Question 1

Which of the following would not be included in GDP as a form of consumption spending?

Accepted Answer

A) Ann takes Tim out to a restaurant for dinner. 
B) Ann and Tim buy a microwave oven. 
C) Ann and Tim buy vegetables to prepare soup at home. 
D) Ann prepares Tim's income tax return. 
E) Tim buys Ann flowers. 
A) Ann takes Tim out to a restaurant for dinner. 
B) Ann and Tim buy a microwave oven. 
C) Ann and Tim buy vegetables to prepare soup at home. 
D) Ann prepares Tim's income tax return. 
E) Tim buys Ann flowers.

Question 2

If the GDP price index rises from 100 to 110 to 115 over three consecutive year,the inflation rate is decreasing.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 5

Which of the actions below will not increase GDP?

Accepted Answer

A) Bears prowl suburban areas,overturning garbage cans so that the town must hire more sanitation workers to clean up. 
B) Vandals spray paint all over brick buildings,increasing business for paint removal services. 
C) An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood. 
D) A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home. 
E) A consumer has a tune-up done on his pick-up truck at the local garage. 
A) Bears prowl suburban areas,overturning garbage cans so that the town must hire more sanitation workers to clean up. 
B) Vandals spray paint all over brick buildings,increasing business for paint removal services. 
C) An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood. 
D) A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home. 
E) A consumer has a tune-up done on his pick-up truck at the local garage.

Question 6

Real GDP is measured in

Accepted Answer

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

Question 7

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 8

To determine the CPI,you would need to know the

Accepted Answer

A) current market basket at current- and base-year prices 
B) base-year market basket at current- and base-year prices 
C) current market basket at current prices and base-year market basket at base-year prices 
D) current market basket at base-year prices only 
E) current market basket at current prices only 
A) current market basket at current- and base-year prices 
B) base-year market basket at current- and base-year prices 
C) current market basket at current prices and base-year market basket at base-year prices 
D) current market basket at base-year prices only 
E) current market basket at current prices only

Question 9

If exports total $6.5 billion and imports total $8.0 billion in a year,then

Accepted Answer

A) together imports and exports add $1.5 billion to GDP 
B) together exports and imports add $6.5 billion to GDP 
C) together exports and imports subtract $1.5 billion from GDP 
D) together exports and imports subtract $8.0 billion from GDP 
E) together exports and imports add nothing to GDP 
A) together imports and exports add $1.5 billion to GDP 
B) together exports and imports add $6.5 billion to GDP 
C) together exports and imports subtract $1.5 billion from GDP 
D) together exports and imports subtract $8.0 billion from GDP 
E) together exports and imports add nothing to GDP

Question 10

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 11

Rhonda sells a house she has owned for 15 years.To make it more marketable,she buys carpeting and has it professionally installed,and buys wallpaper that her daughter hangs.Which items would be included in this year's GDP?

Accepted Answer

A) the sale price of the house 
B) the sale price of the house,carpeting,and wallpaper and the installation fee for the carpet 
C) the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's daughter's time 
D) the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's time 
E) the sale price of the wallpaper and carpeting and the installation fee for the carpet 
A) the sale price of the house 
B) the sale price of the house,carpeting,and wallpaper and the installation fee for the carpet 
C) the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's daughter's time 
D) the sale price of the house,carpeting,and wallpaper,the installation fee for the carpet,and the opportunity cost of Rhonda's time 
E) the sale price of the wallpaper and carpeting and the installation fee for the carpet

Question 12

Which of the following would not be included in the calculation of GDP?

Accepted Answer

A) Jim purchases a new automobile. 
B) Joe pays a plumber $100 to fix a broken pipe. 
C) Sandy,who is on welfare,receives $100 in food stamps. 
D) Kurt purchases an airline ticket for $500 just before a big reduction in fares. 
E) Laurie pays $15 for a haircut. 
A) Jim purchases a new automobile. 
B) Joe pays a plumber $100 to fix a broken pipe. 
C) Sandy,who is on welfare,receives $100 in food stamps. 
D) Kurt purchases an airline ticket for $500 just before a big reduction in fares. 
E) Laurie pays $15 for a haircut.

Question 13

Which of the following transactions is not included in GDP?

Accepted Answer

A) Someone sells drugs in a vacant lot. 
B) Someone sells drugs in a pharmacy. 
C) A doctor treats a patient for drug addiction. 
D) A drug addict spends two months in a drug rehabilitation center. 
E) The drug addict buys cough medicine. 
A) Someone sells drugs in a vacant lot. 
B) Someone sells drugs in a pharmacy. 
C) A doctor treats a patient for drug addiction. 
D) A drug addict spends two months in a drug rehabilitation center. 
E) The drug addict buys cough medicine.

Question 14

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 15

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 16

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 17

GDP understates total economic activity because it ignores household production of goods and services.

Accepted Answer

A) True 
 B)False

Question 18

A fixed-weight price index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that the economy is in equilibrium with the government budget is in deficit and with saving is less 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 less than or equal to exports 
E) it is impossible to determine anything about imports and exports with the given information 
A) imports must exceed exports 
B) imports must be less than exports 
C) imports must equal exports 
D) imports could be less than or equal to exports 
E) it is impossible to determine anything about imports and exports with the given information

Question 20

Which of the following is not included in GDP?

Accepted Answer

A) the value of the restoration of an old painting 
B) interest payments on the national debt 
C) the cost of a new vending machine 
D) government expenditure on a new bridge 
E) a purchase of legal services by a household 
A) the value of the restoration of an old painting 
B) interest payments on the national debt 
C) the cost of a new vending machine 
D) government expenditure on a new bridge 
E) a purchase of legal services by a household

Exam 6: Tracking the Useconomy

Which of the following would not be included in GDP as a form of consumption spending?

If the GDP price index rises from 100 to 110 to 115 over three consecutive year,the inflation rate is decreasing.

U.S.imports are

Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

Which of the actions below will not increase GDP?

Real GDP is measured in

Nominal GDP is measured in

To determine the CPI,you would need to know the

If exports total $6.5 billion and imports total $8.0 billion in a year,then

Depreciation is subtracted from GDP to get NDP.Depreciation

Rhonda sells a house she has owned for 15 years.To make it more marketable,she buys carpeting and has it professionally installed,and buys wallpaper that her daughter hangs.Which items would be included in this year's GDP?

Which of the following would not be included in the calculation of GDP?

Which of the following transactions is not included in GDP?

Which of the following would increase GDP?

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

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

GDP understates total economic activity because it ignores household production of goods and services.

A fixed-weight price index recognizes the fact that the composition of output changes over time.

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

Which of the following is not included in GDP?

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

Filters