Question 1

Depreciation refers to a decrease in the value of a durable good caused by

Accepted Answer

A) an increase in the price level 
B) changes in the depreciation allowance 
C) wear and tear over time 
D) changes in tax law 
E) a decrease in its resale value 
A) an increase in the price level 
B) changes in the depreciation allowance 
C) wear and tear over time 
D) changes in tax law 
E) a decrease in its resale value

Question 2

Which of the following would not be included in this year's US GDP?

Accepted Answer

A) the value of the tomatoes you produced in your garden last summer 
B) the new textbook you bought at the college bookstore for this class 
C) the ticket you bought for the professional baseball game you attended in July 
D) the bottle of California wine you bought for dinner the other night 
E) the value of the tires that you bought to put on your car this year 
A) the value of the tomatoes you produced in your garden last summer 
B) the new textbook you bought at the college bookstore for this class 
C) the ticket you bought for the professional baseball game you attended in July 
D) the bottle of California wine you bought for dinner the other night 
E) the value of the tires that you bought to put on your car this year

Question 3

Investment spending is a flow variable; inventories are a stock variable.

Accepted Answer

A) True 
 B)False

Question 4

Taxes are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

Question 5

A problem inherent in using value added to measure GDP is that the method does not avoid double counting.

Accepted Answer

A) True 
 B)False

Question 6

Katrina pays $40 for a meal at a fancy restaurant.The ingredients used in it probably cost the restaurant $10.The value added to GDP by the purchase of this meal is

Accepted Answer

A) $30 
B) $40 
C) $70 
D) $40 plus the wages paid the chef and waiters 
E) $40 plus the profit earned by the restaurant's owner 
A) $30 
B) $40 
C) $70 
D) $40 plus the wages paid the chef and waiters 
E) $40 plus the profit earned by the restaurant's owner

Question 7

Which of the following is not a problem associated with GDP as a measure of social welfare?

Accepted Answer

A) It excludes many nonmarket activities. 
B) It values all types of output equally. 
C) It excludes pollution damage. 
D) It excludes intermediate goods as a separate entry. 
E) It excludes the value of leisure time. 
A) It excludes many nonmarket activities. 
B) It values all types of output equally. 
C) It excludes pollution damage. 
D) It excludes intermediate goods as a separate entry. 
E) It excludes the value of leisure time.

Question 8

GDP figures tend to understate the quantity of goods and services available because

Accepted Answer

A) they ignore most household production 
B) many items are counted twice or more in intermediate stages of production 
C) more women are entering the labor force 
D) firms often add less to inventories than they planned to 
E) exports are subtracted from GDP but imports are not added back in 
A) they ignore most household production 
B) many items are counted twice or more in intermediate stages of production 
C) more women are entering the labor force 
D) firms often add less to inventories than they planned to 
E) exports are subtracted from GDP but imports are not added back in

Question 9

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

Accepted Answer

A) interest rates 
B) saving 
C) taxes 
D) exports 
E) imports 
A) interest rates 
B) saving 
C) taxes 
D) exports 
E) imports

Question 10

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 11

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

Accepted Answer

A) True 
 B)False

Question 12

Given the following hypothetical data: C = $3,000; I = $1,200; G = $2,000; X - M = -$500; depreciation = $200; transfer payments = $800,net domestic product is

Accepted Answer

A) $5,500 
B) $5,700 
C) $6,200 
D) $6,400 
E) $6,900 
A) $5,500 
B) $5,700 
C) $6,200 
D) $6,400 
E) $6,900

Question 13

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases,GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 14

Real GDP is the same thing as

Accepted Answer

A) total spending on all goods and services 
B) constant-dollar GDP 
C) net domestic product 
D) nominal GDP adjusted for taxes 
E) domestic income 
A) total spending on all goods and services 
B) constant-dollar GDP 
C) net domestic product 
D) nominal GDP adjusted for taxes 
E) domestic income

Question 15

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 16

Which of the following would not increase U.S.GDP?

Accepted Answer

A) increased demand in Costa Rica for California-made personal computers 
B) increased demand in Alabama for California-made personal computers 
C) increased production of computers in California,but no increase in the number sold 
D) increased shipments of computers from the U.S.to Canada 
E) increased shipments of Ghanian cocoa to the United States on Greek vessels 
A) increased demand in Costa Rica for California-made personal computers 
B) increased demand in Alabama for California-made personal computers 
C) increased production of computers in California,but no increase in the number sold 
D) increased shipments of computers from the U.S.to Canada 
E) increased shipments of Ghanian cocoa to the United States on Greek vessels

Question 17

The largest component of aggregate expenditure is

Accepted Answer

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

Question 18

The simple circular flow model shows that

Accepted Answer

A) households are on the demand side of both the product and resource market 
B) firms are on the demand side of both the product and resource market 
C) households are on the supply side of the resource market and the demand side of the product market 
D) firms and governments are on the supply side of the loanable funds market 
E) governments are on the demand side of the product market and the supply side of the resource market 
A) households are on the demand side of both the product and resource market 
B) firms are on the demand side of both the product and resource market 
C) households are on the supply side of the resource market and the demand side of the product market 
D) firms and governments are on the supply side of the loanable funds market 
E) governments are on the demand side of the product market and the supply side of the resource market

Question 19

When a refrigerator worth $1,000 is produced and sold,its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

Accepted Answer

A) the wages earned by the workers in the firm that produced it 
B) the wages earned by the workers and the profits earned by the owners of the firm that produced it 
C) wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator 
D) wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator,less taxes 
E) wages,interest,and rent paid by the firm's owners,plus the profit they kept for themselves 
A) the wages earned by the workers in the firm that produced it 
B) the wages earned by the workers and the profits earned by the owners of the firm that produced it 
C) wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator 
D) wages,interest,and rent paid by the firm's owners to those who contributed to making the refrigerator,less taxes 
E) wages,interest,and rent paid by the firm's owners,plus the profit they kept for themselves

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 6: Tracking the Useconomy

Depreciation refers to a decrease in the value of a durable good caused by

Which of the following would not be included in this year's US GDP?

Investment spending is a flow variable; inventories are a stock variable.

Taxes are an injection into the circular flow.

A problem inherent in using value added to measure GDP is that the method does not avoid double counting.

Katrina pays $40 for a meal at a fancy restaurant.The ingredients used in it probably cost the restaurant $10.The value added to GDP by the purchase of this meal is

Which of the following is not a problem associated with GDP as a measure of social welfare?

GDP figures tend to understate the quantity of goods and services available because

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

GDP is not a perfect measure of welfare because it

The main function of financial markets is to direct consumers' saving to firms that use it for investment spending.

Given the following hypothetical data: C = $3,000; I = $1,200; G = $2,000; X - M = -$500; depreciation = $200; transfer payments = $800,net domestic product is

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases,GDP will decrease.

Real GDP is the same thing as

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?

Which of the following would not increase U.S.GDP?

The largest component of aggregate expenditure is

The simple circular flow model shows that

When a refrigerator worth $1,000 is produced and sold,its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

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

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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