Question 1

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

Accepted Answer

The basic point is that nothing escapes

Question 2

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

Accepted Answer

A)  government expenditure on goods and services. 
B)  the implicit payments for unpaid household work. 
C)  investment. 
D)  net exports. 
A)  government expenditure on goods and services. 
B)  the implicit payments for unpaid household work. 
C)  investment. 
D)  net exports.

Question 3

Intermediate goods are excluded from GDP because

Accepted Answer

A)  their inclusion would understate GDP 
B)  the premise of the question is incorrect because intermediate goods are directly included in calculating GDP. 
C)  their inclusion would involve double counting. 
D)  they represent goods that have never been purchased so they cannot be counted. 
A)  their inclusion would understate GDP 
B)  the premise of the question is incorrect because intermediate goods are directly included in calculating GDP. 
C)  their inclusion would involve double counting. 
D)  they represent goods that have never been purchased so they cannot be counted.

Question 4

When real GDP is less than potential GDP

Accepted Answer

A)  people work longer hours than usual. 
B)  some labor is unemployed. 
C)  some capital equipment is underused. 
D)  Both answers B and C are correct. 
A)  people work longer hours than usual. 
B)  some labor is unemployed. 
C)  some capital equipment is underused. 
D)  Both answers B and C are correct.

Question 5

What is the relationship between gross investment, net investment, and depreciation? Which measures the change in the capital stock?

Accepted Answer

Gross investment minus depreciation equa

Question 6

Real GDP is not a perfect indicator of economic welfare because .

Accepted Answer

A)  economic welfare depends on many factors not measured or not measured accurately by real GDP 
B)  it includes a direct measure of health and life expectancy 
C)  it underestimates inflation 
D)  it includes the underground economy 
A)  economic welfare depends on many factors not measured or not measured accurately by real GDP 
B)  it includes a direct measure of health and life expectancy 
C)  it underestimates inflation 
D)  it includes the underground economy

Question 7

-In the above figure, which point represents the overuse of resources?

Accepted Answer

A)  point G 
B)  point F 
C)  point I 
D)  point K 
A)  point G 
B)  point F 
C)  point I 
D)  point K

Question 8

An example of "investment" in computing real GDP using the expenditure approach is the purchase of

Accepted Answer

A)  computer chips by Dell to put in their personal computers. 
B)  a new set of tools by an auto mechanic, for use in repairing cars. 
C)  a 100 year old house by a married couple. 
D)  100 shares of IBM stock. 
A)  computer chips by Dell to put in their personal computers. 
B)  a new set of tools by an auto mechanic, for use in repairing cars. 
C)  a 100 year old house by a married couple. 
D)  100 shares of IBM stock.

Question 9

Gross private domestic investment is all purchases of newly produced business capital goods and buildings

Accepted Answer

A)  plus the change in business inventories plus residential construction. 
B)  plus purchases of capital goods produced in previous years to replace any depreciated capital goods. 
C)  minus the change in business inventories. 
D)  plus fixed investment minus inventory investment. 
A)  plus the change in business inventories plus residential construction. 
B)  plus purchases of capital goods produced in previous years to replace any depreciated capital goods. 
C)  minus the change in business inventories. 
D)  plus fixed investment minus inventory investment.

Question 10

An economy recovering from a recession

Accepted Answer

A)  moves down from its trough to a period of depression. 
B)  moves up from its trough to a period of expansion. 
C)  moves up from its peak to a period of expansion. 
D)  moves down from its peak to a period of expansion. 
A)  moves down from its trough to a period of depression. 
B)  moves up from its trough to a period of expansion. 
C)  moves up from its peak to a period of expansion. 
D)  moves down from its peak to a period of expansion.

Question 11

Which of the following is included in government expenditures when measuring GDP?

Accepted Answer

A)  Social Security payments 
B)  the current president's salary 
C)  pension payment made to past presidents 
D)  unemployment compensation payments 
A)  Social Security payments 
B)  the current president's salary 
C)  pension payment made to past presidents 
D)  unemployment compensation payments

Question 12

A recession is commonly defined as occurring when

Accepted Answer

A)  the unemployment rate rises above 7.5 percent for 6 or more months. 
B)  real GDP decreases for a period of 6 or more months. 
C)  the unemployment rate rises above 5.0 percent for 12 or more months. 
D)  real GDP decreases for a period of 12 or more months. 
A)  the unemployment rate rises above 7.5 percent for 6 or more months. 
B)  real GDP decreases for a period of 6 or more months. 
C)  the unemployment rate rises above 5.0 percent for 12 or more months. 
D)  real GDP decreases for a period of 12 or more months.

Question 13

A productivity growth slowdown can be shown as year- to- year fluctuations of real GDP around potential GDP.

