Question 1

Which of the following is included in GDP as government purchases?

Accepted Answer

A) Social Security payments to elderly citizens 
B) welfare benefits distributed to the poor 
C) outright grants from government to recipients 
D) payments to clerical workers hired by government 
E) unemployment compensation benefits 
A) Social Security payments to elderly citizens 
B) welfare benefits distributed to the poor 
C) outright grants from government to recipients 
D) payments to clerical workers hired by government 
E) unemployment compensation benefits

Question 2

Which of the following increases GDP?

Accepted Answer

A) Workers take more vacation time. 
B) The length of the average work week decreases. 
C) Homeowners purchase lawn care services rather than maintain the lawns themselves. 
D) Meals cooked at home at an average cost of $10 are replaced by restaurant meals at an average cost of $10. 
E) More people wrap birthday presents in the Sunday newspaper's cartoon section. 
A) Workers take more vacation time. 
B) The length of the average work week decreases. 
C) Homeowners purchase lawn care services rather than maintain the lawns themselves. 
D) Meals cooked at home at an average cost of $10 are replaced by restaurant meals at an average cost of $10. 
E) More people wrap birthday presents in the Sunday newspaper's cartoon section.

Question 3

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

Accepted Answer

A) 9 percent per year 
B) 3 percent per year 
C) 5 percent per year 
D) 7 percent per year 
E) 1 percent per year 
A) 9 percent per year 
B) 3 percent per year 
C) 5 percent per year 
D) 7 percent per year 
E) 1 percent per year

Question 4

The CPI tends to understate the true rate of inflation.

Accepted Answer

A) True 
 B)False

Question 5

Exports are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

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 a leakage from the circular flow?

Accepted Answer

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

Question 8

Double counting in the value added approach to GDP refers to

Accepted Answer

A) corporate income being taxed twice 
B) the amount of income taxes paid to states that is taxable by the federal government 
C) calculating GDP twice using the income and expenditures methods 
D) adding the value of exports to GDP and subtracting the value of imports 
E) counting the total value of a final output in addition to the value of the inputs used to make it 
A) corporate income being taxed twice 
B) the amount of income taxes paid to states that is taxable by the federal government 
C) calculating GDP twice using the income and expenditures methods 
D) adding the value of exports to GDP and subtracting the value of imports 
E) counting the total value of a final output in addition to the value of the inputs used to make it

Question 9

If the price index for 2008 was 100 and the price index for 2009 was 109,then how much did prices change between 2008 and 2009?

Accepted Answer

A) 1 percent increase 
B) 8 percent increase 
C) 9 percent increase 
D) 12 percent increase 
E) 12 percent decrease 
A) 1 percent increase 
B) 8 percent increase 
C) 9 percent increase 
D) 12 percent increase 
E) 12 percent decrease

Question 10

The consumer price index measures changes in

Accepted Answer

A) the prices of all goods and services 
B) the prices of goods that are sold 
C) the total cost of a specific market basket of consumer goods and services 
D) the total costs of all goods and services 
E) the total costs of goods and services purchased by firms 
A) the prices of all goods and services 
B) the prices of goods that are sold 
C) the total cost of a specific market basket of consumer goods and services 
D) the total costs of all goods and services 
E) the total costs of goods and services purchased by firms

Question 11

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 12

Suppose that in year 1 the respective prices of yogurt,candy bars,and popcorn are $1,$2,and $3.In year 2 the unit prices of each are $2,$3,and $4,respectively.Which of the following statements is true of the price level between year 1 and year 2?

Accepted Answer

A) it doubled 
B) it increased by 33 percent 
C) it rose from $6 to $9 
D) it went up from 106 to 109 
E) it must have risen at a rate between 33 percent and 100 percent 
A) it doubled 
B) it increased by 33 percent 
C) it rose from $6 to $9 
D) it went up from 106 to 109 
E) it must have risen at a rate between 33 percent and 100 percent

Question 13

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

Accepted Answer

A) the index utilizes prices from the base year only 
B) the index does not account for relative price changes over time 
C) price distortions only decrease when there is a long time period covered 
D) base year does not include new products which came into existence later 
E) the price index does not take into consideration quality changes 
A) the index utilizes prices from the base year only 
B) the index does not account for relative price changes over time 
C) price distortions only decrease when there is a long time period covered 
D) base year does not include new products which came into existence later 
E) the price index does not take into consideration quality changes

Question 14

Leakages include any diversion from the domestic spending stream.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that the economy is in equilibrium with a trade deficit and that saving is greater than investment.According to the circular flow model,the government's budget

Accepted Answer

A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a deficit 
A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a deficit

Question 16

A firm run by a rational entrepreneur would want to hold inventories.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) government spending 
B) imports 
C) disposable income 
D) taxes 
E) saving 
A) government spending 
B) imports 
C) disposable income 
D) taxes 
E) saving

Question 18

Limitations of the national income accounting system include

Accepted Answer

A) valuing all output at its market price regardless of whether it contributes to a society's economic welfare 
B) placing a market value on all positive externalities but ignoring negative externalities 
C) accurate measurement of the value of leisure time 
D) double counting food produced on a farm for family consumption 
E) ignoring government production of goods and services 
A) valuing all output at its market price regardless of whether it contributes to a society's economic welfare 
B) placing a market value on all positive externalities but ignoring negative externalities 
C) accurate measurement of the value of leisure time 
D) double counting food produced on a farm for family consumption 
E) ignoring government production of goods and services

Question 19

The Consumer Price Index is a measure of the

Accepted Answer

A) cost of a market basket of consumer goods and services relative to its cost in some base year 
B) change in the average price of a market basket of "necessary" goods and services 
C) annual inflation rate in the producers' goods market 
D) change in the average price level of all final goods and services 
E) average price of all goods and services relative to their price last year 
A) cost of a market basket of consumer goods and services relative to its cost in some base year 
B) change in the average price of a market basket of "necessary" goods and services 
C) annual inflation rate in the producers' goods market 
D) change in the average price level of all final goods and services 
E) average price of all goods and services relative to their price last year

Question 20

Which of the following would 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 used 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 French wine you bought for dinner the other night 
E) the value of the tires that GM bought to put on its cars this year 
A) the value of the tomatoes you produced in your garden last summer 
B) the used 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 French wine you bought for dinner the other night 
E) the value of the tires that GM bought to put on its cars this year

Exam 6: Tracking the Useconomy

Which of the following is included in GDP as government purchases?

Which of the following increases GDP?

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

The CPI tends to understate the true rate of inflation.

Exports are an injection into the circular flow.

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

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

Double counting in the value added approach to GDP refers to

If the price index for 2008 was 100 and the price index for 2009 was 109,then how much did prices change between 2008 and 2009?

The consumer price index measures changes in

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.

Suppose that in year 1 the respective prices of yogurt,candy bars,and popcorn are $1,$2,and $3.In year 2 the unit prices of each are $2,$3,and $4,respectively.Which of the following statements is true of the price level between year 1 and year 2?

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

Leakages include any diversion from the domestic spending stream.

Suppose that the economy is in equilibrium with a trade deficit and that saving is greater than investment.According to the circular flow model,the government's budget

A firm run by a rational entrepreneur would want to hold inventories.

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

Limitations of the national income accounting system include

The Consumer Price Index is a measure of the

Which of the following would be included in this year's US 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

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