Question 1

An increase in business inventories during a time period,ceteris paribus,will

Accepted Answer

A) Decrease GDP during that period. 
B) Increase GDP during that period. 
C) Not affect GDP during that period but will increase GDP in later periods when the inventory is sold. 
D) Never affect GDP because changes in inventories are not included in the calculation of GDP. 
A) Decrease GDP during that period. 
B) Increase GDP during that period. 
C) Not affect GDP during that period but will increase GDP in later periods when the inventory is sold. 
D) Never affect GDP because changes in inventories are not included in the calculation of GDP.

Question 2

The sum of value added

Accepted Answer

A) Measures the intangible quality of goods and services produced in the economy. 
B) Equals the sum of the value of intermediate goods. 
C) Is one way to compute the GDP. 
D) Equals net domestic product. 
A) Measures the intangible quality of goods and services produced in the economy. 
B) Equals the sum of the value of intermediate goods. 
C) Is one way to compute the GDP. 
D) Equals net domestic product.

Question 3

Which is better for making comparisons over time,nominal GDP or real GDP,and why?

Accepted Answer

Nominal GDP is the market value of all f

Question 4

Are there any measurement problems that occur with the GDP calculation? Explain.

Accepted Answer

GDP measures the value of output that is

Question 5

For the nation's capital stock to grow,net investment must be positive.

Accepted Answer

A) True 
 B)False

Question 6

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,national income is

Accepted Answer

A) $4,020 billion. 
B) $3,785 billion. 
C) $2,475 billion. 
D) $3,595 billion. 
A) $4,020 billion. 
B) $3,785 billion. 
C) $2,475 billion. 
D) $3,595 billion.

Question 7

If nominal GDP was $11,500 billion in 2003 and the price level in 2003 was 111.6,then real GDP would have been approximately

Accepted Answer

A) $9,795 billion. 
B) $10,305 billion. 
C) $10,485 billion. 
D) $9,750 billion. 
A) $9,795 billion. 
B) $10,305 billion. 
C) $10,485 billion. 
D) $9,750 billion.

Question 8

Assume nominal GDP is $10,000 trillion in period 1 and $15,000 trillion in period 2.If prices in period 2 are twice as high as in period 1,real GDP in period 2 is

Accepted Answer

A) $10,000 trillion measured in period 1 prices. 
B) $12,500 trillion measured in period 1 prices. 
C) $15,000 trillion measured in period 1 prices. 
D) $7,500 trillion measured in period 1 prices. 
A) $10,000 trillion measured in period 1 prices. 
B) $12,500 trillion measured in period 1 prices. 
C) $15,000 trillion measured in period 1 prices. 
D) $7,500 trillion measured in period 1 prices.

Question 9

Real GDP is used most effectively 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 over 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 over time.

Question 10

A convenience store pays a farmer $1.25 per pineapple.If it costs the farmer $0.15 in seeds,$0.25 in fertilizer,and $0.25 in forgone output to grow each pineapple,the value added by the farmer to each pineapple is

Accepted Answer

A) $0.40. 
B) $1.25. 
C) $0.85. 
D) $0.60. 
A) $0.40. 
B) $1.25. 
C) $0.85. 
D) $0.60.

Question 11

"Income received by households before payment of personal taxes" is known as

Accepted Answer

A) Disposable income. 
B) Net domestic product. 
C) Saving. 
D) Personal income. 
A) Disposable income. 
B) Net domestic product. 
C) Saving. 
D) Personal income.

Question 12

GDP is geographically focused,including all output produced within a nation's borders.

Accepted Answer

A) True 
 B)False

Question 13

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 "income received by households before payment of personal taxes" (also known as personal income)is

Accepted Answer

A) $5,870 billion. 
B) $10,070 billion. 
C) $9,570 billion. 
D) $10,600 billion. 
A) $5,870 billion. 
B) $10,070 billion. 
C) $9,570 billion. 
D) $10,600 billion.

Question 14

The components of GDP are

Accepted Answer

A) C + I + X - (G + M). 
B) C + I + G + (X - M). 
C) C + I - G + (X - M). 
D) C + I + G - (X + M). 
A) C + I + X - (G + M). 
B) C + I + G + (X - M). 
C) C + I - G + (X - M). 
D) C + I + G - (X + M).

Question 15

In Figure 5.1,during the period between the early 1970s and 1980,real GDP grew at a faster rate than nominal GDP.This is an indication that

Accepted Answer

A) Average price levels decreased. 
B) Production increased at a faster rate than average price increased. 
C) Production increased at a slower rate than average price increased. 
D) Average price levels increased. 
A) Average price levels decreased. 
B) Production increased at a faster rate than average price increased. 
C) Production increased at a slower rate than average price increased. 
D) Average price levels increased.

Question 16

Prices are used in national income accounting for all of the following reasons except to

Accepted Answer

A) Add the values of output from different sectors of the economy. 
B) Compare the value of output of one period with that of another. 
C) Provide an index to measure the rate of inflation. 
D) Provide an index to measure unemployment. 
A) Add the values of output from different sectors of the economy. 
B) Compare the value of output of one period with that of another. 
C) Provide an index to measure the rate of inflation. 
D) Provide an index to measure unemployment.

Question 17

The wearing out of plants and equipment is known as

Accepted Answer

A) Maintenance Costs. 
B) Depreciation. 
C) Inflation. 
D) Chain-weighted adjustment. 
A) Maintenance Costs. 
B) Depreciation. 
C) Inflation. 
D) Chain-weighted adjustment.

Question 18

The alternative combinations of final goods and services that can be produced with all available resources and technology are the

Accepted Answer

A) Real GDP. 
B) Nominal GDP. 
C) Production possibilities. 
D) Net domestic product. 
A) Real GDP. 
B) Nominal GDP. 
C) Production possibilities. 
D) Net domestic product.

Question 19

If a nation has GDP of $12,500 billion and GDP per capita of $62,500,what is the nation's population?

Accepted Answer

A) 180 million. 
B) 200 million. 
C) 625 million. 
D) 230 million. 
A) 180 million. 
B) 200 million. 
C) 625 million. 
D) 230 million.

Question 20

If real GDP in 2005 is $8,000 billion and the price level is 125,what is nominal GDP in 2005?

Accepted Answer

A) $10,000 billion 
B) $9,200.5 billion 
C) $6,830.6 billion 
D) $5,000 billion 
A) $10,000 billion 
B) $9,200.5 billion 
C) $6,830.6 billion 
D) $5,000 billion

Exam 5: National Income Accounting

An increase in business inventories during a time period,ceteris paribus,will

The sum of value added

Which is better for making comparisons over time,nominal GDP or real GDP,and why?

Are there any measurement problems that occur with the GDP calculation? Explain.

For the nation's capital stock to grow,net investment must be positive.

If nominal GDP was $11,500 billion in 2003 and the price level in 2003 was 111.6,then real GDP would have been approximately

Assume nominal GDP is $10,000 trillion in period 1 and $15,000 trillion in period 2.If prices in period 2 are twice as high as in period 1,real GDP in period 2 is

Real GDP is used most effectively to

A convenience store pays a farmer $1.25 per pineapple.If it costs the farmer $0.15 in seeds,$0.25 in fertilizer,and $0.25 in forgone output to grow each pineapple,the value added by the farmer to each pineapple is

"Income received by households before payment of personal taxes" is known as

GDP is geographically focused,including all output produced within a nation's borders.

The components of GDP are

In Figure 5.1,during the period between the early 1970s and 1980,real GDP grew at a faster rate than nominal GDP.This is an indication that

Prices are used in national income accounting for all of the following reasons except to

The wearing out of plants and equipment is known as

The alternative combinations of final goods and services that can be produced with all available resources and technology are the

If a nation has GDP of $12,500 billion and GDP per capita of $62,500,what is the nation's population?

If real GDP in 2005 is $8,000 billion and the price level is 125,what is nominal GDP in 2005?

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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