Accepted Answer

A) True 
 B)False

Question 14

Real GDP does not show the state of economic welfare in a country in part because GDP omits
I. household production.
II. leisure time available.
III. the quality of the environment.

Accepted Answer

A)  I and III 
B)  II and III 
C)  I, II and III 
D)  I only 
A)  I and III 
B)  II and III 
C)  I, II and III 
D)  I only

Question 15

Net investment equals

Accepted Answer

A)  capital stock minus depreciation. 
B)  the total quantity of plant, equipment and buildings. 
C)  gross investment minus depreciation. 
D)  gross investment/depreciation. 
A)  capital stock minus depreciation. 
B)  the total quantity of plant, equipment and buildings. 
C)  gross investment minus depreciation. 
D)  gross investment/depreciation.

Question 16

Which of the following is NOT a reason that real GDP is a poor measure of a nation's economic welfare?

Accepted Answer

A)  Real GDP does not include the underground economy. 
B)  Real GDP overvalues household production. 
C)  Real GDP omits measures of political freedom. 
D)  Real GDP does not take into account the value of people's leisure time. 
A)  Real GDP does not include the underground economy. 
B)  Real GDP overvalues household production. 
C)  Real GDP omits measures of political freedom. 
D)  Real GDP does not take into account the value of people's leisure time.

Question 17

The times during which real GDP increases are referred to as

Accepted Answer

A)  contractions. 
B)  corrections. 
C)  expansions. 
D)  anti- cycles. 
A)  contractions. 
B)  corrections. 
C)  expansions. 
D)  anti- cycles.

Question 18

Which of the following is NOT included in real GDP?

Accepted Answer

A)  production of services, such as the services of doctors 
B)  production in the home 
C)  production of goods that last more than one year, such as television sets 
D)  production of goods that do not last more than one year, such as gasoline 
A)  production of services, such as the services of doctors 
B)  production in the home 
C)  production of goods that last more than one year, such as television sets 
D)  production of goods that do not last more than one year, such as gasoline

Question 19

The factor market can best be described as where

Accepted Answer

A)  firms buy goods and services. 
B)  firms buy the services of labor, land and capital. 
C)  governments sell goods and services. 
D)  households buy goods and services. 
A)  firms buy goods and services. 
B)  firms buy the services of labor, land and capital. 
C)  governments sell goods and services. 
D)  households buy goods and services.

Question 20

What must be done to net domestic product at factor cost in order to transform it to gross domestic product? Explain why these adjustments are necessary.

Accepted Answer

Several adjustments must be made to net

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

Intermediate goods are excluded from GDP because

When real GDP is less than potential GDP

What is the relationship between gross investment, net investment, and depreciation? Which measures the change in the capital stock?

Real GDP is not a perfect indicator of economic welfare because .

-In the above figure, which point represents the overuse of resources?

An example of "investment" in computing real GDP using the expenditure approach is the purchase of

Gross private domestic investment is all purchases of newly produced business capital goods and buildings

An economy recovering from a recession

Which of the following is included in government expenditures when measuring GDP?

A recession is commonly defined as occurring when

A productivity growth slowdown can be shown as year- to- year fluctuations of real GDP around potential GDP.

Real GDP does not show the state of economic welfare in a country in part because GDP omits I. household production. II. leisure time available. III. the quality of the environment.

Net investment equals

Which of the following is NOT a reason that real GDP is a poor measure of a nation's economic welfare?

The times during which real GDP increases are referred to as

Which of the following is NOT included in real GDP?

The factor market can best be described as where

What must be done to net domestic product at factor cost in order to transform it to gross domestic product? Explain why these adjustments are necessary.

What Is Economics

The Economic Problem

Demand and Supply

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 4: Measuring Gdp and Economic Growth

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

Intermediate goods are excluded from GDP because

When real GDP is less than potential GDP

What is the relationship between gross investment, net investment, and depreciation? Which measures the change in the capital stock?

Real GDP is not a perfect indicator of economic welfare because .

-In the above figure, which point represents the overuse of resources?

An example of "investment" in computing real GDP using the expenditure approach is the purchase of

Gross private domestic investment is all purchases of newly produced business capital goods and buildings

An economy recovering from a recession

Which of the following is included in government expenditures when measuring GDP?

A recession is commonly defined as occurring when

A productivity growth slowdown can be shown as year- to- year fluctuations of real GDP around potential GDP.

Real GDP does not show the state of economic welfare in a country in part because GDP omits I. household production. II. leisure time available. III. the quality of the environment.

Net investment equals

Which of the following is NOT a reason that real GDP is a poor measure of a nation's economic welfare?

The times during which real GDP increases are referred to as

Which of the following is NOT included in real GDP?

The factor market can best be described as where

What must be done to net domestic product at factor cost in order to transform it to gross domestic product? Explain why these adjustments are necessary.

What Is Economics

The Economic Problem

Demand and Supply

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

U.S. Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters