Question 1

GDP does count:

Accepted Answer

A) state and local government purchases. 
B) spending for new homes. 
C) changes in inventories. 
D) none of the above. 
A) state and local government purchases. 
B) spending for new homes. 
C) changes in inventories. 
D) none of the above. D

Question 2

Discuss how economists calculate NI, PI and DI.

Accepted Answer

GDP - depreciation = NI - profits - FICA + transfer payments + net interest + dividends = PI - personal income taxes = DI.

Question 3

More than 70 percent of national income can be attributed to:

Accepted Answer

A) compensation of employees. 
B) rental income. 
C) corporate profit. 
D) net interest. 
E) proprietors' income. 
A) compensation of employees. 
B) rental income. 
C) corporate profit. 
D) net interest. 
E) proprietors' income. A

Question 4

Exhibit 5-9 GDP data (billions of dollars)
  In Exhibit 5-10, and using the expenditures approach, compute personal consumption expenditures. Which of the following is correct?

Accepted Answer

A) $6,750 billion. 
B) $6,600 billion. 
C) $6,550 billion. 
D) $6,100 billion. 
E) $5,000 billion. 
A) $6,750 billion. 
B) $6,600 billion. 
C) $6,550 billion. 
D) $6,100 billion. 
E) $5,000 billion.

Question 5

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Accepted Answer

A) True 
 B)False

Question 6

Nominal gross domestic product is based on the existing prices at which final goods are actually sold.

Accepted Answer

A) True 
 B)False

Question 7

Net exports:

Accepted Answer

A) will increase if exports of goods decline. 
B) will increase if imports of goods rise. 
C) in our GDP accounts permit estimation of foreign ownership of American businesses. 
D) include budgetary outlays of the federal government. 
E) is the net effect of the foreign trade sector on GDP. 
A) will increase if exports of goods decline. 
B) will increase if imports of goods rise. 
C) in our GDP accounts permit estimation of foreign ownership of American businesses. 
D) include budgetary outlays of the federal government. 
E) is the net effect of the foreign trade sector on GDP.

Question 8

Using the expenditure approach, GDP equals:

Accepted Answer

A) C + I + G + (X - M). 
B) C + I + G + (X + M). 
C) C + I - G + (X - M). 
D) C + I + G - (X - M). 
A) C + I + G + (X - M). 
B) C + I + G + (X + M). 
C) C + I - G + (X - M). 
D) C + I + G - (X - M).

Question 9

Personal consumption expenditures is the smallest component of total spending.

Accepted Answer

A) True 
 B)False

Question 10

Personal consumption expenditures include:

Accepted Answer

A) all commodities that business firms buy. 
B) the purchase prices paid for stocks and bonds by individual households. 
C) the construction of residential housing. 
D) all goods and services bought by households. 
E) the corrected value of housewives' services. 
A) all commodities that business firms buy. 
B) the purchase prices paid for stocks and bonds by individual households. 
C) the construction of residential housing. 
D) all goods and services bought by households. 
E) the corrected value of housewives' services.

Question 11

Payments to households not in exchange for goods and services currently produced are:

Accepted Answer

A) transfer payments. 
B) government purchases. 
C) consumption expenditures. 
D) investment expenditures. 
A) transfer payments. 
B) government purchases. 
C) consumption expenditures. 
D) investment expenditures.

Question 12

Exhibit 5-9 GDP data (billions of dollars)
  In Exhibit 5-9, personal income (PI)equals:

Accepted Answer

A) $3,472 billion. 
B) $3,691 billion. 
C) $4,291 billion. 
D) $3,384 billion. 
E) $3,175 billion. 
A) $3,472 billion. 
B) $3,691 billion. 
C) $4,291 billion. 
D) $3,384 billion. 
E) $3,175 billion.

Question 13

Durable and nondurable goods and services lumped together in the expenditure approach to measuring GDP are called:

Accepted Answer

A) Personal consumption. 
B) Gross private domestic investment. 
C) Government spending. 
D) Inventory. 
E) Employee compensation. 
A) Personal consumption. 
B) Gross private domestic investment. 
C) Government spending. 
D) Inventory. 
E) Employee compensation.

Question 14

The circular flow model represents the establishment of market value for:

Accepted Answer

A) goods and services. 
B) wages and salaries. 
C) profits and rents. 
D) all of these. 
A) goods and services. 
B) wages and salaries. 
C) profits and rents. 
D) all of these.

Question 15

The most broadly based price index is the:

Accepted Answer

A) real GDP price index. 
B) consumer price index. 
C) producer price index. 
D) GDP chain price index. 
A) real GDP price index. 
B) consumer price index. 
C) producer price index. 
D) GDP chain price index.

Question 16

GDP does not count:

Accepted Answer

A) the estimated value of homemaker production. 
B) state and local government purchases. 
C) spending for new homes. 
D) changes in inventories. 
A) the estimated value of homemaker production. 
B) state and local government purchases. 
C) spending for new homes. 
D) changes in inventories.

Question 17

The GDP chain price index is designed to adjust nominal GDP for changes in:

Accepted Answer

A) the level of transfer payments. 
B) the quality of goods over time. 
C) the costs of economic bads such as pollution and crime. 
D) the general level of prices over time. 
A) the level of transfer payments. 
B) the quality of goods over time. 
C) the costs of economic bads such as pollution and crime. 
D) the general level of prices over time.

Question 18

The income approach to measuring GDP includes:

Accepted Answer

A) compensation for employees, net interest, rent, net profits, and indirect business taxes and depreciation. 
B) compensation for employees, net interest, rent, corporate profit, and transfer payments. 
C) compensation for employees, net interest, rent, and indirect business taxes. 
D) compensation for employees, net interest, rent, corporate profits, and capital depreciation. 
E) compensation for employees, rent, corporate profits, proprietors' income, and transfer payments. 
A) compensation for employees, net interest, rent, net profits, and indirect business taxes and depreciation. 
B) compensation for employees, net interest, rent, corporate profit, and transfer payments. 
C) compensation for employees, net interest, rent, and indirect business taxes. 
D) compensation for employees, net interest, rent, corporate profits, and capital depreciation. 
E) compensation for employees, rent, corporate profits, proprietors' income, and transfer payments.

Question 19

Gross private domestic investment or simply business investment spending (I):

Accepted Answer

A) excludes all investment in the United States by foreign firms. 
B) includes all capital in the United States. 
C) includes net additions to the capital stock plus all new corporate stocks and bonds. 
D) includes business expenditures on new factories, tools, and machinery. 
A) excludes all investment in the United States by foreign firms. 
B) includes all capital in the United States. 
C) includes net additions to the capital stock plus all new corporate stocks and bonds. 
D) includes business expenditures on new factories, tools, and machinery.

Question 20

Which one of the following statements is true ?

Accepted Answer

A) Resources flow from the government to households. 
B) Resources flow from firms to households. 
C) Taxes flow from firms to the government. 
D) Resource payments flow from firms to households 
E) Imports flow from firms to foreign economies. 
A) Resources flow from the government to households. 
B) Resources flow from firms to households. 
C) Taxes flow from firms to the government. 
D) Resource payments flow from firms to households 
E) Imports flow from firms to foreign economies.

Exam 5: Gross Domestic Product

GDP does count:

Discuss how economists calculate NI, PI and DI.

More than 70 percent of national income can be attributed to:

Exhibit 5-9 GDP data (billions of dollars) In Exhibit 5-10, and using the expenditures approach, compute personal consumption expenditures. Which of the following is correct?

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Nominal gross domestic product is based on the existing prices at which final goods are actually sold.

Net exports:

Using the expenditure approach, GDP equals:

Personal consumption expenditures is the smallest component of total spending.

Personal consumption expenditures include:

Payments to households not in exchange for goods and services currently produced are:

Exhibit 5-9 GDP data (billions of dollars) In Exhibit 5-9, personal income (PI)equals:

Durable and nondurable goods and services lumped together in the expenditure approach to measuring GDP are called:

The circular flow model represents the establishment of market value for:

The most broadly based price index is the:

GDP does not count:

The GDP chain price index is designed to adjust nominal GDP for changes in:

The income approach to measuring GDP includes:

Gross private domestic investment or simply business investment spending (I):

Which one of the following statements is true ?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters