Question 1

In the circular flow diagram, households and the firms interact in two markets: the product and the factor markets.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 2000 is _______ than the nominal GDP.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  There is insufficient information to answer this question. 
A)  greater than 
B)  equal to 
C)  less than 
D)  There is insufficient information to answer this question.

Question 3

Explain why each of the following items is excluded from GDP:
(a) profits from the stock and bond market
(b) transfer payments
(c) sale of used goods
(d) goods and services produced in the home

Accepted Answer

(a) Profits from the sale of stocks and

Question 4

List some limitations of GDP as a measurement of social welfare.

Accepted Answer

GDP is not necessarily a good measure of

Question 5

Refer to Application 2, "Comparing the Severity of Recessions," to answer the following questions:
-According to the application, during the recession that started in 1973, unemployments that rose from:

Accepted Answer

A)  6.9 to 9.1 percent. 
B)  3.5 to 15.3 percent. 
C)  4.9 percent to 8.5 percent. 
D)  4.6 percent to 10 percent. 
A)  6.9 to 9.1 percent. 
B)  3.5 to 15.3 percent. 
C)  4.9 percent to 8.5 percent. 
D)  4.6 percent to 10 percent.

Question 6

From World War II until 2008, the U.S. has experienced:

Accepted Answer

A)  one depression. 
B)  four depressions. 
C)  10 depressions. 
D)  no depressions. 
A)  one depression. 
B)  four depressions. 
C)  10 depressions. 
D)  no depressions.

Question 7

GDP is not a perfect measure of social welfare and the society's economic well- being because:

Accepted Answer

A)  it does not include all economic activities in the economy. 
B)  it does not say anything about the distribution of income. 
C)  GDP accounting rules do not adjust for production that causes negative spillovers. 
D)  all of the above. 
A)  it does not include all economic activities in the economy. 
B)  it does not say anything about the distribution of income. 
C)  GDP accounting rules do not adjust for production that causes negative spillovers. 
D)  all of the above.

Question 8

Recall Application 3, "The Links Between Self- Reported Happiness and GDP," to answer the following questions:
-According to the Application 3, over the past 30 years in the U.S., as income per capita has increased significantly, self- reported levels of happiness among individuals have

Accepted Answer

A)  declined. 
B)  remained constant. 
C)  exactly doubled. 
D)  increased. 
A)  declined. 
B)  remained constant. 
C)  exactly doubled. 
D)  increased.

Question 9

Double counting can be avoided by:

Accepted Answer

A)  including the value of intermediate goods in the GNP but not in the GDP. 
B)  not counting the value of intermediate goods in GDP. 
C)  including the value of intermediate goods in the production year but not in the selling year of those goods. 
D)  including the value of intermediate goods in the current year. 
A)  including the value of intermediate goods in the GNP but not in the GDP. 
B)  not counting the value of intermediate goods in GDP. 
C)  including the value of intermediate goods in the production year but not in the selling year of those goods. 
D)  including the value of intermediate goods in the current year.

Question 10

Over the last 20 years, which Asian country has experienced a depression?

Accepted Answer

A)  Malaysia 
B)  Japan 
C)  China 
D)  Thailand 
A)  Malaysia 
B)  Japan 
C)  China 
D)  Thailand

Question 11

Consumer expenditures on household appliances represent which of the following components of Consumption Expenditures?

Accepted Answer

A)  inventory investment 
B)  services 
C)  durable goods 
D)  nondurable goods 
A)  inventory investment 
B)  services 
C)  durable goods 
D)  nondurable goods

Question 12

If output of each good or service doubles and all prices remain the unchanged, nominal GDP doubles.

Accepted Answer

A) True 
 B)False

Question 13

In factor markets:

Accepted Answer

A)  households supply inputs, which firms demand. 
B)  firms supply products, which households demand. 
C)  households demand inputs, which firms supply. 
D)  households supply goods and services, which businesses demand. 
A)  households supply inputs, which firms demand. 
B)  firms supply products, which households demand. 
C)  households demand inputs, which firms supply. 
D)  households supply goods and services, which businesses demand.

Question 14

Which of the following would be included in GDP?

Accepted Answer

A)  the sale of Firestone tires to Ford Motor company 
B)  the broker's fee one pays when purchasing stocks 
C)  the purchase of a used car 
D)  none of the above 
A)  the sale of Firestone tires to Ford Motor company 
B)  the broker's fee one pays when purchasing stocks 
C)  the purchase of a used car 
D)  none of the above

Question 15

The equation for GDP using the expenditure approach is:

Accepted Answer

A)  GDP = Consumption + Investment + Government Purchases + Imports + Exports. 
B)  GDP = Consumption + Investment + Government Purchases - Imports - Exports. 
C)  GDP = Consumption + Investment + Government Purchases + Imports - Exports. 
D)  GDP = Consumption + Investment + Government Purchases + Exports - Imports. 
A)  GDP = Consumption + Investment + Government Purchases + Imports + Exports. 
B)  GDP = Consumption + Investment + Government Purchases - Imports - Exports. 
C)  GDP = Consumption + Investment + Government Purchases + Imports - Exports. 
D)  GDP = Consumption + Investment + Government Purchases + Exports - Imports.

Question 16

Gross Domestic Product (GDP):

Accepted Answer

A)  excludes sales of all final goods and services. 
B)  includes all goods and services sold in a given period. 
C)  includes sales of raw materials. 
D)  excludes used car sales because no new production takes place. 
A)  excludes sales of all final goods and services. 
B)  includes all goods and services sold in a given period. 
C)  includes sales of raw materials. 
D)  excludes used car sales because no new production takes place.

Question 17

Underground activities pertain to all illegal activities in the economy.

Accepted Answer

A) True 
 B)False

Question 18

GDP is the value of all goods purchased each year by the citizens of a country.

Accepted Answer

A) True 
 B)False

Question 19

Real GDP equals nominal GDP when:

Accepted Answer

A)  the current year is earlier than the base year. 
B)  the current year and the base year are the same. 
C)  the current year is later than the base year. 
D)  the current year and the base year are not the same. 
A)  the current year is earlier than the base year. 
B)  the current year and the base year are the same. 
C)  the current year is later than the base year. 
D)  the current year and the base year are not the same.

Question 20

Because production generates income which, in turn, generates expenditure, it is true that:

Accepted Answer

A)  it is not possible to charge taxes on either expenditure or income without disrupting macroeconomic equilibrium. 
B)  the magnitude of government budget deficits is equal to the magnitude of trade deficits, albeit with the opposite sign. 
C)  both the income and production approaches to measuring macroeconomic activity should yield the same results. 
D)  corporate profits can not be larger than the income paid to households for the rental of their capital. 
A)  it is not possible to charge taxes on either expenditure or income without disrupting macroeconomic equilibrium. 
B)  the magnitude of government budget deficits is equal to the magnitude of trade deficits, albeit with the opposite sign. 
C)  both the income and production approaches to measuring macroeconomic activity should yield the same results. 
D)  corporate profits can not be larger than the income paid to households for the rental of their capital.

In the circular flow diagram, households and the firms interact in two markets: the product and the factor markets.

Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 2000 is _______ than the nominal GDP.

Explain why each of the following items is excluded from GDP: (a) profits from the stock and bond market (b) transfer payments (c) sale of used goods (d) goods and services produced in the home

List some limitations of GDP as a measurement of social welfare.

Refer to Application 2, "Comparing the Severity of Recessions," to answer the following questions: -According to the application, during the recession that started in 1973, unemployments that rose from:

From World War II until 2008, the U.S. has experienced:

GDP is not a perfect measure of social welfare and the society's economic well- being because:

Recall Application 3, "The Links Between Self- Reported Happiness and GDP," to answer the following questions: -According to the Application 3, over the past 30 years in the U.S., as income per capita has increased significantly, self- reported levels of happiness among individuals have

Double counting can be avoided by:

Over the last 20 years, which Asian country has experienced a depression?

Consumer expenditures on household appliances represent which of the following components of Consumption Expenditures?

If output of each good or service doubles and all prices remain the unchanged, nominal GDP doubles.

In factor markets:

Which of the following would be included in GDP?

The equation for GDP using the expenditure approach is:

Gross Domestic Product (GDP):

Underground activities pertain to all illegal activities in the economy.

GDP is the value of all goods purchased each year by the citizens of a country.

Real GDP equals nominal GDP when:

Because production generates income which, in turn, generates expenditure, it is true that:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 5: Measuring a Nations Production and Income

In the circular flow diagram, households and the firms interact in two markets: the product and the factor markets.

Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 2000 is _______ than the nominal GDP.

Explain why each of the following items is excluded from GDP: (a) profits from the stock and bond market (b) transfer payments (c) sale of used goods (d) goods and services produced in the home

List some limitations of GDP as a measurement of social welfare.

Refer to Application 2, "Comparing the Severity of Recessions," to answer the following questions: -According to the application, during the recession that started in 1973, unemployments that rose from:

From World War II until 2008, the U.S. has experienced:

GDP is not a perfect measure of social welfare and the society's economic well- being because:

Recall Application 3, "The Links Between Self- Reported Happiness and GDP," to answer the following questions: -According to the Application 3, over the past 30 years in the U.S., as income per capita has increased significantly, self- reported levels of happiness among individuals have

Double counting can be avoided by:

Over the last 20 years, which Asian country has experienced a depression?

Consumer expenditures on household appliances represent which of the following components of Consumption Expenditures?

If output of each good or service doubles and all prices remain the unchanged, nominal GDP doubles.

In factor markets:

Which of the following would be included in GDP?

The equation for GDP using the expenditure approach is:

Gross Domestic Product (GDP):

Underground activities pertain to all illegal activities in the economy.

GDP is the value of all goods purchased each year by the citizens of a country.

Real GDP equals nominal GDP when:

Because production generates income which, in turn, generates expenditure, it is true that:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters