Question 1

For an economy as a whole,

Accepted Answer

A) the market value of production must equal expenditure. 
B) investment must equal the value of stocks and bonds purchased. 
C) wages must equal income. 
D) consumption must equal saving. 
A) the market value of production must equal expenditure. 
B) investment must equal the value of stocks and bonds purchased. 
C) wages must equal income. 
D) consumption must equal saving. A

Question 2

Which of the following statements about GDP is correct?

Accepted Answer

A) GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force. 
B) Money continuously flows from households to government and then back to households,and GDP measures this flow of money. 
C) GDP is to a nation's economy as household income is to a household. 
D) All of the above are correct. 
A) GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force. 
B) Money continuously flows from households to government and then back to households,and GDP measures this flow of money. 
C) GDP is to a nation's economy as household income is to a household. 
D) All of the above are correct. C

Question 3

In the actual economy,goods and services are purchased by

Accepted Answer

A) households,but not firms or the government. 
B) households and firms,but not the government. 
C) households and the government,but not firms. 
D) households,firms,and the government. 
A) households,but not firms or the government. 
B) households and firms,but not the government. 
C) households and the government,but not firms. 
D) households,firms,and the government. D

Question 4

If an economy's GDP falls,then it must be the case that the economy's

Accepted Answer

A) income and saving fall. 
B) income and market value of all production both fall. 
C) income falls and market value of all production rises. 
D) income rises and market value of all production falls. 
A) income and saving fall. 
B) income and market value of all production both fall. 
C) income falls and market value of all production rises. 
D) income rises and market value of all production falls.

Question 5

For an actual economy,total expenditures on goods and services by households does not equal GDP because

Accepted Answer

A) household spending exceeds their incomes.​ 
B) ​household expenditures on goods and services falls short of GDP,since household save for the future. 
C) ​household expenditures include only goods,since services are intangible and cannot be measured accurately. 
D) ​household expenditures on goods and services are made using borrowed funds. 
A) household spending exceeds their incomes.​ 
B) ​household expenditures on goods and services falls short of GDP,since household save for the future. 
C) ​household expenditures include only goods,since services are intangible and cannot be measured accurately. 
D) ​household expenditures on goods and services are made using borrowed funds.

Question 6

Because every transaction has a buyer and a seller,

Accepted Answer

A) GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B) every transaction contributes equally to an economy's income and to its expenditure. 
C) the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D) firms' profits are necessarily zero in a simple circular-flow diagram. 
A) GDP is more closely associated with an economy's income than it is with an economy's expenditure. 
B) every transaction contributes equally to an economy's income and to its expenditure. 
C) the number of firms must be equal to the number of households in a simple circular-flow diagram. 
D) firms' profits are necessarily zero in a simple circular-flow diagram.

Question 7

In a simple circular-flow diagram,firms

Accepted Answer

A) purchase resources from households. 
B) purchase the output produced by households. 
C) receive income by selling resources to households. 
D) All of the above are correct. 
A) purchase resources from households. 
B) purchase the output produced by households. 
C) receive income by selling resources to households. 
D) All of the above are correct.

Question 8

In a simple circular-flow diagram,total income and total expenditure are

Accepted Answer

A) never equal because total income always exceeds total expenditure. 
B) seldom equal because of the ongoing changes in an economy's unemployment rate. 
C) equal only when the government purchases no goods or services. 
D) always equal because every transaction has a buyer and a seller. 
A) never equal because total income always exceeds total expenditure. 
B) seldom equal because of the ongoing changes in an economy's unemployment rate. 
C) equal only when the government purchases no goods or services. 
D) always equal because every transaction has a buyer and a seller.

Question 9

In a simple circular-flow diagram,

Accepted Answer

A) households spend all of their income. 
B) all goods and services are bought by households. 
C) expenditures flow through the markets for goods and services,while income flows through the markets for the factors of production. 
D) All of the above are correct. 
A) households spend all of their income. 
B) all goods and services are bought by households. 
C) expenditures flow through the markets for goods and services,while income flows through the markets for the factors of production. 
D) All of the above are correct.

Question 10

In a simple circular-flow diagram,firms use the money they get from a sale to

Accepted Answer

A) pay wages to workers. 
B) pay rent to landlords. 
C) pay profit to the firms' owners. 
D) All of the above are correct. 
A) pay wages to workers. 
B) pay rent to landlords. 
C) pay profit to the firms' owners. 
D) All of the above are correct.

Question 11

If an economy's GDP falls,then it must be the case that the economy's

Accepted Answer

A) income falls and saving rises. 
B) income and saving both fall. 
C) income falls and expenditure rises. 
D) income and expenditure both fall. 
A) income falls and saving rises. 
B) income and saving both fall. 
C) income falls and expenditure rises. 
D) income and expenditure both fall.

Question 12

If an economy's GDP rises,then it must be the case that the economy's

Accepted Answer

A) income rises and saving falls. 
B) income and saving both rise. 
C) income rises and expenditure falls. 
D) income and expenditure both rise. 
A) income rises and saving falls. 
B) income and saving both rise. 
C) income rises and expenditure falls. 
D) income and expenditure both rise.

Question 13

In the GDP accounts production equals

Accepted Answer

A) income. 
B) income + saving. 
C) income - government expenditures. 
D) income - imports. 
A) income. 
B) income + saving. 
C) income - government expenditures. 
D) income - imports.

Question 14

According to the circular-flow diagram GDP

Accepted Answer

A) can be computed as the total income paid by firms or as expenditures on final goods and services. 
B) can be computed as the total income paid by firms,but not as expenditures on final goods and services. 
C) can be computed as expenditures on final goods and services,but not as the total income paid by firms. 
D) cannot be computed as either total income paid by firms or expenditures on final goods and services. 
A) can be computed as the total income paid by firms or as expenditures on final goods and services. 
B) can be computed as the total income paid by firms,but not as expenditures on final goods and services. 
C) can be computed as expenditures on final goods and services,but not as the total income paid by firms. 
D) cannot be computed as either total income paid by firms or expenditures on final goods and services.

Question 15

For the economy as a whole,

Accepted Answer

A) income must be greater than expenditure. 
B) unemployment must rise when GDP rises. 
C) expenditure must equal income. 
D) consumption must be greater than investment. 
A) income must be greater than expenditure. 
B) unemployment must rise when GDP rises. 
C) expenditure must equal income. 
D) consumption must be greater than investment.

Question 16

Expenditures on a nation's domestic production

Accepted Answer

A) are less than its domestic production. 
B) are equal to its domestic production. 
C) are greater than its domestic production. 
D) could be less than,equal to,or greater than its domestic production. 
A) are less than its domestic production. 
B) are equal to its domestic production. 
C) are greater than its domestic production. 
D) could be less than,equal to,or greater than its domestic production.

Question 17

In the simple circular-flow diagram,with households and firms,GDP can be computed

Accepted Answer

A) ​as the total payments for factors of production made by households. 
B) ​as the total expenditures by households on goods but not services,since services are intangible. 
C) ​as the total expenditures by households on goods and services. 
D) ​as the total expenditures by households on goods and services,less taxes paid. 
A) ​as the total payments for factors of production made by households. 
B) ​as the total expenditures by households on goods but not services,since services are intangible. 
C) ​as the total expenditures by households on goods and services. 
D) ​as the total expenditures by households on goods and services,less taxes paid.

Question 18

In the actual economy,households

Accepted Answer

A) spend all of their income. 
B) divide their income among spending,taxes,and saving. 
C) buy all goods and services produced in the economy. 
D) Both (a)and (c)are correct. 
A) spend all of their income. 
B) divide their income among spending,taxes,and saving. 
C) buy all goods and services produced in the economy. 
D) Both (a)and (c)are correct.

Question 19

For an economy as a whole,

Accepted Answer

A) wages must equal profit. 
B) consumption must equal income. 
C) income must equal expenditure. 
D) consumption must equal saving. 
A) wages must equal profit. 
B) consumption must equal income. 
C) income must equal expenditure. 
D) consumption must equal saving.

Question 20

According to the circular-flow diagram,GDP

Accepted Answer

A) can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services. 
B) can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production. 
C) can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production. 
D) can be computed as the payments firms make to factors of production,but not as revenues they receive from the sales of goods and services. 
A) can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services. 
B) can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production. 
C) can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production. 
D) can be computed as the payments firms make to factors of production,but not as revenues they receive from the sales of goods and services.

Exam 10: Measuring a Nations Income: The Economy's Income and Expenditure

For an economy as a whole,

Which of the following statements about GDP is correct?

In the actual economy,goods and services are purchased by

If an economy's GDP falls,then it must be the case that the economy's

For an actual economy,total expenditures on goods and services by households does not equal GDP because

Because every transaction has a buyer and a seller,

In a simple circular-flow diagram,firms

In a simple circular-flow diagram,total income and total expenditure are

In a simple circular-flow diagram,

In a simple circular-flow diagram,firms use the money they get from a sale to

If an economy's GDP falls,then it must be the case that the economy's

If an economy's GDP rises,then it must be the case that the economy's

In the GDP accounts production equals

According to the circular-flow diagram GDP

For the economy as a whole,

Expenditures on a nation's domestic production

In the simple circular-flow diagram,with households and firms,GDP can be computed

In the actual economy,households

For an economy as a whole,

According to the circular-flow diagram,GDP

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion