Question 1

Soybeans produced in Brazil, but eaten by cows in a Kansas feedlot, will be included in U.S. GDP.

Accepted Answer

A) True 
 B)False

Question 2

Macroeconomics focuses on issues such as job growth, economic growth, and inflation rates.

Accepted Answer

A) True 
 B)False

Question 3

A benefit of using GDP per capita instead of GDP is that GDP:

Accepted Answer

A)  takes into account the differences in wealth between the rich and poor within a country. 
B)  measures the effects of outliers skewing averages. 
C)  takes into account the size of the population when measuring the value of the goods and services a country produces. 
D)  takes into account the environmental benefits or harm of economic activity.

Question 4

It can be said that macroeconomics was born during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not true regarding the informal economy?

Accepted Answer

A)  Informal market activities tend to be paid under the table. 
B)  Informal market activities are not reported to the government for tax purposes. 
C)  Informal market activities do not contribute to the standard of living of citizens. 
D)  Countries with large informal economies have total output that is less than their official GDP statistics.

Question 6

Current national income and production statistics include the environmental benefits or harm of economic activity.

Accepted Answer

A) True 
 B)False

Question 7

Social Security payments are included in the personal income category of national income.

Accepted Answer

A) True 
 B)False

Question 8

Corporate profits are slightly less than 10% of GDP.

Accepted Answer

A) True 
 B)False

Question 9

In the circular flow diagram, the clockwise direction shows the flow of _____, where households supply _____ and businesses supply _____.

Accepted Answer

A)  money; purchases of goods and services; income to households 
B)  money; labor; goods and services 
C)  goods and services; labor; goods and services 
D)  goods and services; purchases of goods and services; income to households

Question 10

If a country's GDP is $200 million, and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is:

Accepted Answer

A)  $20,000. 
B)  $25,000. 
C)  $11,111. 
D)  $100,000.

Question 11

(Table) According to the table, the GDP for 2010 was: GDP Expenditures for 2010 $$\begin{array} { | l | c | } 
\hline \text { Expenditure } & \text { Billions } \
\hline \text { Personal consumption } & \$ 10,353.5 \
\hline \text { Gross private domestic investment } & 1,769.1 \
\hline \text { Exports } & 1,746.1 \
\hline \text { Imports } & 2,251.5 \
\hline \text { Government purchases } & 2,975.1 \
\hline \text { Capital consumption allowance } & 1,030.2 \
\hline
\end{array}$$

Accepted Answer

A)  $15,603.1 billion. 
B)  $16,843.8 billion. 
C)  $14,592.3 billion. 
D)  $13,562.1 billion.

Question 12

Last year, Marian earned $25,000, paid $2,000 in taxes, and saved $5,000. Marian's personal income was _____, her disposable personal income was _____, and her consumption spending was _____.

Accepted Answer

A)  $20,000; $18,000; $13,000 
B)  $25,000; $23,000; $18,000 
C)  $25,000; $18,000; $13,000 
D)  $23,000; $21,000; $18,000

Question 13

Gross domestic product is the total market value of all:

Accepted Answer

A)  final goods and services produced in the United States by labor and property. 
B)  final and intermediate goods and services produced in the United States by labor and property. 
C)  intermediate goods produced in the United States by labor and property. 
D)  final goods and services sold in the United States.

Question 14

Shortcomings of the national income and product accounts include ignoring nonmarket transactions, such as the value of your labor within your own home (for example, the value of cooking your own dinner).

Accepted Answer

A) True 
 B)False

Question 15

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. Which of the following is the best interpretation of this finding?

Accepted Answer

A)  The economy grew at a rate of 0.25% for a few months, but economic growth actually decreased by 1.5% in November. 
B)  The rate of economic growth slowed in November, but the economy did not move into a recession. 
C)  The economy was in an expansion in October but moved into a recession in November. 
D)  Economic activity was above the historical trend rate of growth, but it is likely that the economy moved into a recession in November.

Question 16

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

Accepted Answer

A)  GDP is unaffected by this change. 
B)  GDP falls as a result of this change. 
C)  GDP at first rises but then falls. 
D)  GDP rises as a result of this change.

Question 17

Leisure time is included in the GDP accounts.

Accepted Answer

A) True 
 B)False

Question 18

What component of GDP includes college tuition?

Accepted Answer

A)  durable goods 
B)  nondurable goods 
C)  services 
D)  private domestic investment

Question 19

The major item that must be added to national income to obtain GDP is:

Accepted Answer

A)  individual income taxes. 
B)  property taxes. 
C)  capital consumption allowance. 
D)  Social Security payments.

Question 20

As a country's economy grows and real GDP per capita rises, citizens often do not feel proportionately better off. Which of the following provides a logical explanation for this?

Accepted Answer

A)  GDP may be rising due to rising prices rather than rising output. 
B)  If the consumption portion of GDP is rising more rapidly than other categories of GDP, the average person may have less to consume. 
C)  As incomes rise, households may use the extra income to buy services and goods that they used to produce for themselves; thus, even though GDP is higher, how much they actually consume is not higher. 
D)  If the rise in output is due to an increase in the population, then the amount of goods available per person may not be rising.

Exam 5: Introduction to Macroeconomics

Soybeans produced in Brazil, but eaten by cows in a Kansas feedlot, will be included in U.S. GDP.

Macroeconomics focuses on issues such as job growth, economic growth, and inflation rates.

A benefit of using GDP per capita instead of GDP is that GDP:

It can be said that macroeconomics was born during the Great Depression.

Which of the following is not true regarding the informal economy?

Current national income and production statistics include the environmental benefits or harm of economic activity.

Social Security payments are included in the personal income category of national income.

Corporate profits are slightly less than 10% of GDP.

In the circular flow diagram, the clockwise direction shows the flow of ___, where households supply _ and businesses supply ___.

If a country's GDP is $200 million, and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is:

Last year, Marian earned $25,000, paid $2,000 in taxes, and saved $5,000. Marian's personal income was ___, her disposable personal income was _, and her consumption spending was ___.

Gross domestic product is the total market value of all:

Shortcomings of the national income and product accounts include ignoring nonmarket transactions, such as the value of your labor within your own home (for example, the value of cooking your own dinner).

Suppose the National Activity Index of the Federal Reserve Bank of Chicago hovered around +0.25 for a few months but then dropped to -1.5 in November. Which of the following is the best interpretation of this finding?

When Mr. Wilson worked full time, he paid a service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

Leisure time is included in the GDP accounts.

What component of GDP includes college tuition?

The major item that must be added to national income to obtain GDP is:

As a country's economy grows and real GDP per capita rises, citizens often do not feel proportionately better off. Which of the following provides a logical explanation for this?