Question 1

To adjust nominal GDP for a given year in order to obtain real GDP, we multiply the nominal GDP by the price index.

Accepted Answer

A) True 
 B)False

Question 2

(GDP figures are in billions of dollars.)   Refer to the above table. What was real GDP in Year 2?

Accepted Answer

A)  $4,820 billion 
B)  $4,875 billion 
C)  $4,911 billion 
D)  $5,320 billion 
A)  $4,820 billion 
B)  $4,875 billion 
C)  $4,911 billion 
D)  $5,320 billion

Question 3

When U.S. households buy new imported European and Japanese cars, the total value of the cars is counted as part of C in the GDP accounts.

Accepted Answer

A) True 
 B)False

Question 4

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2. In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

Accepted Answer

A) True 
 B)False

Question 5

The total income earned through the use of resources, plus taxes on production and on imports, equals:

Accepted Answer

A)  National income 
B)  Gross domestic product 
C)  Personal income 
D)  Disposable income 
A)  National income 
B)  Gross domestic product 
C)  Personal income 
D)  Disposable income

Question 6

The following are examples of final goods in national income accounting, except:

Accepted Answer

A)  Lumber and steel beams purchased by a construction company 
B)  Tractor purchased by a construction company 
C)  Laptop computer purchased by an executive for personal use 
D)  Desktop computer purchased by an executive for business use 
A)  Lumber and steel beams purchased by a construction company 
B)  Tractor purchased by a construction company 
C)  Laptop computer purchased by an executive for personal use 
D)  Desktop computer purchased by an executive for business use

Question 7

U.S. GDP in 2012 was about:

Accepted Answer

A)  $8.1 trillion 
B)  $15.7 trillion 
C)  $890 billion 
D)  $1200 billion 
A)  $8.1 trillion 
B)  $15.7 trillion 
C)  $890 billion 
D)  $1200 billion

Question 8

The following data about a hypothetical economy are in billions of dollars.   Refer to the above data. GDP in this economy is:

Accepted Answer

A)  $6,080 billion 
B)  $6,230 billion 
C)  $6,380 billion 
D)  $6,400 billion 
A)  $6,080 billion 
B)  $6,230 billion 
C)  $6,380 billion 
D)  $6,400 billion

Question 9

In an economy that is experiencing a shrinking production capacity:

Accepted Answer

A)  Gross domestic investment is negative 
B)  Net private domestic investment is zero 
C)  Depreciation is negative 
D)  Depreciation exceeds gross investment 
A)  Gross domestic investment is negative 
B)  Net private domestic investment is zero 
C)  Depreciation is negative 
D)  Depreciation exceeds gross investment

Question 10

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

Accepted Answer

A)  2 percent 
B)  8 percent 
C)  19 percent 
D)  25 percent 
A)  2 percent 
B)  8 percent 
C)  19 percent 
D)  25 percent

Question 11

(The following national income data are in billions of dollars.)   Refer to the above data. National income in this economy is:

Accepted Answer

A)  $804 billion 
B)  $940 billion 
C)  $975 billion 
D)  $1,019 billion 
A)  $804 billion 
B)  $940 billion 
C)  $975 billion 
D)  $1,019 billion

Question 12

If real GDP declines in a given year, nominal GDP:

Accepted Answer

A)  Must also be declining 
B)  Must also be increasing 
C)  May either rise or fall 
D)  Is likely to remain constant 
A)  Must also be declining 
B)  Must also be increasing 
C)  May either rise or fall 
D)  Is likely to remain constant

Question 13

(The following national income data for an economy are in billions of dollars.)   Refer to the above data. Which items need to be accounted for in going from National Income to GDP?

Accepted Answer

A)  1, 12, and 13 
B)  2, 11, and 12 
C)  13 only 
D)  1 and 2 
A)  1, 12, and 13 
B)  2, 11, and 12 
C)  13 only 
D)  1 and 2

Question 14

GDP does not include which of the following activities?

