Question 1

Which of the following is included in the investment component of GDP?

Accepted Answer

A)  spending on new business equipment such as power tools and spending on stocks and bonds 
B)  spending on new business equipment such as power tools but not spending on stocks and bonds 
C)  spending on stocks and bonds but not spending on new business equipment such as power tools 
D)  neither spending on new business equipment such as power tools nor spending on stocks and bonds 
A)  spending on new business equipment such as power tools and spending on stocks and bonds 
B)  spending on new business equipment such as power tools but not spending on stocks and bonds 
C)  spending on stocks and bonds but not spending on new business equipment such as power tools 
D)  neither spending on new business equipment such as power tools nor spending on stocks and bonds

Question 2

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7. Taking these four transactions into account, how much is added to GDP?

Accepted Answer

A)  $31 
B)  $25 
C)  $19 
D)  None of the above is correct. 
A)  $31 
B)  $25 
C)  $19 
D)  None of the above is correct.

Question 3

Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which produces and sells leather furniture. With each $1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $3,000. Neither firm had any inventory at the beginning of 2009. During that year, Cowhide produced enough leather for 20 couches. Couches, Inc. bought 80% of that leather for $16,000 and promised to buy the remaining 20% for $4,000 in 2010. Couches, Inc. produced 16 couches during 2009 and sold each one during that year for $3,000. What was the economy's GDP for 2009?

Accepted Answer

A)  $48,000 
B)  $52,000 
C)  $64,000 
D)  $68,000 
A)  $48,000 
B)  $52,000 
C)  $64,000 
D)  $68,000

Question 4

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

Accepted Answer

A)  included in both U.S. GDP and U.S. GNP. 
B)  included in U.S. GDP, but it is not included in U.S. GNP. 
C)  included in U.S. GNP, but it is not included in U.S. GDP. 
D)  included in neither U.S. GDP nor U.S. GNP. 
A)  included in both U.S. GDP and U.S. GNP. 
B)  included in U.S. GDP, but it is not included in U.S. GNP. 
C)  included in U.S. GNP, but it is not included in U.S. GDP. 
D)  included in neither U.S. GDP nor U.S. GNP.

Question 5

Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?

Accepted Answer

The purchase of foreign equipment is cou

Question 6

Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called

Accepted Answer

A)  an inventory good. 
B)  a transitory good. 
C)  a final good. 
D)  an intermediate good. 
A)  an inventory good. 
B)  a transitory good. 
C)  a final good. 
D)  an intermediate good.

Question 7

Which of the following statements regarding GDP is correct?

Accepted Answer

A)  GDP includes factory production, but not any harm that may be inflicted on the environment. 
B)  GDP accounts for all activities taking place outside markets. 
C)  GDP provides detailed information about the distribution of income. 
D)  GDP is a good measure of economic well-being for all purposes. 
A)  GDP includes factory production, but not any harm that may be inflicted on the environment. 
B)  GDP accounts for all activities taking place outside markets. 
C)  GDP provides detailed information about the distribution of income. 
D)  GDP is a good measure of economic well-being for all purposes.

Question 8

Table 5-2
The table below contains data for the country of Crete for the year 2010.
  
-Refer to Table 5-2. What were Crete's net exports in 2010?

Accepted Answer

A)  -$217 
B)  -$88 
C)  $88 
D)  $217 
A)  -$217 
B)  -$88 
C)  $88 
D)  $217

Question 9

For an economy as a whole, income must equal expenditure because

Accepted Answer

A)  the number of firms is equal to the number of households in an economy. 
B)  individuals can only spend what they earn each period. 
C)  every dollar of spending by some buyer is a dollar of income for some seller. 
D)  every dollar of saving by some consumer is a dollar of spending by some other consumer. 
A)  the number of firms is equal to the number of households in an economy. 
B)  individuals can only spend what they earn each period. 
C)  every dollar of spending by some buyer is a dollar of income for some seller. 
D)  every dollar of saving by some consumer is a dollar of spending by some other consumer.

Question 10

If real GDP doubles and the GDP deflator doubles, then nominal GDP

Accepted Answer

A)  remains constant. 
B)  doubles. 
C)  triples. 
D)  quadruples. 
A)  remains constant. 
B)  doubles. 
C)  triples. 
D)  quadruples.

Question 11

The government's purchases of goods but not its purchases of services are included in GDP.

Accepted Answer

A) True 
 B)False

Question 12

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

Accepted Answer

A) True 
 B)False

Question 13

How is net national product (NNP) calculated?

Accepted Answer

A)  Saving is subtracted from the total income of a nation's citizens. 
B)  Saving is added to the total income of a nation's citizens 
C)  Depreciation losses are subtracted from the total income of a nation's citizens. 
D)  Depreciation losses are added to the total income of a nation's citizens. 
A)  Saving is subtracted from the total income of a nation's citizens. 
B)  Saving is added to the total income of a nation's citizens 
C)  Depreciation losses are subtracted from the total income of a nation's citizens. 
D)  Depreciation losses are added to the total income of a nation's citizens.

Question 14

Table 5-6
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009.
Prices and Quantities
  
-Refer to Table 5-6. In 2010, this country's real GDP was

Accepted Answer

A)  $540. 
B)  $700. 
C)  $810. 
D)  $1050. 
A)  $540. 
B)  $700. 
C)  $810. 
D)  $1050.

Question 15

In the United States in 2009, purchases of capital equipment, inventories, and structures represented approximately

Accepted Answer

A)  3 percent of GDP. 
B)  7 percent of GDP. 
C)  11 percent of GDP. 
D)  15 percent of GDP. 
A)  3 percent of GDP. 
B)  7 percent of GDP. 
C)  11 percent of GDP. 
D)  15 percent of GDP.

Question 16

Consider two cars manufactured by Chevrolet in 2009. During 2009, Chevrolet sells one of the two cars to Sean for $24,000. Later in the same year, Sean sells the car to Kati for $19,000. The second automobile, with a market value of $30,000, is unsold at the end of 2010 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2009?

Accepted Answer

A)  $24,000 
B)  $43,000 
C)  $54,000 
D)  $73,000 
A)  $24,000 
B)  $43,000 
C)  $54,000 
D)  $73,000

Question 17

Recently, the U.S. national income accounts have switched to calling government purchases

Accepted Answer

A)  government spending and transfer payments. 
B)  transfer payments and gross investment by government. 
C)  government consumption expenditure and gross investment. 
D)  government wages, salaries, and investment expenditure. 
A)  government spending and transfer payments. 
B)  transfer payments and gross investment by government. 
C)  government consumption expenditure and gross investment. 
D)  government wages, salaries, and investment expenditure.

Question 18

Which of the following represents a transfer payment?

Accepted Answer

A)  You transfer $1,000 from your bank account to a mutual fund. 
B)  The government sends your grandfather his Social Security check. 
C)  You make a payment to get legal documents showing you purchased a previously owned home. 
D)  Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account. 
A)  You transfer $1,000 from your bank account to a mutual fund. 
B)  The government sends your grandfather his Social Security check. 
C)  You make a payment to get legal documents showing you purchased a previously owned home. 
D)  Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account.

Question 19

U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.

Accepted Answer

A) True 
 B)False

Question 20

George lived in a home that was newly constructed in 2005 for which he paid $200,000. In 2008 he sold the house for $225,000. Which of the following statements is correct regarding the sale of the house?

Accepted Answer

A)  The 2008 sale increased 2008 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2008 sale increased 2008 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2008 sale increased 2008 GDP by $225,000; furthermore, the 2008 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2008 sale affected neither 2008 GDP nor 2005 GDP. 
A)  The 2008 sale increased 2008 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2008 sale increased 2008 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2008 sale increased 2008 GDP by $225,000; furthermore, the 2008 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2008 sale affected neither 2008 GDP nor 2005 GDP.

Which of the following is included in the investment component of GDP?

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7. Taking these four transactions into account, how much is added to GDP?

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?

Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called

Which of the following statements regarding GDP is correct?

Table 5-2 The table below contains data for the country of Crete for the year 2010. -Refer to Table 5-2. What were Crete's net exports in 2010?

For an economy as a whole, income must equal expenditure because

If real GDP doubles and the GDP deflator doubles, then nominal GDP

The government's purchases of goods but not its purchases of services are included in GDP.

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

How is net national product (NNP) calculated?

Table 5-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. Prices and Quantities -Refer to Table 5-6. In 2010, this country's real GDP was

In the United States in 2009, purchases of capital equipment, inventories, and structures represented approximately

Recently, the U.S. national income accounts have switched to calling government purchases

Which of the following represents a transfer payment?

U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.

George lived in a home that was newly constructed in 2005 for which he paid $200,000. In 2008 he sold the house for $225,000. Which of the following statements is correct regarding the sale of the house?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 5: Measuring a Nations Income

Which of the following is included in the investment component of GDP?

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7. Taking these four transactions into account, how much is added to GDP?

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

Since it is counted as investment, why doesn't the purchase of earthmoving equipment from China by a U.S. corporation increase U.S. GDP?

Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called

Which of the following statements regarding GDP is correct?

Table 5-2 The table below contains data for the country of Crete for the year 2010. -Refer to Table 5-2. What were Crete's net exports in 2010?

For an economy as a whole, income must equal expenditure because

If real GDP doubles and the GDP deflator doubles, then nominal GDP

The government's purchases of goods but not its purchases of services are included in GDP.

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

How is net national product (NNP) calculated?

Table 5-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009. Prices and Quantities -Refer to Table 5-6. In 2010, this country's real GDP was

In the United States in 2009, purchases of capital equipment, inventories, and structures represented approximately

Recently, the U.S. national income accounts have switched to calling government purchases

Which of the following represents a transfer payment?

U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.

George lived in a home that was newly constructed in 2005 for which he paid $200,000. In 2008 he sold the house for $225,000. Which of the following statements is correct regarding the sale of the house?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters