Question 1

GDP reflects many things; however,it does not reflect the value of production that takes place in a nonmarket setting.

Accepted Answer

A) True 
 B)False

Question 2

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000,earns profits of $500,and sells its output for $14,000,the firm's value added is

Accepted Answer

A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500 
A) $12,000 
B) $8,000 
C) $6,000 
D) $2,000 
E) $500

Question 3

Which of the following is the best example of an investment as defined by economists?

Accepted Answer

A) a household's purchase of 100 shares of Apple computer stock 
B) a firm's purchase of 100 shares of General Electric stock 
C) a firm's purchase of a bond issued by General Mills 
D) a firm's purchase of a U.S.savings bond 
E) a firm buying personal computers for its secretarial staff 
A) a household's purchase of 100 shares of Apple computer stock 
B) a firm's purchase of 100 shares of General Electric stock 
C) a firm's purchase of a bond issued by General Mills 
D) a firm's purchase of a U.S.savings bond 
E) a firm buying personal computers for its secretarial staff

Question 4

If aggregate income equals aggregate expenditure,which of the following will not be true?

Accepted Answer

A) Leakages from the circular flow must equal injections. 
B) Consumption plus investment plus government spending plus net exports must equal disposable income plus net taxes. 
C) Saving must equal investment. 
D) Saving plus net taxes and imports must equal investment plus government purchases and exports. 
E) Saving must equal investment if the government's budget is balanced and exports equal imports. 
A) Leakages from the circular flow must equal injections. 
B) Consumption plus investment plus government spending plus net exports must equal disposable income plus net taxes. 
C) Saving must equal investment. 
D) Saving plus net taxes and imports must equal investment plus government purchases and exports. 
E) Saving must equal investment if the government's budget is balanced and exports equal imports.

Question 5

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

Accepted Answer

A) taxes 
B) saving 
C) transfer payments 
D) government borrowing 
E) disposable income 
A) taxes 
B) saving 
C) transfer payments 
D) government borrowing 
E) disposable income

Question 6

Each month,the Bureau of Labor Statistics calculates the

Accepted Answer

A) CPI 
B) number of births in the U.S. 
C) nominal GDP 
D) cost of going to college 
E) All of the answers are correct 
A) CPI 
B) number of births in the U.S. 
C) nominal GDP 
D) cost of going to college 
E) All of the answers are correct

Question 7

Gross Domestic Product equals the

Accepted Answer

A) total output of all goods and services produced by resources located in the U.S. 
B) market value of all goods and services produced by resources located in the U.S. 
C) market value of all final goods and services produced by resources located in the U.S. 
D) value added to the economy by intermediate goods and services minus original cost 
E) value of total sales of goods and services produced in the U.S. 
A) total output of all goods and services produced by resources located in the U.S. 
B) market value of all goods and services produced by resources located in the U.S. 
C) market value of all final goods and services produced by resources located in the U.S. 
D) value added to the economy by intermediate goods and services minus original cost 
E) value of total sales of goods and services produced in the U.S.

Question 8

GDP is a poor measure of social well-being because

Accepted Answer

A) the value of leisure time is not counted in GDP 
B) revenue earned on U.S.exports is ignored 
C) each dollar of government spending is valued at less than one-half of private spending 
D) consumer spending is more important than business spending and should be considered more valuable 
E) it values products at their market prices but ignores services produced 
A) the value of leisure time is not counted in GDP 
B) revenue earned on U.S.exports is ignored 
C) each dollar of government spending is valued at less than one-half of private spending 
D) consumer spending is more important than business spending and should be considered more valuable 
E) it values products at their market prices but ignores services produced

Question 9

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

Accepted Answer

A) positive 
B) equal to zero 
C) less than 100 
D) greater than 100 
E) negative 
A) positive 
B) equal to zero 
C) less than 100 
D) greater than 100 
E) negative

Question 10

If an economy produces final output worth $5 trillion,then the amount of gross income generated by that production

Accepted Answer

A) is $5 trillion 
B) is more than $5 trillion 
C) is $5 trillion minus taxes 
D) would be $5 trillion if profits were zero 
E) would be $5 trillion if costs of production were zero 
A) is $5 trillion 
B) is more than $5 trillion 
C) is $5 trillion minus taxes 
D) would be $5 trillion if profits were zero 
E) would be $5 trillion if costs of production were zero

Question 11

GDP fails to measure changes in

Accepted Answer

A) the prices of products caused by inflation 
B) the market value of goods and services since it uses market prices for valuation 
C) the quality of existing products that do not cause a change in price 
D) leisure time,since it is valued at the minimum wage and not the true opportunity cost of lost wages 
E) the production of services that are produced in the economy 
A) the prices of products caused by inflation 
B) the market value of goods and services since it uses market prices for valuation 
C) the quality of existing products that do not cause a change in price 
D) leisure time,since it is valued at the minimum wage and not the true opportunity cost of lost wages 
E) the production of services that are produced in the economy

Question 12

Net exports is the value of

Accepted Answer

A) exports minus the value of imports 
B) imports minus the value of exports 
C) imports minus tariffs 
D) exports minus tariffs 
E) exports plus the value of imports minus depreciation 
A) exports minus the value of imports 
B) imports minus the value of exports 
C) imports minus tariffs 
D) exports minus tariffs 
E) exports plus the value of imports minus depreciation

Question 13

Use the following data to calculate GDP: consumption = $5,000; gross investment = $800; government purchases = $700; exports = $30; imports = $60; transfer payments = $340.

Accepted Answer

A) GDP = $7,400 
B) GDP = $7,740 
C) GDP = $3,140 
D) GDP = $6,200 
E) GDP cannot be determined due to insufficient data 
A) GDP = $7,400 
B) GDP = $7,740 
C) GDP = $3,140 
D) GDP = $6,200 
E) GDP cannot be determined due to insufficient data

Question 14

It is not possible for the government to spend more than it collects in taxes.

Accepted Answer

A) True 
 B)False

Question 15

A major difference between the CPI and the GDP price index is that the CPI includes

Accepted Answer

A) all domestically produced goods and the price index includes only a sample of domestically produced goods 
B) all domestically produced goods and the price index includes a sample of goods consumed,including imported goods 
C) only a sample of domestically produced goods and the price index includes all domestically produced goods 
D) a sample of goods consumed,including imported goods,and the price index includes all domestically produced goods 
E) a sample of all goods consumed that are domestically produced,and the price index includes all goods produced 
A) all domestically produced goods and the price index includes only a sample of domestically produced goods 
B) all domestically produced goods and the price index includes a sample of goods consumed,including imported goods 
C) only a sample of domestically produced goods and the price index includes all domestically produced goods 
D) a sample of goods consumed,including imported goods,and the price index includes all domestically produced goods 
E) a sample of all goods consumed that are domestically produced,and the price index includes all goods produced

Question 16

A wholesale nursery purchases six dozen gladiolus bulbs for $5.The nursery sells the six dozen resulting flowers to a wholesale florist for $10.The wholesale florist delivers the flowers to a retail florist for $15.The flowers are sold by the retail florist for $75 to the bereaved Jones family to use at great-grandfather Jones's wake.What is the value added by the retail florist?

Accepted Answer

A) $10 
B) $15 
C) $25 
D) $60 
E) $75 
A) $10 
B) $15 
C) $25 
D) $60 
E) $75

Question 17

Which of the following would not be included in GDP as government purchases?

Accepted Answer

A) The local township repairs the roads. 
B) The state government funds a state university. 
C) The federal government sends out Social Security checks. 
D) The federal government pays a lawyer as a public defender. 
E) The state government buys computer time. 
A) The local township repairs the roads. 
B) The state government funds a state university. 
C) The federal government sends out Social Security checks. 
D) The federal government pays a lawyer as a public defender. 
E) The state government buys computer time.

Question 18

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

Accepted Answer

A) government purchases of goods and services 
B) saving 
C) transfer payments 
D) exports 
E) consumption expenditures 
A) government purchases of goods and services 
B) saving 
C) transfer payments 
D) exports 
E) consumption expenditures

Question 19

Transfer payments are an injection into the circular flow.

Accepted Answer

A) True 
 B)False

Question 20

An increase in household production will show up in GDP.

Accepted Answer

A) True 
 B)False

Exam 6: Tracking the Useconomy

GDP reflects many things; however,it does not reflect the value of production that takes place in a nonmarket setting.

If a firm hires labor for $4,000,pays rent of $1,500,buys raw materials for $6,000,earns profits of $500,and sells its output for $14,000,the firm's value added is

Which of the following is the best example of an investment as defined by economists?

If aggregate income equals aggregate expenditure,which of the following will not be true?

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

Each month,the Bureau of Labor Statistics calculates the

Gross Domestic Product equals the

GDP is a poor measure of social well-being because

We can conclude that there has been inflation since the base year if the GDP price index in the current year is

If an economy produces final output worth $5 trillion,then the amount of gross income generated by that production

GDP fails to measure changes in

Net exports is the value of

Use the following data to calculate GDP: consumption = $5,000; gross investment = $800; government purchases = $700; exports = $30; imports = $60; transfer payments = $340.

It is not possible for the government to spend more than it collects in taxes.

A major difference between the CPI and the GDP price index is that the CPI includes

Which of the following would not be included in GDP as government purchases?

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

Transfer payments are an injection into the circular flow.

An increase in household production will show up 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

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