D) government spending increased by 3 percent 
E) the increase might have been caused by an increase in the price level, but we cannot tell for sure 
A) real output has increased by 3 percent 
B) the price level has increased by 3 percent 
C) consumer spending increased by 3 percent 
D) government spending increased by 3 percent 
E) the increase might have been caused by an increase in the price level, but we cannot tell for sure

Question 12

A decrease in GDP necessarily means that consumer welfare has decreased.

Accepted Answer

A) True 
 B)False

Question 13

If U.S. net investment is positive, the nation's capital stock is growing.

Accepted Answer

A) True 
 B)False

Question 14

GDP is not a perfect measure of welfare because it

Accepted Answer

A) treats a dollar spent on guns the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy 
A) treats a dollar spent on guns the same as a dollar spent on education 
B) treats a dollar spent on exports the same as a dollar spent on imports 
C) double counts the value of leisure time 
D) double counts depreciation 
E) counts illegal activities in the underground economy

Question 15

Leakages include any diversion from the domestic spending stream.

Accepted Answer

A) True 
 B)False

Question 16

The final market value of a good is

Accepted Answer

A) the sum of values added at all stages of production 
B) the value added at one stage of production 
C) greater than the sum of all the values added at all stages of production 
D) less than the sum of all the values added at all stages of production 
E) less than the price for which it is sold 
A) the sum of values added at all stages of production 
B) the value added at one stage of production 
C) greater than the sum of all the values added at all stages of production 
D) less than the sum of all the values added at all stages of production 
E) less than the price for which it is sold

Question 17

Which of the following is the best example of an intermediate good or service?

Accepted Answer

A) any good bought by a household, rather than a firm 
B) pizzas bought at a restaurant 
C) legal services hired by a public accounting firm 
D) sunglasses worn on a summer vacation in Florida 
E) a professional performance of "The Phantom of the Opera" 
A) any good bought by a household, rather than a firm 
B) pizzas bought at a restaurant 
C) legal services hired by a public accounting firm 
D) sunglasses worn on a summer vacation in Florida 
E) a professional performance of "The Phantom of the Opera"

Question 18

Which of the following expenditures are not included in the consumption component of GDP?

Accepted Answer

A) maid service 
B) purchase of a new home 
C) a new videocassette recorder 
D) a restaurant meal 
E) tax preparation service 
A) maid service 
B) purchase of a new home 
C) a new videocassette recorder 
D) a restaurant meal 
E) tax preparation service

Question 19

Gross Domestic Product measures the

Accepted Answer

A) market value of all final goods and services produced by a nation's citizens, residents and firms of a nation regardless of the location of production 
B) market value of all final goods and services produced by resources located within a nation regardless of who owns those resources 
C) market value of all goods and services produced by resources located within a nation regardless of who owns those resources 
D) market values of all goods and services produced by a nation's citizens and firms regardless of the location of production 
E) market value of all goods and services produced within a nation by resources owned by residents and firms of that nation 
A) market value of all final goods and services produced by a nation's citizens, residents and firms of a nation regardless of the location of production 
B) market value of all final goods and services produced by resources located within a nation regardless of who owns those resources 
C) market value of all goods and services produced by resources located within a nation regardless of who owns those resources 
D) market values of all goods and services produced by a nation's citizens and firms regardless of the location of production 
E) market value of all goods and services produced within a nation by resources owned by residents and firms of that nation

Question 20

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

Accepted Answer

A) government purchases of goods and services 
B) taxes 
C) investment 
D) exports 
E) consumption expenditures 
A) government purchases of goods and services 
B) taxes 
C) investment 
D) exports 
E) consumption expenditures

Exam 7: Tracking the Us Economy

The value added at all production stages sums to the market value of the final good, and the value added for all final goods sums to GDP based on the income approach.

If a firm hires labor for $20,000, pays rent of $12,000, buys raw materials for $6,000, earns profits of $3,000, and sells its output for $41,000, the firm's value added is

In double-entry GDP accounting,

If a firm's inventory decreases, the GDP counts the net decrease as a reduction in investment.

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

In order to convert nominal GDP to real GDP, we must divide

Which of the following is reflected in GDP?

Nominal GDP is measured in

If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion, then the

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

If real GDP increased by 3 percent, then

A decrease in GDP necessarily means that consumer welfare has decreased.

If U.S. net investment is positive, the nation's capital stock is growing.

GDP is not a perfect measure of welfare because it

Leakages include any diversion from the domestic spending stream.

The final market value of a good is

Which of the following is the best example of an intermediate good or service?

Which of the following expenditures are not included in the consumption component of GDP?

Gross Domestic Product measures 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

Filters