Question 1

Which of the following represents an income flow in the circular flow of domestic output and national income?

Accepted Answer

A) net exports 
B) investment expenditures 
C) government purchases 
D) corporate profits 
A) net exports 
B) investment expenditures 
C) government purchases 
D) corporate profits

Question 2

U.S.GDP in 2015 was about

Accepted Answer

A) $8 trillion. 
B) $18 trillion. 
C) $890 billion. 
D) $30 trillion. 
A) $8 trillion. 
B) $18 trillion. 
C) $890 billion. 
D) $30 trillion.

Question 3

Computation of GDP by the expenditures method would include the purchase of

Accepted Answer

A) fertilizer by a farmer. 
B) cement by a construction company. 
C) land by the U.S.Department of Interior. 
D) government bonds by a commercial bank. 
A) fertilizer by a farmer. 
B) cement by a construction company. 
C) land by the U.S.Department of Interior. 
D) government bonds by a commercial bank.

Question 4

Gross private domestic investment exceeds depreciation in an economy that experiences expanding production capacity.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a private transfer payment?

Accepted Answer

A) unemployment benefits received by newly laid-off workers 
B) the sale of used clothing at a thrift store 
C) the Social Security benefits paid to a retired worker 
D) a check for $250 sent by a parent to a daughter at college 
A) unemployment benefits received by newly laid-off workers 
B) the sale of used clothing at a thrift store 
C) the Social Security benefits paid to a retired worker 
D) a check for $250 sent by a parent to a daughter at college

Question 6

The expenditures or output approach to GDP measures it by summing up

Accepted Answer

A) compensation of employees, rents, interest, dividends, undistributed corporate profits, proprietors' income, indirect business taxes paid, consumption of fixed capital, and net foreign factor income earned in the United States. 
B) compensation of employees, rents, interest, dividends, corporate profits, proprietors' income, and indirect business taxes, and subtracting the consumption of fixed capital. 
C) the total spending for consumption, investment, net exports, and government purchases. 
D) the total spending for consumption and government purchases, but subtracting public and private transfer payments. 
A) compensation of employees, rents, interest, dividends, undistributed corporate profits, proprietors' income, indirect business taxes paid, consumption of fixed capital, and net foreign factor income earned in the United States. 
B) compensation of employees, rents, interest, dividends, corporate profits, proprietors' income, and indirect business taxes, and subtracting the consumption of fixed capital. 
C) the total spending for consumption, investment, net exports, and government purchases. 
D) the total spending for consumption and government purchases, but subtracting public and private transfer payments.

Question 7

National income measures

Accepted Answer

A) nominal GDP after it has been inflated or deflated for changes in the value of the dollar. 
B) the after-tax income of resource suppliers. 
C) the total of all sources of private income plus government revenue from taxes on production and imports. 
D) the amount of wage, rent, interest, and profits income actually received by households. 
A) nominal GDP after it has been inflated or deflated for changes in the value of the dollar. 
B) the after-tax income of resource suppliers. 
C) the total of all sources of private income plus government revenue from taxes on production and imports. 
D) the amount of wage, rent, interest, and profits income actually received by households.

Question 8

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion.GDP in year 2 is

Accepted Answer

A) $180 billion. 
B) $190 billion. 
C) $200 billion. 
D) $210 billion. 
A) $180 billion. 
B) $190 billion. 
C) $200 billion. 
D) $210 billion.

Question 9

The value of a sale of a share of stock is considered to be an investment in national income accounting.

Accepted Answer

A) True 
 B)False

Question 10

What is the difference between national income and personal income?

Accepted Answer

A) personal taxes 
B) National income includes income earned both in the United States and abroad, while personal income only includes that income earned within the borders of the United States. 
C) National income represents before-tax income, while personal income measures how much is available for spending after all taxes have been subtracted. 
D) National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned. 
A) personal taxes 
B) National income includes income earned both in the United States and abroad, while personal income only includes that income earned within the borders of the United States. 
C) National income represents before-tax income, while personal income measures how much is available for spending after all taxes have been subtracted. 
D) National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned.

Question 11

The largest expenditure component of GDP is

Accepted Answer

A) government purchases. 
B) personal consumption expenditures. 
C) gross private domestic investment. 
D) net exports. 
A) government purchases. 
B) personal consumption expenditures. 
C) gross private domestic investment. 
D) net exports.

Question 12

Value added by a firm is the market value of the firm's output minus the

Accepted Answer

A) total wages paid to its employees. 
B) value of inputs bought from other firms. 
C) profits that the firm's owners earn. 
D) total costs of all inputs used. 
A) total wages paid to its employees. 
B) value of inputs bought from other firms. 
C) profits that the firm's owners earn. 
D) total costs of all inputs used.

Question 13

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

Accepted Answer

A) 2 percent 
B) 8 percent 
C) 19 percent 
D) 25 percent 
A) 2 percent 
B) 8 percent 
C) 19 percent 
D) 25 percent

Question 14

Real GDP is

Accepted Answer

A) the nominal value of all goods and services produced in the economy. 
B) the nominal value of all goods and services produced in the domestic economy, corrected for inflation or deflation. 
C) that aggregate output that is produced when the economy is operating at full employment. 
D) always greater than nominal GDP. 
A) the nominal value of all goods and services produced in the economy. 
B) the nominal value of all goods and services produced in the domestic economy, corrected for inflation or deflation. 
C) that aggregate output that is produced when the economy is operating at full employment. 
D) always greater than nominal GDP.

Question 15

In national income accounting, the consumption category of expenditures includes purchases of

Accepted Answer

A) both new and used consumer goods. 
B) automobiles for personal use but not houses. 
C) consumer durable and nondurable goods but not services. 
D) consumer nondurable goods and services but not consumer durable goods. 
A) both new and used consumer goods. 
B) automobiles for personal use but not houses. 
C) consumer durable and nondurable goods but not services. 
D) consumer nondurable goods and services but not consumer durable goods.

Question 16

The following are national income account data for a hypothetical economy in billions of dollars: government purchases ($1,050), personal consumption expenditures ($4,800), imports ($370), exports ($240), and gross private domestic investment ($1,130).Personal consumption expenditures are approximately what percentage of this economy?

Accepted Answer

A) 60 percent 
B) 65 percent 
C) 70 percent 
D) 75 percent 
A) 60 percent 
B) 65 percent 
C) 70 percent 
D) 75 percent

Question 17

GDP estimates account for which of the following items?

Accepted Answer

A) do-it-yourself activities 
B) "psychic income" people derive from their work 
C) household spending for health and home insurance 
D) improvements in product quality 
A) do-it-yourself activities 
B) "psychic income" people derive from their work 
C) household spending for health and home insurance 
D) improvements in product quality

Question 18

GDP tends to overstate economic well-being because it takes into account

Accepted Answer

A) improvements in product quality over time. 
B) expenditures undertaken to correct pollution. 
C) illegal activities of individuals and businesses. 
D) nonmarket activities, such as the productive work of homemakers. 
A) improvements in product quality over time. 
B) expenditures undertaken to correct pollution. 
C) illegal activities of individuals and businesses. 
D) nonmarket activities, such as the productive work of homemakers.

Question 19

One year nominal GDP was $286 billion and the price index was 88.Real GDP that year was

Accepted Answer

A) $252 billion. 
B) $325 billion. 
C) $308 billion. 
D) $262 billion. 
A) $252 billion. 
B) $325 billion. 
C) $308 billion. 
D) $262 billion.

Question 20

The value added in an industry includes the wages earned by workers in the industry.

Accepted Answer

A) True 
 B)False

Exam 27: Measuring Domestic Output and National Income

Which of the following represents an income flow in the circular flow of domestic output and national income?

U.S.GDP in 2015 was about

Computation of GDP by the expenditures method would include the purchase of

Gross private domestic investment exceeds depreciation in an economy that experiences expanding production capacity.

Which of the following is a private transfer payment?

The expenditures or output approach to GDP measures it by summing up

National income measures

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion.GDP in year 2 is

The value of a sale of a share of stock is considered to be an investment in national income accounting.

What is the difference between national income and personal income?

The largest expenditure component of GDP is

Value added by a firm is the market value of the firm's output minus the

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

Real GDP is

In national income accounting, the consumption category of expenditures includes purchases of

GDP estimates account for which of the following items?

GDP tends to overstate economic well-being because it takes into account

One year nominal GDP was $286 billion and the price index was 88.Real GDP that year was

The value added in an industry includes the wages earned by workers in the industry.

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

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