Question 1

Which of the following items would be included in the calculation of GDP?

Accepted Answer

A)  The value of a car produced this year within the country. 
B)  Purchase of a used car. 
C)  The value of environmental degradation. 
D)  Sale of Gulf War military surplus.

Question 2

Current account deficits:

Accepted Answer

A)  also result in a capital account deficit of the same size. 
B)  result in a capital account surplus of the same size. 
C)  may result in either a capital account surplus or deficit. 
D)  result because exports exceed imports.

Question 3

A country's current account balance is:

Accepted Answer

A)  the total values of a country's export of goods and services minus its import of goods and services and minus its net income paid overseas. 
B)  the total values of a country's export of goods and services plus its import of goods and services and minus its net income paid overseas. 
C)  the total values of a country's export of goods and services minus its import of goods and services and plus its net income paid overseas. 
D)  the total values of a country's export of goods and services minus its import of goods.

Question 4

Actual measured saving and measured investment are equal.

Accepted Answer

A) True 
 B)False

Question 5

In the factor market, firms demand:

Accepted Answer

A)  wages, rents, interest and profit. 
B)  goods and services. 
C)  material, land, labour, capital and entrepreneurship. 
D)  money for their goods and services.

Question 6

GDP figures tend to understate the quantity of goods and services available because:

Accepted Answer

A)  exports are subtracted from GDP but imports are not added back in. 
B)  many items are counted twice or more in intermediate stages of production. 
C)  more women are entering the labour force. 
D)  the changes in quality of products are not included in GDP.

Question 7

A country's current account balance is equal to:

Accepted Answer

A)  current account balance minus the capital account balance. 
B)  net exports plus imports. 
C)  net exports minus net income paid overseas. 
D)  net exports plus government spending.

Question 8

Net national product is the total net income from production accruing to:

Accepted Answer

A)  a country's residents. 
B)  other countries' residents. 
C)  those who paid their taxes in advance. 
D)  the dealers of the black economy.

Question 9

GDP provides information about:

Accepted Answer

A)  the total value of incomes of labour, land and capital. 
B)  distribution and quality of products produced. 
C)  the total value of goods and services produced on the black market. 
D)  the individual incomes.

Question 10

Which of the following expenditures would not be included in GDP?

Accepted Answer

A)  Purchase of a new lawnmower. 
B)  Purchase of a second-hand car from the black market. 
C)  Purchase of a ticket to the latest movie. 
D)  All of the above would be counted in GDP.

Question 11

Nominal GDP is based on:

Accepted Answer

A)  the existing prices during the period of production. 
B)  prices of final goods and services adjusted for inflation. 
C)  prices at which intermediate goods are sold. 
D)  the existing price during a given time period based on the price existing in a selected base year.

Question 12

Real GDP measures a value of a specific basket of goods produced in a given period.

Accepted Answer

A) True 
 B)False

Question 13

The portion of the circular flow model which shows the flow of funds from savers to borrowers is the:

Accepted Answer

A)  product market. 
B)  factor market. 
C)  savings market. 
D)  financial market.

Question 14

Narrbegin Exhibit 11.3 GDP data (billions of dollars)
 $\begin{array}{|l|r|}
\hline \text { Capital depreciation } & 950 \
\hline \text { Change in business inventory } & 50 \
\hline \text { Compensation of employees } & 5000 \
\hline \text { Corporate profit } & 600 \
\hline \text { Durable goods } & 600 \
\hline \text { Exports } & 100 \
\hline \text { Factor payments from the rest of the world } & 360 \
\hline \text { Factor payments to the rest of the world } & 300 \
\hline \text { Farm income } & 300 \
\hline \text { Gross private domestic investment } & 1000 \
\hline \text { Government spending } & 800 \
\hline \text { Imports } & 150 \
\hline \text { Net interest } & 500 \
\hline \text { Non-durable goods } & 2000 \
\hline \text { Non-farm income } & 700 \
\hline \text { Proprietors' income } & 1000 \
\hline \text { Rental income } & 100 \
\hline \text { Services } & 4000\
\hline 
\end{array}$
 
-Use the information in Exhibit 11.3 to compute net national product. Which of the following is correct?

Accepted Answer

A)  $7110 billion. 
B)  $7410 billion. 
C)  $7460 billion. 
D)  $7760 billion.

Question 15

Which of the following purchases would be counted as a final good in the GDP calculation?

Accepted Answer

A)  A family's purchase of a used car. 
B)  A speculator's purchase of 100 shares of News Corp. stock. 
C)  A deli's purchase of bread for making its sandwiches. 
D)  A business's purchase of new office equipment.

Question 16

Which of the following statements is true?

Accepted Answer

A)  The inclusion of intermediate goods and services into GDP calculations would underestimate our nation's production level. 
B)  The expenditure approach sums the compensation of employees, rents, profits, net interest and non-income expenses for depreciation and indirect business taxes. 
C)  Real GDP has been adjusted for changes in the general level of prices due to inflation. 
D)  Real GDP equals nominal GDP multiplied by the GDP deflator.

Question 17

Resources that flow through the circular flow model include all of the following except:

Accepted Answer

A)  land. 
B)  labour. 
C)  capital. 
D)  creativity.

Question 18

The circular flow model represents the establishment of market value for:

Accepted Answer

A)  goods and services only. 
B)  wages and salaries excluding goods and services. 
C)  profits and rents but not for wages and salaries. 
D)  profits and rents as well as wages and salaries.

Question 19

Gross domestic product includes:

Accepted Answer

A)  intermediate as well as final goods. 
B)  foreign goods as well as domestically produced goods. 
C)  used goods sold in the current time period. 
D)  only the value of final goods and services.

Question 20

Gross domestic product (GDP) is a correct measure of both economic 'goods' and 'bads'.

Accepted Answer

A) True 
 B)False

Exam 12: Measuring the Size of the Economy

Which of the following items would be included in the calculation of GDP?

Current account deficits:

A country's current account balance is:

Actual measured saving and measured investment are equal.

In the factor market, firms demand:

GDP figures tend to understate the quantity of goods and services available because:

A country's current account balance is equal to:

Net national product is the total net income from production accruing to:

GDP provides information about:

Which of the following expenditures would not be included in GDP?

Nominal GDP is based on:

Real GDP measures a value of a specific basket of goods produced in a given period.

The portion of the circular flow model which shows the flow of funds from savers to borrowers is the:

Which of the following purchases would be counted as a final good in the GDP calculation?

Which of the following statements is true?

Resources that flow through the circular flow model include all of the following except:

The circular flow model represents the establishment of market value for:

Gross domestic product includes:

Gross domestic product (GDP) is a correct measure of both economic 'goods' and 'bads'.