Question 1

Goods and services produced in the domestic economy and sold abroad are called _____.

Accepted Answer

A) net exports 
B) exports 
C) imports 
D) transfer payments

Question 2

Which of the following is included in gross private domestic investment in the computation of GDP?

Accepted Answer

A) The sale of some Safeway stocks to another company 
B) Safeway's purchase of three new delivery trucks 
C) Your purchase of groceries at Safeway 
D) An annual bonus given to Safeway employees

Question 3

The gross domestic product of a nation can be measured:

Accepted Answer

A) as the total value of consumer expenditures on goods and services. 
B) as the total value of income generated in producing total output. 
C) as the total cost of producing of that output excluding profit 
D) as the total value of inputs used to produce a nation's output.

Question 4

An increase in real GDP from 2002 to 2006 necessarily indicates that

Accepted Answer

A) people are better off in 2002 than they were in 2006. 
B) depreciation was lower in 2002 than it is in 2006. 
C) prices increased between 2002 and 2006. 
D) quantities of goods and services produced increased between 2002 and 2006.

Question 5

The smallest component of income generated in the production of U.S.GDP is:

Accepted Answer

A) depreciation. 
B) net interest. 
C) rental income. 
D) employee compensation.

Question 6

GDP can be calculated by totaling either the:

Accepted Answer

A) market values of all final goods and services or the total volume of all intermediate goods at all stages of production. 
B) market values of all final goods and services or the value added at all stages of production. 
C) total sales values of all intermediate goods at all stages of production or the value added at all stages of production. 
D) market values of all final goods and services or the values added by labor at all stages of production.

Question 7

Which of the following items is a stock variable?

Accepted Answer

A) Expenditure on consumer goods 
B) Private investment 
C) Labor wage 
D) Government debt

Question 8

All of the following are included in gross domestic income EXCEPT:

Accepted Answer

A) wages. 
B) welfare payments. 
C) net interest. 
D) rental income.

Question 9

Which of the following is the best measure of a nation's standard of living?

Accepted Answer

A) nominal GDP 
B) market GDP 
C) real GDP per capita 
D) nominal GDP per capita

Question 10

Goods and services produced and but not sold in the current period are not included in current period GDP.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions 
Exhibit: Circular Flow Model 
-(Exhibit: Circular Flow Model)
The exhibit shows a simplified circular flow model where only consumption goods are being produced.The arrow marked "A" represents the flow of:

Accepted Answer

A) personal consumption expenditures. 
B) consumer goods and services. 
C) factors of production. 
D) factor incomes.

Question 12

Suppose the clothing manufacturer, Eddie Bauer, produced 10,000 pairs of jeans in 2005 but sold only 9,200 pairs.How will this be recorded in GDP accounts?

Accepted Answer

A) The 9,200 pairs that were sold will be counted under the consumption component of GDP in 2005 and the 800 pairs that were not sold will not be included in GDP. 
B) The 10,000 pairs of jeans produced would be counted as investment and will be included in GDP in 2005. 
C) The 9,200 pairs sold will be counted as consumption and the 800 pairs that were not sold will counted as investment and both items will be included in GDP in 2005. 
D) The 9,200 pairs sold will be counted under the consumption component of GDP in 2005 and the 800 pairs that were not sold will be included in GDP in 2006.

Question 13

Taxes imposed on firms on the production or sale of goods and services are called:

Accepted Answer

A) output tax. 
B) profit tax. 
C) direct business taxes. 
D) indirect business taxes.

Question 14

The construction of a new state highway would be included in the _____ category of GDP.

Accepted Answer

A) personal consumption 
B) government purchases 
C) government output 
D) government investment

Question 15

Goods that are produced in a particular period but not sold in the current period:

Accepted Answer

A) are included in consumption estimates. 
B) are called inventories and are included in gross private investment. 
C) are excluded from the current year's GDP and included in GDP in the year they are sold. 
D) are classified as intermediate goods.

Question 16

Use the following to answer questions 
Exhibit: Stages in the Production of an Office Building
 
-(Exhibit: Stages in the Production of an Office Building)
A mining firm extracts iron from the earth.A steel mill converts the iron to steel beams for use in construction.A construction company uses the steel beams to make a building.Assume that the total product of these firms represents the only components of the building and that they will have no other uses.What is the valued-added by Crane Construction?

Accepted Answer

A) $725,000 
B) $825,000 
C) $950,000 
D) $1,050,000

Question 17

Personal income equals:

Accepted Answer

A) net national product plus income earned but not received plus income received but not earned. 
B) wages and salaries plus net interest income plus transfer payments. 
C) national income minus income earned but not received plus income received but not earned. 
D) factor incomes received for supplying factors of production plus income received but not earned.

Question 18

It is difficult to measure the contribution of the service sector to GDP because

Accepted Answer

A) its contribution to GDP is very little. 
B) of large fluctuations in prices in the service sector. 
C) there are close ties between the service sector and illegal activities. 
D) it is difficult to determine what counts as a unit of output.

Question 19

For a homeowner, the rental value of the home is estimated and included in GDP.

Accepted Answer