Question 1

Which of the following items can you definitively say is part of the underground economy?

Accepted Answer

A) Payments to family members for performing household tasks. 
B) Income from legal pursuits. 
C) Unreported income. 
D) Child care services provided by a legitimate company. 
A) Payments to family members for performing household tasks. 
B) Income from legal pursuits. 
C) Unreported income. 
D) Child care services provided by a legitimate company. C

Question 2

Table 5.1 National Income Accounts (dollar figures are in billions)
$\begin{array}{|l|r|}
\hline \text { Expenditures for consumer goods and services } & \$ 4,565 \
\hline \text { Exports } & \$ 740 \
\hline \text { Government purchases of goods and services } & \$ 1,465 \
\hline \text { Social Security taxes } & \$ 510 \
\hline\text { Net investment } & \$ 225 \
\hline\text { Indirect business taxes } & \$ 520 \
\hline\text { Imports } & \$ 825 \
\hline \text { Gross investment } & \$ 865 \
\hline \text { Corporate income taxes } & \$ 185 \
\hline \text { Personal incometaxes } & \$ 750 \
\hline \text { Corporateretained earnings } & \$ 45 \
\hline\text { Net foreign factor income } & \$ 20 \
\hline \text { Govermment transfer payments to households } & \$ 690 \
\hline \text { Net interest payments to households } & \$ 0 \
\hline
\end{array}$
 On the basis of Table 5.1,depreciation is

Accepted Answer

A) $640 billion. 
B) $50 billion. 
C) $85 billion. 
D) $690 billion. 
A) $640 billion. 
B) $50 billion. 
C) $85 billion. 
D) $690 billion. A

Question 3

If the price level is increasing at 4% and output is increasing at 5%,then

Accepted Answer

A) Real GDP is increasing faster than nominal GDP. 
B) Nominal GDP is increasing faster than real GDP. 
C) Nominal GDP is increasing at 20%. 
D) None of the choices are correct. 
A) Real GDP is increasing faster than nominal GDP. 
B) Nominal GDP is increasing faster than real GDP. 
C) Nominal GDP is increasing at 20%. 
D) None of the choices are correct. B

Question 4

Suppose iPhones cost consumers $200 and USB cables cost consumers $25.What contribution does the production of 2,000 iPhones and 1,200 USB cables make to GDP?

Accepted Answer

A) $1,200,000. 
B) $430,000. 
C) $200,000. 
D) $580,000. 
A) $1,200,000. 
B) $430,000. 
C) $200,000. 
D) $580,000.

Question 5

What is the difference between GDP and GNP?

Accepted Answer

GDP is the market value of all final goo

Question 6

If a farmer grows a head of cabbage with fertilizer costs of $0.10 and seed costs of $0.15 and sells it to a wholesaler for $0.55,the total value added by the farmer is

Accepted Answer

A) $0.30. 
B) $0.25. 
C) $0.55. 
D) $0.35. 
A) $0.30. 
B) $0.25. 
C) $0.55. 
D) $0.35.

Question 7

Which of the following best measures the household sector's contribution to the support of the public sector?

Accepted Answer

A) GDP minus depreciation. 
B) The difference between personal income and disposable income. 
C) Government transfer payments. 
D) Corporate profits taxes plus undistributed corporate profits. 
A) GDP minus depreciation. 
B) The difference between personal income and disposable income. 
C) Government transfer payments. 
D) Corporate profits taxes plus undistributed corporate profits.

Question 8

All of the following count as unreported income except

Accepted Answer

A) A waiter's tips that are not reported to the IRS. 
B) The $5 you pay your friend to help you study for a test. 
C) International trade in cocaine. 
D) The money you pay a private tutor who works for Tutors Inc. 
A) A waiter's tips that are not reported to the IRS. 
B) The $5 you pay your friend to help you study for a test. 
C) International trade in cocaine. 
D) The money you pay a private tutor who works for Tutors Inc.

Question 9

The national income aggregate calculated by subtracting depreciation from GDP is known as

Accepted Answer

A) Net investment. 
B) Net domestic product. 
C) Gross investment. 
D) Value added. 
A) Net investment. 
B) Net domestic product. 
C) Gross investment. 
D) Value added.

Question 10

The economic definition of investment includes all of the following except

Accepted Answer

A) Residential construction. 
B) Net changes in business inventory. 
C) Spending for plants and capital equipment. 
D) A retirement portfolio of stocks and bonds. 
A) Residential construction. 
B) Net changes in business inventory. 
C) Spending for plants and capital equipment. 
D) A retirement portfolio of stocks and bonds.

Question 11

An economy's production possibilities curve indicates

Accepted Answer

A) The rate of economic growth. 
B) The prices of any two goods. 
C) The rate of investment. 
D) How much the economy can produce. 
A) The rate of economic growth. 
B) The prices of any two goods. 
C) The rate of investment. 
D) How much the economy can produce.

Question 12

The part of disposable income not spent on current consumption is

Accepted Answer

A) Saving. 
B) Dissaving. 
C) Investment. 
D) Social Security taxes. 
A) Saving. 
B) Dissaving. 
C) Investment. 
D) Social Security taxes.

Question 13

Table 5.2 National Income Accounts (dollar figures are in billions)
$\begin{array}{|l|r|}
\hline \text { Expenditures for consumer goods and services } & \$ 2,850 \
\hline \text { Exports } & \$ 300\
\hline \text { Government purchases of goods and services } & \$810 \
\hline \text { Social Security taxes } & \$ 295 \
\hline\text { Net investment } & \$510 \
\hline\text { Indirect business taxes } & \$ 445 \
\hline\text { Imports } & \$450 \
\hline \text { Gross investment } & \$700 \
\hline \text { Corporate income taxes } & \$ 190\
\hline \text { Personal incometaxes } & \$ 875 \
\hline \text { Corporateretained earnings } & \$ 210 \
\hline\text { Net foreign factor income } & \$ 0 \
\hline \text { Govermment transfer payments to households } & \$780 \
\hline \text { Net interest payments to households } & \$ 20 \
\hline
\end{array}$

On the basis of Table 5.2,GDP is

Accepted Answer

A) $2,090 billion. 
B) $4,210 billion. 
C) $4,400 billion. 
D) $4,020 billion. 
A) $2,090 billion. 
B) $4,210 billion. 
C) $4,400 billion. 
D) $4,020 billion.

Question 14

If one added up the value of all intermediate goods that went into the production of real GDP,the total value of intermediate goods would be

Accepted Answer

A) Less than the GDP. 
B) Equal to the GDP. 
C) Greater than the GDP. 
D) None of the choices are correct. 
A) Less than the GDP. 
B) Equal to the GDP. 
C) Greater than the GDP. 
D) None of the choices are correct.

Question 15

Net domestic product (NDP)is determined by

Accepted Answer

A) Subtracting depreciation from GDP. 
B) Adding consumption,investment,government expenditures,and net exports. 
C) Adding appreciation to GDP. 
D) Subtracting consumption from GDP. 
A) Subtracting depreciation from GDP. 
B) Adding consumption,investment,government expenditures,and net exports. 
C) Adding appreciation to GDP. 
D) Subtracting consumption from GDP.

Question 16

One In the News article states that the underground economy includes transactions that are untaxed or unaccounted for in GDP.According to this article,the underground economy

Accepted Answer

A) Involves a small percentage of households. 
B) Includes only illegal transactions. 
C) Is captured in GDP. 
D) Impacts the amount of tax dollars collected by the IRS. 
A) Involves a small percentage of households. 
B) Includes only illegal transactions. 
C) Is captured in GDP. 
D) Impacts the amount of tax dollars collected by the IRS.

Question 17

According to the hypothetical economy in Figure 5.1,between 1960 and 1970 real GDP declined but nominal GDP continued to rise.The increase in nominal GDP was due to

Accepted Answer

A) An increase in the price level greater than the decrease in output,causing the nominal dollar value of output produced to increase. 
B) An increase in the quantity of output produced. 
C) A decrease in the price level. 
D) An increase in the standard of living. 
A) An increase in the price level greater than the decrease in output,causing the nominal dollar value of output produced to increase. 
B) An increase in the quantity of output produced. 
C) A decrease in the price level. 
D) An increase in the standard of living.

Question 18

Transfer payments are part of personal income but not national income because

Accepted Answer

A) They are a payment for which no goods or services are exchanged. 
B) Personal income is an earnings concept. 
C) National income is a receipts concept. 
D) They represent a payment to factors of production. 
A) They are a payment for which no goods or services are exchanged. 
B) Personal income is an earnings concept. 
C) National income is a receipts concept. 
D) They represent a payment to factors of production.

Question 19

According to the economy in Figure 5.3,net exports

Accepted Answer

A) Were a negative number from 1990 to 2000. 
B) Were a negative number from 1970 to 1985. 
C) Made a positive contribution to GDP from 1970 to 1985. 
D) Did not impact GDP from 1990 to 2000 because exports were greater than imports. 
A) Were a negative number from 1990 to 2000. 
B) Were a negative number from 1970 to 1985. 
C) Made a positive contribution to GDP from 1970 to 1985. 
D) Did not impact GDP from 1990 to 2000 because exports were greater than imports.

Question 20

To calculate real GDP,we

Accepted Answer

A) Measure in the prices of goods and services of that period. 
B) Estimate future prices of goods and services. 
C) Adjust the market value of goods and services for changing prices. 
D) None of the choices are correct. 
A) Measure in the prices of goods and services of that period. 
B) Estimate future prices of goods and services. 
C) Adjust the market value of goods and services for changing prices. 
D) None of the choices are correct.

Exam 5: National Income Accounting

Which of the following items can you definitively say is part of the underground economy?

If the price level is increasing at 4% and output is increasing at 5%,then

Suppose iPhones cost consumers $200 and USB cables cost consumers $25.What contribution does the production of 2,000 iPhones and 1,200 USB cables make to GDP?

What is the difference between GDP and GNP?

If a farmer grows a head of cabbage with fertilizer costs of $0.10 and seed costs of $0.15 and sells it to a wholesaler for $0.55,the total value added by the farmer is

Which of the following best measures the household sector's contribution to the support of the public sector?

All of the following count as unreported income except

The national income aggregate calculated by subtracting depreciation from GDP is known as

The economic definition of investment includes all of the following except

An economy's production possibilities curve indicates

The part of disposable income not spent on current consumption is

If one added up the value of all intermediate goods that went into the production of real GDP,the total value of intermediate goods would be

Net domestic product (NDP)is determined by

One In the News article states that the underground economy includes transactions that are untaxed or unaccounted for in GDP.According to this article,the underground economy

According to the hypothetical economy in Figure 5.1,between 1960 and 1970 real GDP declined but nominal GDP continued to rise.The increase in nominal GDP was due to

Transfer payments are part of personal income but not national income because

According to the economy in Figure 5.3,net exports

To calculate real GDP,we

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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