Accepted Answer

A)  Businesses installing anti-pollution equipment 
B)  Households spending to enhance security of their neighborhoods 
C)  Couples remodeling their own homes 
D)  Families eating out in restaurants 
A)  Businesses installing anti-pollution equipment 
B)  Households spending to enhance security of their neighborhoods 
C)  Couples remodeling their own homes 
D)  Families eating out in restaurants

Question 15

When gross investment is positive, net investment:

Accepted Answer

A)  Is always zero 
B)  Must be negative 
C)  Must be positive 
D)  May be either positive or negative 
A)  Is always zero 
B)  Must be negative 
C)  Must be positive 
D)  May be either positive or negative

Question 16

In 2011, the three largest economies in the world were (listed in order, from largest):

Accepted Answer

A)  The U.S., China, Germany 
B)  China, the U.S., Japan 
C)  The U.S., China, Japan 
D)  China, the U.S., Germany 
A)  The U.S., China, Germany 
B)  China, the U.S., Japan 
C)  The U.S., China, Japan 
D)  China, the U.S., Germany

Question 17

To avoid multiple counting in national income accounts:

Accepted Answer

A)  Only final goods and services should be counted 
B)  Intermediate goods and services should be counted 
C)  Both final and intermediate goods and services should be counted 
D)  Primary, intermediate, and final goods and services should be counted 
A)  Only final goods and services should be counted 
B)  Intermediate goods and services should be counted 
C)  Both final and intermediate goods and services should be counted 
D)  Primary, intermediate, and final goods and services should be counted

Question 18

A product that was produced in 2013 and not sold until 2014 is counted as part of GDP in 2013.

Accepted Answer

A) True 
 B)False

Question 19

Business inventories increase when firms produce:

Accepted Answer

A)  More than they sell, and the inventory increase is added to GDP 
B)  Less than they sell, and the inventory increase is added to GDP 
C)  More than they sell, and the inventory increase is subtracted from GDP 
D)  Less than they sell, and the inventory increase is subtracted from GDP 
A)  More than they sell, and the inventory increase is added to GDP 
B)  Less than they sell, and the inventory increase is added to GDP 
C)  More than they sell, and the inventory increase is subtracted from GDP 
D)  Less than they sell, and the inventory increase is subtracted from GDP

Question 20

The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:

Accepted Answer

A)  Output in 2005 was higher than in 2004 
B)  Prices in 2005 were higher than in 2004 
C)  Output in 2005 was lower than in 2004 
D)  Prices in 2005 were lower than in 2004 
A)  Output in 2005 was higher than in 2004 
B)  Prices in 2005 were higher than in 2004 
C)  Output in 2005 was lower than in 2004 
D)  Prices in 2005 were lower than in 2004

Exam 7: Measuring Domestic Output and National Income

To adjust nominal GDP for a given year in order to obtain real GDP, we multiply the nominal GDP by the price index.

(GDP figures are in billions of dollars.) Refer to the above table. What was real GDP in Year 2?

When U.S. households buy new imported European and Japanese cars, the total value of the cars is counted as part of C in the GDP accounts.

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2. In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

The total income earned through the use of resources, plus taxes on production and on imports, equals:

The following are examples of final goods in national income accounting, except:

U.S. GDP in 2012 was about:

The following data about a hypothetical economy are in billions of dollars. Refer to the above data. GDP in this economy is:

In an economy that is experiencing a shrinking production capacity:

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

(The following national income data are in billions of dollars.) Refer to the above data. National income in this economy is:

If real GDP declines in a given year, nominal GDP:

(The following national income data for an economy are in billions of dollars.) Refer to the above data. Which items need to be accounted for in going from National Income to GDP?

GDP does not include which of the following activities?

When gross investment is positive, net investment:

In 2011, the three largest economies in the world were (listed in order, from largest):

To avoid multiple counting in national income accounts:

A product that was produced in 2013 and not sold until 2014 is counted as part of GDP in 2013.

Business inventories increase when firms produce:

The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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