Question 1

Transfer payments are excluded from government purchases in GDP accounting because

Accepted Answer

A)  they are difficult to measure. 
B)  they are a reward to individuals who have been productive their entire lives. 
C)  they are already included as part of investment. 
D)  nothing is being produced in return for the payment.

Question 2

If the prices of goods begin to rise rapidly, people may find it difficult to maintain their lifestyles. Explain why.

Accepted Answer

The answer of If the prices of goods begin to...

Question 3

The amount of income that households keep after paying taxes is

Accepted Answer

A)  national income. 
B)  personal income. 
C)  personal disposable income. 
D)  value added income.

Question 4

When the GDP is measured using "adjustments for price changes" it is known as the

Accepted Answer

A)  real GDP. 
B)  nominal GDP. 
C)  real GNP. 
D)  nominal GNP.

Question 5

The circular flow is used to make the point that

Accepted Answer

A)  rising prices never occur during times of unemployment. 
B)  unemployment only occurs during a recession. 
C)  production generates income. 
D)  households purchase factors of production from firms.

Question 6

Which of the following is a category of national income?

Accepted Answer

A)  net interest 
B)  corporate profits 
C)  rental income 
D)  all of the above

Question 7

Which of the following is NOT a component of private investment, for purposes of GDP accounting?

Accepted Answer

A)  newly produced housing 
B)  additions to firms' stock of inventories 
C)  purchases by firms of used machinery 
D)  newly built factories

Question 8

Which prices are used to measure goods and services in calculating the nominal GDP?

Accepted Answer

A)  past years prices 
B)  current prices 
C)  average prices 
D)  projected prices

Question 9

From World War II through 2010, the United States experienced ________ recessions.

Accepted Answer

A)  2 
B)  5 
C)  11 
D)  15

Question 10

Use the following information to answer the next several questions:
Scenario 1: Imagine that an economy produces two goods, flashlights and fishing lures. In 2015, the economy produced 70 flashlights and 40 fishing lures, and the prices of flashlights and fishing lures were $5 and $12, respectively. In 2016, the economy produced 85 flashlights and 50 fishing lures, and the prices of flashlights and fishing lures were $7 and $15, respectively.
-Based on the information in Scenario 1, nominal GDP grew by about ________ percent from 2015 to 2016.

Accepted Answer

A)  23 
B)  31 
C)  62 
D)  162

Question 11

Describe the recession phase of a business cycle, including when it begins and when it ends.

Accepted Answer

The answer of Describe the recession phase of a business...

Question 12

Intermediate goods are not counted as part of gross domestic product.

Accepted Answer

A) True 
 B)False

Question 13

GDP ignores transactions that take place in the underground economy.

Accepted Answer

A) True 
 B)False

Question 14

We measure gross domestic product by multiplying the quantities of goods by their prices because it allows us to

Accepted Answer

A)  express the values of products in a common unit of measurement. 
B)  correct for inflation. 
C)  directly compare the output of one economy to that of another. 
D)  calculate the total number of units of goods produced in an economy.

Question 15

For the purpose of GDP accounting, consumption expenditures include

Accepted Answer

A)  only nondurable goods. 
B)  only durable goods. 
C)  both nondurable goods and services. 
D)  durable goods, nondurable goods, and services.

Question 16

Macroeconomics differs from microeconomics in that

Accepted Answer

A)  macroeconomics is the study of individual markets, while microeconomics deals with the nation's economy as a whole. 
B)  microeconomics is the study of individual markets, while macroeconomics deals with the nation's economy as a whole. 
C)  macroeconomics focuses principally on social and political issues, while microeconomics involves the study of a nation's monetary system. 
D)  microeconomics focuses principally on social and political issues, while macroeconomics involves the study of a nation's monetary system.

Question 17

How many quarters (3-month periods) must the "real" GDP decline to have the economy considered to be in a recession?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 18

For the purposes of GDP accounting, government purchases include

Accepted Answer

A)  the purchases of new military equipment. 
B)  Social Security payments. 
C)  direct transfer payments by the government to other individuals. 
D)  welfare payments.

Question 19

If Cassie's Coffee House purchases 42 cents worth of ingredients and spends 28 cents on wages per cup of coffee to produce an 89 cent cup of coffee, then Cassie's Coffee House's value added per cup of coffee is

Accepted Answer

A)  19 cents. 
B)  28 cents. 
C)  47 cents. 
D)  61 cents.

Question 20

A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it and spins it into yarn. The yarn is then sold to a knitting mill, which produces and sells sweaters. In calculating GDP we would count

Accepted Answer

A)  the raw wool, the yarn and the sweaters. 
B)  only the yarn and the sweaters. 
C)  only the sweaters. 
D)  only the raw wool and the yarn.

Exam 11: Measuring a Nations Production and Income