Question 1

Which of the following correctly states the leakages-injections approach to GDP?

Accepted Answer

A) DI + (NT)= C + I + G + (X - M) 
B) S + C + T = DI 
C) S + C + (NT)= I + G + (X - M) 
D) S + (NT)+ M = I + G + X 
E) S + (NT)= I + G + (X - M)

Question 2

An imputed payment

Accepted Answer

A) is a payment that is due but not made 
B) is a payment not made through the market and therefore not counted in GDP 
C) refers to nonmarket goods and services being valued as if they were sold on a market 
D) refers to governmental services being valued at the cost of production 
E) refers to consumers imputing a value to the payment

Question 3

Which of the following would not be counted in this year's GDP?

Accepted Answer

A) Midwest Tractor Company's inventory of brand new farm equipment,which will remain unsold by year's end 
B) the inventory of new baseballs ordered by the Detroit Tigers 
C) the new house the Barnabys had constructed this year 
D) the vacation that the Cartiers enjoyed in France this winter 
E) Bruno's meal at the local La Casa Caliente

Question 4

Imports are a leakage from the circular flow.

Accepted Answer

A) True 
 B)False

Question 5

Marianne and Laura are both homemakers with children.Then Laura takes a volunteer (unpaid)job at a hospital and hires Marianne to care for her preschool-age child.What happens to GDP?

Accepted Answer

A) GDP increases 
B) GDP decreases 
C) there is no change in GDP 
D) GDP increases only if Marianne gives the child better care than Laura 
E) GDP increases only if the patients receive better care now that Laura works in the hospital

Question 6

GDP reflects many things; however,it does not reflect the depletion of natural resources,leisure,or many things we as individuals do for ourselves.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) the spark plugs you bought to tune up your car at home 
B) the government hiring a public relations consultant 
C) any improvements in product or service quality not reflected in a higher price 
D) winning a brand new Chevy truck in a contest 
E) sales of U.S.beef to Scotland

Question 8

Suppose that the economy is in equilibrium with the government budget in deficit and with exports greater than imports.According to the circular flow model,

Accepted Answer

A) saving must exceed investment 
B) saving must equal investment 
C) saving must be less than investment 
D) saving could be equal to or less than investment 
E) it is impossible to determine anything about saving and investment using the given information

Question 9

If the CPI this year is 162 and last year it was 170,what do we know about the inflation rate this year?

Accepted Answer

A) It is positive. 
B) It is negative. 
C) It has decreased since last year. 
D) It has increased since last year. 
E) It is the same as last year.

Question 10

Which of the following is not true about Gross Domestic Product?

Accepted Answer

A) It includes only final goods and services. 
B) It reflects production in a particular year. 
C) Intermediate goods and services are excluded to prevent double counting. 
D) It may be measured by totalling the spending by each group in society. 
E) It includes transfer payments.

Question 11

Louis always knits ten sweaters a year to give as birthday gifts to his nephews.One year,instead of giving the sweaters as gifts,he sells them to a local store for $50 each; his nephews receive no gifts.What is the effect on GDP?

Accepted Answer

A) GDP increases 
B) GDP decreases 
C) there is no change in GDP 
D) GDP increases only if the $50 sweaters are comparable to store-bought sweaters 
E) GDP increases only if the $50 price is less than the cost of materials

Question 12

If the CPI is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A) 103 percent 
B) 1 percent 
C) 6 percent 
D) 3 percent 
E) 206 percent

Question 13

Net taxes are indirect business taxes minus transfer payments.

Accepted Answer

A) True 
 B)False

Question 14

If a firm hires labor for $8,000,pays rent of $4,000,buys raw materials for $13,000,earns profits of $1,200,and sells its output for $31,000,the firm's value added is

Accepted Answer

A) $4,800 
B) $10,000 
C) $18,000 
D) $25,000 
E) $26,200

Question 15

In GDP measurement,consumer spending includes

Accepted Answer

A) spending by businesses on labor resources 
B) spending by government on office buildings 
C) spending by individual households on automobiles and durables 
D) exchanges in business inventories 
E) a firm's purchase of a radio made in Taiwan

Question 16

Which of the following is an injection into the spending stream?

Accepted Answer

A) planned investment 
B) imports 
C) indirect business taxes 
D) disposable income 
E) interest on savings

Question 17

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

Accepted Answer

A) federal government purchases of automobiles 
B) a purchase of California wine by a Canadian firm 
C) employers' payments for employees' medical insurance 
D) a state government's purchase of personal computers 
E) transactions in the underground economy

Question 18

GDP does not include the

Accepted Answer

A) increase in business inventories in the period 
B) expenditures by government for newly produced goods and services in a given period 
C) value of all transactions in the economy during a given period 
D) value of final output during a given period 
E) household spending on electricity

Question 19

Other things equal,increased imports decrease GDP.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that 1986 is our base year (price index equals 100)and that the 2000 price index was 200.If nominal GDP was $6.2 trillion in 2000,what was real GDP that year (measured in 1986 dollars)?

Accepted Answer

A) $3.1 trillion 
B) $6.2 trillion 
C) $12.4 trillion 
D) $18.6 trillion 
E) $24.3 trillion

Exam 6: Tracking the Useconomy

Which of the following correctly states the leakages-injections approach to GDP?

An imputed payment

Which of the following would not be counted in this year's GDP?

Imports are a leakage from the circular flow.

Marianne and Laura are both homemakers with children.Then Laura takes a volunteer (unpaid) job at a hospital and hires Marianne to care for her preschool-age child.What happens to GDP?

GDP reflects many things; however,it does not reflect the depletion of natural resources,leisure,or many things we as individuals do for ourselves.

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

Suppose that the economy is in equilibrium with the government budget in deficit and with exports greater than imports.According to the circular flow model,

If the CPI this year is 162 and last year it was 170,what do we know about the inflation rate this year?

Which of the following is not true about Gross Domestic Product?

Louis always knits ten sweaters a year to give as birthday gifts to his nephews.One year,instead of giving the sweaters as gifts,he sells them to a local store for $50 each; his nephews receive no gifts.What is the effect on GDP?

If the CPI is 200 one year and 206 the next year,the annual rate of inflation as measured by the CPI is approximately

Net taxes are indirect business taxes minus transfer payments.

If a firm hires labor for $8,000,pays rent of $4,000,buys raw materials for $13,000,earns profits of $1,200,and sells its output for $31,000,the firm's value added is

In GDP measurement,consumer spending includes

Which of the following is an injection into the spending stream?

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

GDP does not include the

Other things equal,increased imports decrease GDP.

Suppose that 1986 is our base year (price index equals 100) and that the 2000 price index was 200.If nominal GDP was $6.2 trillion in 2000,what was real GDP that year (measured in 1986 dollars) ?