Question 1

The market basket of goods and services used to calculate the consumer price index [CPI] by the Department of Labor in the U.S. changes only every two years.

Accepted Answer

A) True 
 B)False

Question 2

Productive activity in the underground economy:

Accepted Answer

A)  results in an overstatement of actual income and production in the national accounting system. 
B)  consists of unrecorded cash transactions. 
C)  is estimated and included in the national income accounting system. 
D)  poses no problem for the measurement of gross domestic product. 
E)  does not affect GDP but is included in the value-added computations. 
A)  results in an overstatement of actual income and production in the national accounting system. 
B)  consists of unrecorded cash transactions. 
C)  is estimated and included in the national income accounting system. 
D)  poses no problem for the measurement of gross domestic product. 
E)  does not affect GDP but is included in the value-added computations.

Question 3

Which of the following is not included in national income?

Accepted Answer

A)  Corporate profits 
B)  Interest earnings 
C)  Capital consumption allowance 
D)  Rental income 
E)  Stockbroker commissions 
A)  Corporate profits 
B)  Interest earnings 
C)  Capital consumption allowance 
D)  Rental income 
E)  Stockbroker commissions

Question 4

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation) for the years 1995 and 2003.
Table 5.6
 $\begin{array}{c}
\quad\quad\quad\quad\text { Production Data }\
\quad\quad\quad\quad\quad\text { Prices per Unit } \quad\quad \text { Quantity }\
\begin{array}{|c|l|l|c|c|}
\hline \text { Production } & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} \
\hline \text { Computers } & \$ 2,000 & \$ 1,600 & 100 & 100 \
\text { Calculators } & \$ 60 & \$ 70 & 900 & 900 \
\hline
\end{array}\end{array}$
-Refer to Table 5.6. What is the nominal GDP for 2003?

Accepted Answer

A)  $223,000 
B)  $254,000 
C)  $376,000 
D)  $448,000 
E)  $520,000 
A)  $223,000 
B)  $254,000 
C)  $376,000 
D)  $448,000 
E)  $520,000

Question 5

Which of the following must be included in the calculation of GDP?

Accepted Answer

A)  The sale of a used car to an auto dealer 
B)  Bartering lawn care services for car washes 
C)  A father staying at home to attend to his child 
D)  The sale of an illegal cable box 
E)  Payment made for a SAT preparation class 
A)  The sale of a used car to an auto dealer 
B)  Bartering lawn care services for car washes 
C)  A father staying at home to attend to his child 
D)  The sale of an illegal cable box 
E)  Payment made for a SAT preparation class

Question 6

The price index for the current year is 180. This means that, on average, prices in the current year are:

Accepted Answer

A)  80 percent of prices in the base year. 
B)  $1.80 higher than prices in the base year. 
C)  180 percent higher than prices in the base year. 
D)  $0.80 higher than prices in the base year. 
E)  80 percent higher than prices in the base year. 
A)  80 percent of prices in the base year. 
B)  $1.80 higher than prices in the base year. 
C)  180 percent higher than prices in the base year. 
D)  $0.80 higher than prices in the base year. 
E)  80 percent higher than prices in the base year.

Question 7

The output produced by domestically owned firms in foreign countries is included in the U.S. GDP but not in the U.S. GNP.

Accepted Answer

A) True 
 B)False

Question 8

The value added approach involves adding up the value of the final product and the value of intermediate goods used in the production process.

Accepted Answer

A) True 
 B)False

Question 9

Identify the correct statement.

Accepted Answer

A)  National income accounting measures only the flow of output between the different sectors of the economy. 
B)  National income accounting summarizes the level of production in an economy over a decade. 
C)  National income accounting explains diagrammatically the flows of goods and services and of money expenditures (income). 
D)  National income accounting summarizes and categorizes the productive activity in an economy over a year. 
E)  National income accounting measures the total money supply in the economy. 
A)  National income accounting measures only the flow of output between the different sectors of the economy. 
B)  National income accounting summarizes the level of production in an economy over a decade. 
C)  National income accounting explains diagrammatically the flows of goods and services and of money expenditures (income). 
D)  National income accounting summarizes and categorizes the productive activity in an economy over a year. 
E)  National income accounting measures the total money supply in the economy.

Question 10

In terms of price indexes, what is a COLA?

Accepted Answer

A)  A measure of the quality of living 
B)  A consumer price adjustment 
C)  An increase in wages designed to match consumer price increases 
D)  An estimate of gross domestic product 
E)  A measure of producer surplus 
A)  A measure of the quality of living 
B)  A consumer price adjustment 
C)  An increase in wages designed to match consumer price increases 
D)  An estimate of gross domestic product 
E)  A measure of producer surplus

Question 11

Which of the following components of GDP accounts for the bulk of national expenditures in the United States?

Accepted Answer

A)  Government purchases 
B)  Imports 
C)  Consumption 
D)  Investment 
E)  Exports 
A)  Government purchases 
B)  Imports 
C)  Consumption 
D)  Investment 
E)  Exports

Question 12

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

Accepted Answer

A) True 
 B)False

Question 13

The value of a price index in the base year will always be zero.

Accepted Answer

A) True 
 B)False

Question 14

The table given below reports the sales value at each stage of production of the soft drink Pepsi.
Table 5.3
 $\begin{array}{|l|c|}
\hline  {\text { Production Stage }} & \text { Sales Value } \
\hline \text { Sugar cane } & \$ 0.05 \
\hline \text { Processed sugar } & \$ 0.10 \
\hline \text { Wholesale Pepsi } & \$ 0.40 \
\hline \text { Pepsi in a vending machine } & \$ 0.60 \
\hline
\end{array}$
-Refer to Table 5.3. The value added by the wholesaler is equal to:

Accepted Answer

A)  $0.05. 
B)  $0.40. 
C)  $0.20. 
D)  $1.15. 
E)  $0.06. 
A)  $0.05. 
B)  $0.40. 
C)  $0.20. 
D)  $1.15. 
E)  $0.06.

Question 15

The term capital consumption allowance is defined as:

Accepted Answer

A)  the amount of net interest in the economy each year. 
B)  the estimated value of depreciation and obsolescence in investment goods. 
C)  the difference between exports and imports. 
D)  the disposition of disposable personal income. 
E)  the difference between earnings not received and receipts not earned. 
A)  the amount of net interest in the economy each year. 
B)  the estimated value of depreciation and obsolescence in investment goods. 
C)  the difference between exports and imports. 
D)  the disposition of disposable personal income. 
E)  the difference between earnings not received and receipts not earned.

Question 16

If nominal GDP of a country increased and real GDP remained unchanged in a particular year, which of the following is most likely to have taken place?

Accepted Answer

A)  Output increased and the price level increased. 
B)  Output increased and the price level decreased. 
C)  Output remained contant and the price level increased. 
D)  Output decreased and the price level decreased. 
E)  Output increased and the price level remained constant. 
A)  Output increased and the price level increased. 
B)  Output increased and the price level decreased. 
C)  Output remained contant and the price level increased. 
D)  Output decreased and the price level decreased. 
E)  Output increased and the price level remained constant.

Question 17

Other things remaining unchanged, a decline in imports is associated with an increase in gross domestic product.

Accepted Answer

A) True 
 B)False

Question 18

National income accounting can best be characterized as:

Accepted Answer

A)  a set of rules used to summarize economic activity over a given period of time. 
B)  a method for comparing different political systems. 
C)  a microeconomic model of the economy used by the Federal Reserve bank. 
D)  a statistical measure of the income received by consumers as opposed to businesses. 
E)  a standardized economic report authored by politicians. 
A)  a set of rules used to summarize economic activity over a given period of time. 
B)  a method for comparing different political systems. 
C)  a microeconomic model of the economy used by the Federal Reserve bank. 
D)  a statistical measure of the income received by consumers as opposed to businesses. 
E)  a standardized economic report authored by politicians.

Question 19

Consider a small country producing only two commodities (coffee beans and corn). Following are the price and output of these two commodities in the year 2008:
 $\begin{array}{|l|l|}
\hline \text { Price } & \text { Quantity } \
\hline \$ 12 & 500 \mathrm{lbs} \text {. of coffee beans } \
\hline \$ 6 & 600 \text { bushels of corn } \
\hline
\end{array}$ 
Assuming the price level in the economy remains same while the output of both these products increase by 10 percent in 2009, calculate the value of real GDP in this country for the year 2009?

Accepted Answer

A)  $9,600 
B)  $10,560 
C)  $1,056 
D)  $6,900 
E)  $10, 960 
A)  $9,600 
B)  $10,560 
C)  $1,056 
D)  $6,900 
E)  $10, 960

Question 20

Scenario 5.1
Suppose that personal income is $250 billion. Furthermore, assume that retained corporate earnings are $2 billion, social security taxes are $15 billion, social security benefit checks equal $16 billion, the capital consumption allowance is $32 billion, and corporate taxes amount to $40 billion.
-Refer to Scenario 5.1. Gross national product of this nation will be:

Accepted Answer

A)  $177 billion. 
B)  $259 billion. 
C)  $291 billion. 
D)  $343 billion. 
E)  $323 billion. 
A)  $177 billion. 
B)  $259 billion. 
C)  $291 billion. 
D)  $343 billion. 
E)  $323 billion.

The market basket of goods and services used to calculate the consumer price index [CPI] by the Department of Labor in the U.S. changes only every two years.

Productive activity in the underground economy:

Which of the following is not included in national income?

Which of the following must be included in the calculation of GDP?

The price index for the current year is 180. This means that, on average, prices in the current year are:

The output produced by domestically owned firms in foreign countries is included in the U.S. GDP but not in the U.S. GNP.

The value added approach involves adding up the value of the final product and the value of intermediate goods used in the production process.

Identify the correct statement.

In terms of price indexes, what is a COLA?

Which of the following components of GDP accounts for the bulk of national expenditures in the United States?

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

The value of a price index in the base year will always be zero.

The term capital consumption allowance is defined as:

If nominal GDP of a country increased and real GDP remained unchanged in a particular year, which of the following is most likely to have taken place?

Other things remaining unchanged, a decline in imports is associated with an increase in gross domestic product.

National income accounting can best be characterized as:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 5: National Income Accounting

The market basket of goods and services used to calculate the consumer price index [CPI] by the Department of Labor in the U.S. changes only every two years.

Productive activity in the underground economy:

Which of the following is not included in national income?

Which of the following must be included in the calculation of GDP?

The price index for the current year is 180. This means that, on average, prices in the current year are:

The output produced by domestically owned firms in foreign countries is included in the U.S. GDP but not in the U.S. GNP.

The value added approach involves adding up the value of the final product and the value of intermediate goods used in the production process.

Identify the correct statement.

In terms of price indexes, what is a COLA?

Which of the following components of GDP accounts for the bulk of national expenditures in the United States?

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

The value of a price index in the base year will always be zero.

The term capital consumption allowance is defined as:

If nominal GDP of a country increased and real GDP remained unchanged in a particular year, which of the following is most likely to have taken place?

Other things remaining unchanged, a decline in imports is associated with an increase in gross domestic product.

National income accounting can best be characterized as:

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters