Question 1

In Figure 5.2,the fact that real GDP is greater than nominal GDP during the 1960-1980 periods implies that

Accepted Answer

A) Average price levels during this period must have been lower than during the base period. 
B) Per capita GDP must have increased. 
C) Average price levels must have decreased during this period. 
D) Production must have decreased during this period. 
A) Average price levels during this period must have been lower than during the base period. 
B) Per capita GDP must have increased. 
C) Average price levels must have decreased during this period. 
D) Production must have decreased during this period.

Question 2

Table 5.3 National Income Accounts (dollar figures are in billions)
$$\begin{array} {| l | r| } 
\hline \text { Expenditures for consumer poods and services } & \$ 8,200 \
\hline \text { Exports } & \$ 1,700 \
\hline \text { Government purchases of poods and services } & \$ 2,500 \
\hline \text { Docial Security taxes } & \$ 1,900 \
\hline \text { Net irvestment } & \$ 1,400 \
\hline \text { Indirect business taxes } & \$ 1,400 \
\hline \text { Irnoorts } & \$ 1,900 \
\hline \text { Gross irvestment } & \$ 1,800 \
\hline \text { Corporate income taxes } & \$ 600 \
\hline \text { Personal income taxes } & \$ 1,500 \
\hline \text { Corporateretained earnings } & \$ 130 \
\hline \text { Net foreipn factor income } & \$ 100 \
\hline \text { Government transfer payments to households } & \$ 1600 \
\hline \text { Net interest paynnents to households } & \$ 500 \
\hline
\end{array}$$
 On the basis of Table 5.3,the value of the income aggregate that is defined as "total income earned by current factors of production" (also known as national income)is

Accepted Answer

A) $10,700 billion. 
B) $12,300 billion. 
C) $11,900 billion. 
D) $12,000 billion. 
A) $10,700 billion. 
B) $12,300 billion. 
C) $11,900 billion. 
D) $12,000 billion.

Question 3

The social well-being of a country

Accepted Answer

A) Is best measured by per capita GDP. 
B) Always increases when real GDP increases. 
C) Decreases when real GDP decreases. 
D) Is measured by more than changes in real GDP. 
A) Is best measured by per capita GDP. 
B) Always increases when real GDP increases. 
C) Decreases when real GDP decreases. 
D) Is measured by more than changes in real GDP.

Question 4

The value of final output produced in a given period,measured in current prices,is

Accepted Answer

A) Real GDP. 
B) Nominal GDP. 
C) NDP. 
D) GNP. 
A) Real GDP. 
B) Nominal GDP. 
C) NDP. 
D) GNP.

Question 5

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

Accepted Answer

A) Income earned by an attorney. 
B) Income earned by a CPA. 
C) Contract work performed by an electrician. 
D) Tips earned by a bartender who does not report them to the IRS. 
A) Income earned by an attorney. 
B) Income earned by a CPA. 
C) Contract work performed by an electrician. 
D) Tips earned by a bartender who does not report them to the IRS.

Question 6

Which of the following is investment,according to an economist?

Accepted Answer

A) The purchase of U.S.savings bonds. 
B) A collection of rare coins. 
C) An increase in business inventories. 
D) The purchase of a new family car. 
A) The purchase of U.S.savings bonds. 
B) A collection of rare coins. 
C) An increase in business inventories. 
D) The purchase of a new family car.

Question 7

Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP.Your friend is

Accepted Answer

A) Wrong.GDP will not be affected because nothing new is being produced. 
B) Right.GDP will increase,ceteris paribus. 
C) Wrong.GDP will not be affected because this is not a socially desirable use of resources and will therefore not be included in GDP. 
D) Wrong.GDP will decline because the neighborhood will be less clean. 
A) Wrong.GDP will not be affected because nothing new is being produced. 
B) Right.GDP will increase,ceteris paribus. 
C) Wrong.GDP will not be affected because this is not a socially desirable use of resources and will therefore not be included in GDP. 
D) Wrong.GDP will decline because the neighborhood will be less clean.

Question 8

Which of the following is treated differently in computations of GNP as compared with GDP?

Accepted Answer

A) Sales in the underground economy. 
B) Goods produced by U.S.firms located in foreign countries. 
C) Intermediate goods. 
D) The value of services performed by housewives. 
A) Sales in the underground economy. 
B) Goods produced by U.S.firms located in foreign countries. 
C) Intermediate goods. 
D) The value of services performed by housewives.

Question 9

The measure of the part of disposable income that is not consumed is

Accepted Answer

A) GDP. 
B) Net investment. 
C) Savings. 
D) Depreciation. 
A) GDP. 
B) Net investment. 
C) Savings. 
D) Depreciation.

Question 10

If GDP per capita was $500 in 2002 and the population was 25,000,the GDP would have been approximately

Accepted Answer

A) $5,000,000. 
B) $7,500,000. 
C) $125,000,000. 
D) None of the choices are correct. 
A) $5,000,000. 
B) $7,500,000. 
C) $125,000,000. 
D) None of the choices are correct.

Question 11

If a friend helps you with your homework,it will not be calculated in the GDP accounts.But if you hire a tutor who reports the income,the services will be counted in GDP.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is directly included in the calculation of GDP?

Accepted Answer

A) The final sale of a brand new Cadillac. 
B) The appreciation in value of shares of stock. 
C) The sales of sand to a glassmaker. 
D) The sales of land to a builder. 
A) The final sale of a brand new Cadillac. 
B) The appreciation in value of shares of stock. 
C) The sales of sand to a glassmaker. 
D) The sales of land to a builder.

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,depreciation is

Accepted Answer

A) $425 billion. 
B) $125 billion. 
C) -$125 billion. 
D) $190 billion. 
A) $425 billion. 
B) $125 billion. 
C) -$125 billion. 
D) $190 billion.

Question 14

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,personal saving is

Accepted Answer

A) $1,215 billion. 
B) $305 billion. 
C) $205 billion. 
D) $1,130 billion. 
A) $1,215 billion. 
B) $305 billion. 
C) $205 billion. 
D) $1,130 billion.

Question 15

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,disposable income is

Accepted Answer

A) $3,490 billion. 
B) $2,805 billion. 
C) $4,480 billion. 
D) $3,680 billion. 
A) $3,490 billion. 
B) $2,805 billion. 
C) $4,480 billion. 
D) $3,680 billion.

Question 16

The GDP per capita is the most practical way to

Accepted Answer

A) Measure how much income households receive. 
B) Measure how much output can be consumed on a sustainable basis. 
C) Make international comparisons of the standard of living. 
D) Analyze the growth rate of the economy through time. 
A) Measure how much income households receive. 
B) Measure how much output can be consumed on a sustainable basis. 
C) Make international comparisons of the standard of living. 
D) Analyze the growth rate of the economy through time.

Question 17

Which of the following typically purchases the most goods and services in the U.S.economy?

Accepted Answer

A) Foreigners. 
B) Households. 
C) Federal,state and local governments combined. 
D) Businesses. 
A) Foreigners. 
B) Households. 
C) Federal,state and local governments combined. 
D) Businesses.

Question 18

Real GDP is the

Accepted Answer

A) Value of output produced,including the nonmarket activities that are not counted in nominal GDP. 
B) Value of final output produced in a given period,adjusted for changing prices. 
C) Value of final output produced in a given period measured in current prices. 
D) Intangible quality of goods and services produced in the economy. 
A) Value of output produced,including the nonmarket activities that are not counted in nominal GDP. 
B) Value of final output produced in a given period,adjusted for changing prices. 
C) Value of final output produced in a given period measured in current prices. 
D) Intangible quality of goods and services produced in the economy.

Question 19

How are total output and total income related to each other,and why?

Accepted Answer

The value of total output must equal the

Question 20

Suppose you volunteer to help clean up your neighborhood,and the only payment you receive is the sense of goodwill that develops with your neighbors.Your efforts cause the GDP of the economy to

Accepted Answer

A) Remain unchanged. 
B) Fall by the opportunity cost of the time you spend doing volunteer work. 
C) Rise by the opportunity cost of the time spent by all of the people in the neighborhood on the volunteer project. 
D) Rise by the value of increased cleanliness of the neighborhood. 
A) Remain unchanged. 
B) Fall by the opportunity cost of the time you spend doing volunteer work. 
C) Rise by the opportunity cost of the time spent by all of the people in the neighborhood on the volunteer project. 
D) Rise by the value of increased cleanliness of the neighborhood.

Exam 5: National Income Accounting

In Figure 5.2,the fact that real GDP is greater than nominal GDP during the 1960-1980 periods implies that

The social well-being of a country

The value of final output produced in a given period,measured in current prices,is

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

Which of the following is investment,according to an economist?

Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP.Your friend is

Which of the following is treated differently in computations of GNP as compared with GDP?

The measure of the part of disposable income that is not consumed is

If GDP per capita was $500 in 2002 and the population was 25,000,the GDP would have been approximately

If a friend helps you with your homework,it will not be calculated in the GDP accounts.But if you hire a tutor who reports the income,the services will be counted in GDP.

Which of the following is directly included in the calculation of GDP?

The GDP per capita is the most practical way to

Which of the following typically purchases the most goods and services in the U.S.economy?

Real GDP is the

How are total output and total income related to each other,and why?

Suppose you volunteer to help clean up your neighborhood,and the only payment you receive is the sense of goodwill that develops with your neighbors.Your efforts cause the GDP of the economy to

Economics: the Core Issues

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Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

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The Costs of Production

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Competitive Markets

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Natural Monopolies: Deregulation

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