Question 1

Transfer payments are included in

Accepted Answer

A) NI. 
B) PI. 
C) GDP. 
D) NDP. 
A) NI. 
B) PI. 
C) GDP. 
D) NDP. B

Question 2

An economy is enlarging its stock of capital goods

Accepted Answer

A) when net investment exceeds gross investment. 
B) when gross investment exceeds replacement investment. 
C) whenever gross investment is positive. 
D) when replacement investment exceeds gross investment. 
A) when net investment exceeds gross investment. 
B) when gross investment exceeds replacement investment. 
C) whenever gross investment is positive. 
D) when replacement investment exceeds gross investment. B

Question 3

The following are examples of final goods in national income accounting, except

Accepted Answer

A) lumber and steel beams purchased by a construction company. 
B) a tractor purchased by a construction company. 
C) a laptop computer purchased by an executive for personal use. 
D) a desktop computer purchased by an executive for business use. 
A) lumber and steel beams purchased by a construction company. 
B) a tractor purchased by a construction company. 
C) a laptop computer purchased by an executive for personal use. 
D) a desktop computer purchased by an executive for business use. A

Question 4

The service a homeowner performs when she mows her yard is not included in GDP because

Accepted Answer

A) this is a nonmarket transaction. 
B) this is a nonproduction activity. 
C) this is a noninvestment transaction. 
D) multiple counting would be involved. 
A) this is a nonmarket transaction. 
B) this is a nonproduction activity. 
C) this is a noninvestment transaction. 
D) multiple counting would be involved.

Question 5

The total income earned through the use of resources, plus taxes on production and on imports, equals

Accepted Answer

A) national income. 
B) gross domestic product. 
C) personal income. 
D) disposable income. 
A) national income. 
B) gross domestic product. 
C) personal income. 
D) disposable income.

Question 6

The GDP deflator or price index equals

Accepted Answer

A) gross private domestic investment less the consumption of fixed capital. 
B) gross national product less net foreign factor income earned in the United States. 
C) nominal GDP divided by real GDP. 
D) real GDP divided by nominal GDP. 
A) gross private domestic investment less the consumption of fixed capital. 
B) gross national product less net foreign factor income earned in the United States. 
C) nominal GDP divided by real GDP. 
D) real GDP divided by nominal GDP.

Question 7

The following are incomes earned but not received by the nation's households, except

Accepted Answer

A) corporate income taxes. 
B) Social Security contribution. 
C) transfer payments. 
D) undistributed corporate profits. 
A) corporate income taxes. 
B) Social Security contribution. 
C) transfer payments. 
D) undistributed corporate profits.

Question 8

GDP is the

Accepted Answer

A) national income minus all nonincome charges against output. 
B) monetary value of all final goods and services produced within the borders of a nation in a particular year. 
C) monetary value of all economic resources used in producing a year's output. 
D) monetary value of all goods and services, final and intermediate, produced in a specific year. 
A) national income minus all nonincome charges against output. 
B) monetary value of all final goods and services produced within the borders of a nation in a particular year. 
C) monetary value of all economic resources used in producing a year's output. 
D) monetary value of all goods and services, final and intermediate, produced in a specific year.

Question 9

The ZZZ Corporation issued $25 million in new common stock in 2016.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, investment

Accepted Answer

A) of $7 million occurred. 
B) of $25 million occurred. 
C) of $18 million occurred. 
D) has not occurred. 
A) of $7 million occurred. 
B) of $25 million occurred. 
C) of $18 million occurred. 
D) has not occurred.

Question 10

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end.Consumption of private fixed capital in the year was $35 billion.Assuming stable prices, net investment was

Accepted Answer

A) $35 billion. 
B) $40 billion. 
C) $45 billion. 
D) $75 billion. 
A) $35 billion. 
B) $40 billion. 
C) $45 billion. 
D) $75 billion.

Question 11

The GDP tends to

Accepted Answer

A) overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. 
B) understate economic welfare because it includes expenditures undertaken to offset or correct pollution. 
C) understate economic welfare because it does not take into account increases in leisure. 
D) overstate economic welfare because it does not reflect improvements in product quality. 
A) overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. 
B) understate economic welfare because it includes expenditures undertaken to offset or correct pollution. 
C) understate economic welfare because it does not take into account increases in leisure. 
D) overstate economic welfare because it does not reflect improvements in product quality.

Question 12

The purchase of Wal-Mart stock is a part of gross investment but not of net investment.

Accepted Answer

A) True 
 B)False

Question 13

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

Accepted Answer

A) public transfer payments to households. 
B) the consumption of fixed capital. 
C) the underground economy. 
D) intermediate goods. 
A) public transfer payments to households. 
B) the consumption of fixed capital. 
C) the underground economy. 
D) intermediate goods.

Question 14

When gross investment is positive, net investment

Accepted Answer

A) is always zero 
B) must be negative. 
C) must be positive. 
D) may be either positive or negative. 
A) is always zero 
B) must be negative. 
C) must be positive. 
D) may be either positive or negative.

Question 15

Disposable income (DI) includes transfer payments like Social Security benefits and unemployment benefits.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016.In 2016, national income accountants would

Accepted Answer

A) add $10 billion to other elements of investment in calculating total investment. 
B) subtract $10 billion from other elements of investment in calculating total investment. 
C) add $75 billion (= $150/2) to other elements of investment in calculating total investment. 
D) subtract $75 billion (= $150/2) from other elements of investment in calculating total investment. 
A) add $10 billion to other elements of investment in calculating total investment. 
B) subtract $10 billion from other elements of investment in calculating total investment. 
C) add $75 billion (= $150/2) to other elements of investment in calculating total investment. 
D) subtract $75 billion (= $150/2) from other elements of investment in calculating total investment.

Question 17

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000.The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000.Between 1990 and 2000, real GDP

Accepted Answer

A) increased by $60 billion. 
B) decreased by $32 billion. 
C) increased by $100 billion. 
D) increased by $117 billion. 
A) increased by $60 billion. 
B) decreased by $32 billion. 
C) increased by $100 billion. 
D) increased by $117 billion.

Question 18

Transfer payments are

Accepted Answer

A) excluded when calculating GDP because they only reflect inflation. 
B) excluded when calculating GDP because they do not reflect current production. 
C) included when calculating GDP because they are a category of investment spending. 
D) included when calculating GDP because they increase the spending of recipients. 
A) excluded when calculating GDP because they only reflect inflation. 
B) excluded when calculating GDP because they do not reflect current production. 
C) included when calculating GDP because they are a category of investment spending. 
D) included when calculating GDP because they increase the spending of recipients.

Question 19

Arthur sells $100 worth of cotton to Bob.Bob turns the cotton into cloth, which he sells to Camille for $300.Camille uses the cloth to make prom dresses that she sells to Donita for $700.Donita sells the dresses for $1,200 to kids attending the prom.The total contribution to GDP of this series of transactions is

Accepted Answer

A) $1,200. 
B) $500. 
C) $2,300. 
D) $1,100. 
A) $1,200. 
B) $500. 
C) $2,300. 
D) $1,100.

Question 20

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result,

Accepted Answer

A) real GDP will rise more rapidly than nominal GDP. 
B) GDP will tend to increasingly understate the level of output through time. 
C) GDP will tend to increasingly overstate the level of output through time. 
D) the accuracy of GDP will be unaffected through time. 
A) real GDP will rise more rapidly than nominal GDP. 
B) GDP will tend to increasingly understate the level of output through time. 
C) GDP will tend to increasingly overstate the level of output through time. 
D) the accuracy of GDP will be unaffected through time.

Exam 27: Measuring Domestic Output and National Income

Transfer payments are included in

An economy is enlarging its stock of capital goods

The following are examples of final goods in national income accounting, except

The service a homeowner performs when she mows her yard is not included in GDP because

The total income earned through the use of resources, plus taxes on production and on imports, equals

The GDP deflator or price index equals

The following are incomes earned but not received by the nation's households, except

GDP is the

The ZZZ Corporation issued $25 million in new common stock in 2016.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, investment

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end.Consumption of private fixed capital in the year was $35 billion.Assuming stable prices, net investment was

The GDP tends to

The purchase of Wal-Mart stock is a part of gross investment but not of net investment.

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

When gross investment is positive, net investment

Disposable income (DI) includes transfer payments like Social Security benefits and unemployment benefits.

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016.In 2016, national income accountants would

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000.The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000.Between 1990 and 2000, real GDP

Transfer payments are

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters