Question 1

The largest component of income is proprietors' income.

Accepted Answer

A) True 
 B)False

Question 2

-The figure above shows a time-series graph. The horizontal axis measures ________ and the vertical axis measures ________.

Accepted Answer

A)  time; x-values 
B)  time; the variable of interest 
C)  the variable of interest; time 
D)  y-values; the variable of interest 
A)  time; x-values 
B)  time; the variable of interest 
C)  the variable of interest; time 
D)  y-values; the variable of interest

Question 3

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE?
I. U.S. net exports decrease.
II. U.S. investment increases.

Accepted Answer

A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II 
A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II

Question 4

Investment, as included in GDP, consists of what?

Accepted Answer

Investment is the purchase of

Question 5

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

Accepted Answer

A)  increases; does not change 
B)  does not change; increases 
C)  increases; decreases 
D)  increases; increases 
A)  increases; does not change 
B)  does not change; increases 
C)  increases; decreases 
D)  increases; increases

Question 6

On a time-series graph, time is typically shown

Accepted Answer

A)  as an area. 
B)  along the x-axis. 
C)  along the y-axis. 
D)  as an implicit variable held constant. 
A)  as an area. 
B)  along the x-axis. 
C)  along the y-axis. 
D)  as an implicit variable held constant.

Question 7

By itself, an increase in exports

Accepted Answer

A)  increases GDP. 
B)  decreases GDP. 
C)  means imports decrease by the same amount. 
D)  can either increase or decrease GDP, depending on whether the exports are durable or nondurable. 
A)  increases GDP. 
B)  decreases GDP. 
C)  means imports decrease by the same amount. 
D)  can either increase or decrease GDP, depending on whether the exports are durable or nondurable.

Question 8

Intermediate goods are excluded from GDP because

Accepted Answer

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

Question 9

In the national income accounts, the purchase of a new house counts as

Accepted Answer

A)  consumption expenditure. 
B)  investment. 
C)  a transfer. 
D)  an addition to inventory. 
A)  consumption expenditure. 
B)  investment. 
C)  a transfer. 
D)  an addition to inventory.

Question 10

Recessions are commonly defined to occur

Accepted Answer

A)  whenever unemployment increases. 
B)  when growth in real GDP decreases for two consecutive quarters. 
C)  when growth in real GDP is negative for two consecutive quarters. 
D)  when the unemployment rate exceeds 6 percent. 
A)  whenever unemployment increases. 
B)  when growth in real GDP decreases for two consecutive quarters. 
C)  when growth in real GDP is negative for two consecutive quarters. 
D)  when the unemployment rate exceeds 6 percent.

Question 11

A recession is commonly defined as a period with

Accepted Answer

A)  negative growth rate in real GDP that lasts at least one quarter. 
B)  positive growth rate in real GDP that lasts at least one quarter. 
C)  positive growth rate in real GDP that lasts at least two quarters. 
D)  negative growth rate in real GDP that lasts at least two quarters. 
A)  negative growth rate in real GDP that lasts at least one quarter. 
B)  positive growth rate in real GDP that lasts at least one quarter. 
C)  positive growth rate in real GDP that lasts at least two quarters. 
D)  negative growth rate in real GDP that lasts at least two quarters.

Question 12

Which of the following is NOT included in real GDP?

Accepted Answer

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

Question 13

Looking at the components of the income approach we see that

Accepted Answer

A)  compensation of employees is the largest category. 
B)  consumption is the largest category. 
C)  profits are the largest category. 
D)  rental income is the largest category. 
A)  compensation of employees is the largest category. 
B)  consumption is the largest category. 
C)  profits are the largest category. 
D)  rental income is the largest category.

Question 14

An expansion ends when the economy

Accepted Answer

A)  hits a trough and then enters a recession. 
B)  hits a peak and then enters a recession. 
C)  begins to grow following a peak. 
D)  has grown for two quarters in a row. 
A)  hits a trough and then enters a recession. 
B)  hits a peak and then enters a recession. 
C)  begins to grow following a peak. 
D)  has grown for two quarters in a row.

Question 15

You believe that the total amount of goods produced in the United States has generally increased over the years. In a time-series graph illustrating the total amount produced, you expect to find

Accepted Answer

A)  an upward trend. 
B)  no relationship between time and the amount of goods produced. 
C)  an inverse relationship between time and the amount of goods produced. 
D)  a linear relationship. 
A)  an upward trend. 
B)  no relationship between time and the amount of goods produced. 
C)  an inverse relationship between time and the amount of goods produced. 
D)  a linear relationship.

Question 16

Of the following, which is CORRECT?

Accepted Answer

A)  Nominal GDP does not change when the production of goods and services increases. 
B)  Nominal GDP is not affected by changes in prices of goods and services. 
C)  Nominal GDP increases when the prices of goods and services increase. 
D)  Real GDP changes only when the prices of goods and services really change. 
A)  Nominal GDP does not change when the production of goods and services increases. 
B)  Nominal GDP is not affected by changes in prices of goods and services. 
C)  Nominal GDP increases when the prices of goods and services increase. 
D)  Real GDP changes only when the prices of goods and services really change.

Question 17

Gross investment equals net investment plus

Accepted Answer

A)  capital. 
B)  capital gains. 
C)  depreciation. 
D)  dividends paid to the owners of the company. 
A)  capital. 
B)  capital gains. 
C)  depreciation. 
D)  dividends paid to the owners of the company.

Question 18

The chain-weighted output index method of measuring real GDP is based on

Accepted Answer

A)  using current prices rather than base year prices. 
B)  averaging the market value of the expenditures over a two year period and then comparing with a base period. 
C)  using the prices of two adjacent years to calculate the growth rate of real GDP. 
D)  averaging the nominal and real measures of GDP to come up with a more accurate figure. 
A)  using current prices rather than base year prices. 
B)  averaging the market value of the expenditures over a two year period and then comparing with a base period. 
C)  using the prices of two adjacent years to calculate the growth rate of real GDP. 
D)  averaging the nominal and real measures of GDP to come up with a more accurate figure.

Question 19

Which of the following is TRUE regarding a trend?
I. A cross section graph shows trends.
II. A time-series graph shows trends.
III. A scatter plot shows trends over time.

Accepted Answer

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

Question 20

A business cycle is

Accepted Answer

A)  the pattern of short-run upward and downward movements in total output. 
B)  the increase in consumer spending that accompanies an increase in disposable income. 
C)  the cyclical change in the nation's balance of trade. 
D)  the cyclical movement in the interest rates. 
A)  the pattern of short-run upward and downward movements in total output. 
B)  the increase in consumer spending that accompanies an increase in disposable income. 
C)  the cyclical change in the nation's balance of trade. 
D)  the cyclical movement in the interest rates.

The largest component of income is proprietors' income.

-The figure above shows a time-series graph. The horizontal axis measures and the vertical axis measures .

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.

Investment, as included in GDP, consists of what?

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP and U.S. GDP .

On a time-series graph, time is typically shown

By itself, an increase in exports

Intermediate goods are excluded from GDP because

In the national income accounts, the purchase of a new house counts as

Recessions are commonly defined to occur

A recession is commonly defined as a period with

Which of the following is NOT included in real GDP?

Looking at the components of the income approach we see that

An expansion ends when the economy

You believe that the total amount of goods produced in the United States has generally increased over the years. In a time-series graph illustrating the total amount produced, you expect to find

Of the following, which is CORRECT?

Gross investment equals net investment plus

The chain-weighted output index method of measuring real GDP is based on

Which of the following is TRUE regarding a trend? I. A cross section graph shows trends. II. A time-series graph shows trends. III. A scatter plot shows trends over time.

A business cycle is

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 4: Measuring Gdp and Economic Growth

The largest component of income is proprietors' income.

-The figure above shows a time-series graph. The horizontal axis measures ________ and the vertical axis measures ________.

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.

Investment, as included in GDP, consists of what?

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

On a time-series graph, time is typically shown

By itself, an increase in exports

Intermediate goods are excluded from GDP because

In the national income accounts, the purchase of a new house counts as

Recessions are commonly defined to occur

A recession is commonly defined as a period with

Which of the following is NOT included in real GDP?

Looking at the components of the income approach we see that

An expansion ends when the economy

You believe that the total amount of goods produced in the United States has generally increased over the years. In a time-series graph illustrating the total amount produced, you expect to find

Of the following, which is CORRECT?

Gross investment equals net investment plus

The chain-weighted output index method of measuring real GDP is based on

Which of the following is TRUE regarding a trend? I. A cross section graph shows trends. II. A time-series graph shows trends. III. A scatter plot shows trends over time.

A business cycle is

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

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-The figure above shows a time-series graph. The horizontal axis measures and the vertical axis measures .

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP and U.S. GDP .