Question 1

The gross domestic product does capture changes in the

Accepted Answer

A) prices at which final goods are sold 
B) availability of leisure time 
C) quality of products when prices do not change 
D) availability of new products 
E) All of the answers are correct 
A) prices at which final goods are sold 
B) availability of leisure time 
C) quality of products when prices do not change 
D) availability of new products 
E) All of the answers are correct

Question 2

If the CPI is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent 
A) 4.5 percent 
B) 8.6 percent 
C) 9.4 percent 
D) 15 percent 
E) 175 percent

Question 3

Gross Domestic Product includes final goods and services,but not intermediate goods because

Accepted Answer

A) intermediate goods are not part of investment spending 
B) the value of the intermediate goods is already included in the value of the final goods 
C) the value of the intermediate goods is already included as inventory investment 
D) intermediate goods are only produced by government 
E) intermediate goods are not current production 
A) intermediate goods are not part of investment spending 
B) the value of the intermediate goods is already included in the value of the final goods 
C) the value of the intermediate goods is already included as inventory investment 
D) intermediate goods are only produced by government 
E) intermediate goods are not current production

Question 4

Which of the following is not a component of aggregate expenditure?

Accepted Answer

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

Question 5

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 6

The value of the films produced in the United States starring Charlie Chaplin that still exist will not be included in this year's U.S.GDP because

Accepted Answer

A) Charlie Chaplin was not an American citizen 
B) Charlie Chaplin did not make the films this year 
C) the films are no longer being shown and earning revenue 
D) the films no longer have any value except for collectors 
E) films are intermediate goods 
A) Charlie Chaplin was not an American citizen 
B) Charlie Chaplin did not make the films this year 
C) the films are no longer being shown and earning revenue 
D) the films no longer have any value except for collectors 
E) films are intermediate goods

Question 7

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 8

Which is not a shortcoming of GDP accounting?

Accepted Answer

A) It ignores the underground economy. 
B) It excludes household production. 
C) It excludes the value of leisure time. 
D) It ignores changes in population. 
E) It has no mechanism for adjusting the figures for inflation. 
A) It ignores the underground economy. 
B) It excludes household production. 
C) It excludes the value of leisure time. 
D) It ignores changes in population. 
E) It has no mechanism for adjusting the figures for inflation.

Question 9

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 10

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that turns them into peanut butter,which is then sold for $45.Which of the following is true?

Accepted Answer

A) Total value added is $65. 
B) The value of final sales is $65. 
C) The value of final sales is $25. 
D) Total value added is $25. 
E) Total value added is $45. 
A) Total value added is $65. 
B) The value of final sales is $65. 
C) The value of final sales is $25. 
D) Total value added is $25. 
E) Total value added is $45.

Question 11

Which of the following would not be included in an economist's definition of investment spending?

Accepted Answer

A) the purchase of robots by Motor Magic Manufacturing 
B) the construction of a new office building by the Mountain City Real Estate Company 
C) the purchase of General Motors stock by Donald Trump 
D) the purchase of a new pizza oven by H and R Pizza 
E) an unexpected rise in inventories at Randle Manufacturing 
A) the purchase of robots by Motor Magic Manufacturing 
B) the construction of a new office building by the Mountain City Real Estate Company 
C) the purchase of General Motors stock by Donald Trump 
D) the purchase of a new pizza oven by H and R Pizza 
E) an unexpected rise in inventories at Randle Manufacturing

Question 12

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 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

To accurately measure the growth rate of output between two years,one should use

Accepted Answer

A) gross domestic product 
B) net domestic product 
C) real net investment 
D) real gross domestic product 
E) disposable income 
A) gross domestic product 
B) net domestic product 
C) real net investment 
D) real gross domestic product 
E) disposable income

Question 15

Assume the economy produces five goods.If the prices of three of the goods increase,then the price level must increase.

Accepted Answer

A) True 
 B)False

Question 16

Disposable income equals personal income minus indirect business taxes.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an injection into the circular flow?

Accepted Answer

A) consumption 
B) exports 
C) taxes 
D) saving 
E) government borrowing 
A) consumption 
B) exports 
C) taxes 
D) saving 
E) government borrowing

Question 18

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 19

Suppose a loaf of bread sold for $3.00 in 2008.The price of bread then increases to $3.60 in 2009.The price index for bread is

Accepted Answer

A) ($3.60/$3.00)= 1.20 
B) ($3.00/$3.60)$\times$ 100 = 83.33 
C) ($3.60/$3.00)$\times$ 100 = 120 
D) ($3.00/$3.00)$\times$ 100 = 100 
E) ($0.60/$3.00)$\times$ 100 = 20 
A) ($3.60/$3.00)= 1.20 
B) ($3.00/$3.60)$\times$ 100 = 83.33 
C) ($3.60/$3.00)$\times$ 100 = 120 
D) ($3.00/$3.00)$\times$ 100 = 100 
E) ($0.60/$3.00)$\times$ 100 = 20

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 6: Tracking the Useconomy

The gross domestic product does capture changes in the

If the CPI is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately

Gross Domestic Product includes final goods and services,but not intermediate goods because

Which of the following is not a component of aggregate expenditure?

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

The value of the films produced in the United States starring Charlie Chaplin that still exist will not be included in this year's U.S.GDP because

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,

Which is not a shortcoming of GDP accounting?

Which of the following is true regarding Gross Domestic Product?

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that turns them into peanut butter,which is then sold for $45.Which of the following is true?

Which of the following would not be included in an economist's definition of investment spending?

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

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?

To accurately measure the growth rate of output between two years,one should use

Assume the economy produces five goods.If the prices of three of the goods increase,then the price level must increase.

Disposable income equals personal income minus indirect business taxes.

Which of the following is an injection into the circular flow?

The final market value of a good is

Suppose a loaf of bread sold for $3.00 in 2008.The price of bread then increases to $3.60 in 2009.The price index for bread is

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

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate 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

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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