Question 1

Which of the following is a shortcoming of GDP?

Accepted Answer

A) GDP measures nonmarket transactions. 
B) GDP includes an estimate of illegal transactions. 
C) GDP includes an estimate of the value of household services. 
D) None of these are true. 
A) GDP measures nonmarket transactions. 
B) GDP includes an estimate of illegal transactions. 
C) GDP includes an estimate of the value of household services. 
D) None of these are true.

Question 2

Real GDP, as opposed to money (nominal)GDP, has been adjusted for changes in the general level of prices.

Accepted Answer

A) True 
 B)False

Question 3

Compensation of employees:

Accepted Answer

A) excludes the monetary value of fringe benefits. 
B) excludes paid vacations. 
C) is the largest component of GDP. 
D) excludes contributions to employees' Social Security. 
E) includes rental income. 
A) excludes the monetary value of fringe benefits. 
B) excludes paid vacations. 
C) is the largest component of GDP. 
D) excludes contributions to employees' Social Security. 
E) includes rental income.

Question 4

To calculate GDP using the income approach, add:

Accepted Answer

A) indirect business taxes and Social Security taxes. 
B) capital depreciation and Social Security taxes. 
C) indirect business taxes and personal taxes. 
D) indirect business taxes and depreciation. 
E) compensation of employees, rents, profits, net interest, indirect business taxes, and depreciation. 
A) indirect business taxes and Social Security taxes. 
B) capital depreciation and Social Security taxes. 
C) indirect business taxes and personal taxes. 
D) indirect business taxes and depreciation. 
E) compensation of employees, rents, profits, net interest, indirect business taxes, and depreciation.

Question 5

National income (NI)is the total income earned by resource owners, including wages, rents, interest, and profits.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following transactions would be included in GDP?

Accepted Answer

A) Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B) Mr. Doe donates $500 to his town's junior college scholarship fund. 
C) Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D) Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock. 
A) Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B) Mr. Doe donates $500 to his town's junior college scholarship fund. 
C) Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D) Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock.

Question 7

In any year, nominal GDP divided by the GDP chain price index equals real GDP.

Accepted Answer

A) True 
 B)False

Question 8

Using the income approach, general sales taxes, excise taxes, customs duties, business property taxes, and license fees are termed:

Accepted Answer

A) indirect business taxes. 
B) regressive taxes. 
C) disproportionate taxes. 
D) capital depreciation. 
E) progressive taxes. 
A) indirect business taxes. 
B) regressive taxes. 
C) disproportionate taxes. 
D) capital depreciation. 
E) progressive taxes.

Question 9

Exhibit 5-6 Use the table below to answer the following question(s).
  Refer to Exhibit 5-6. Between 2003 and 2008, the general level of prices increased by approximately:

Accepted Answer

A) 16.7 percent. 
B) 33.3 percent. 
C) 66.7 percent. 
D) 133.3 percent. 
A) 16.7 percent. 
B) 33.3 percent. 
C) 66.7 percent. 
D) 133.3 percent.

Question 10

Gross domestic product (GDP)includes:

Accepted Answer

A) intermediate as well as final goods. 
B) foreign goods as well as domestically produced goods. 
C) used goods sold in the current time period. 
D) only final goods and services. 
A) intermediate as well as final goods. 
B) foreign goods as well as domestically produced goods. 
C) used goods sold in the current time period. 
D) only final goods and services.

Question 11

Activities that are directly included in GDP accounts include:

Accepted Answer

A) the value of housework done by householders. 
B) the selling of illegal drugs. 
C) unreported labor in sweatshops. 
D) buying a ticket to a Dodgers-Expos game on your day off. 
A) the value of housework done by householders. 
B) the selling of illegal drugs. 
C) unreported labor in sweatshops. 
D) buying a ticket to a Dodgers-Expos game on your day off.

Question 12

The expenditure approach to GDP accounting includes:

Accepted Answer

A) wages and salaries. 
B) net exports. 
C) net interest. 
D) corporate profit. 
E) proprietors' income. 
A) wages and salaries. 
B) net exports. 
C) net interest. 
D) corporate profit. 
E) proprietors' income.

Question 13

The effect of the Environment Protection Agency (EPA)ordering a firm to clean-up damages from pollution would have which of the following effects?

Accepted Answer

A) GDP would increase. 
B) GDP would decrease. 
C) GDP remains unchanged. 
A) GDP would increase. 
B) GDP would decrease. 
C) GDP remains unchanged.

Question 14

The expenditure approach measures GDP by adding the spending of households, businesses, government, and foreigners.

Accepted Answer

A) True 
 B)False

Question 15

In the four-sector circular flow model, households will use their incomes to do all but which one of the following?

Accepted Answer

A) Save. 
B) Pay taxes. 
C) Buy domestic goods and services. 
D) Buy imported goods and services. 
E) Invest. 
A) Save. 
B) Pay taxes. 
C) Buy domestic goods and services. 
D) Buy imported goods and services. 
E) Invest.

Question 16

Gross private domestic investment does not include:

Accepted Answer

A) spending for new houses. 
B) spending to build up inventories. 
C) unintentional inventory investment. 
D) spending on employee salaries. 
E) spending for office supplies. 
A) spending for new houses. 
B) spending to build up inventories. 
C) unintentional inventory investment. 
D) spending on employee salaries. 
E) spending for office supplies.

Question 17

Disposable personal income:

Accepted Answer

A) includes personal income taxes. 
B) excludes personal income taxes. 
C) excludes transfer payments. 
D) is income spent for personal items such as homes and cars. 
A) includes personal income taxes. 
B) excludes personal income taxes. 
C) excludes transfer payments. 
D) is income spent for personal items such as homes and cars.

Question 18

Exhibit 5-2 Gross domestic product data
  As shown in Exhibit 5-2, total spending by government is:

Accepted Answer

A) $600 billion. 
B) $100 billion. 
C) $200 billion. 
D) $300 billion. 
E) $800 billion. 
A) $600 billion. 
B) $100 billion. 
C) $200 billion. 
D) $300 billion. 
E) $800 billion.

Question 19

Which one of the following is not a component of GDP, as measured using the expenditure approach?

Accepted Answer

A) Personal consumption. 
B) Exports. 
C) Durable goods. 
D) Government spending. 
E) Interest. 
A) Personal consumption. 
B) Exports. 
C) Durable goods. 
D) Government spending. 
E) Interest.

Question 20

GDP:

Accepted Answer

A) is the dollar value of all the final goods and services produced within the borders of a nation. 
B) includes intermediate and final goods and services. 
C) minus an allowance for depreciation of fixed capital equals GNP. 
D) is a less-than-perfect measure of social well-being because it does not include exports and imports. 
E) all of these. 
A) is the dollar value of all the final goods and services produced within the borders of a nation. 
B) includes intermediate and final goods and services. 
C) minus an allowance for depreciation of fixed capital equals GNP. 
D) is a less-than-perfect measure of social well-being because it does not include exports and imports. 
E) all of these.

Exam 5: Gross Domestic Product

Which of the following is a shortcoming of GDP?

Real GDP, as opposed to money (nominal)GDP, has been adjusted for changes in the general level of prices.

Compensation of employees:

To calculate GDP using the income approach, add:

National income (NI)is the total income earned by resource owners, including wages, rents, interest, and profits.

Which one of the following transactions would be included in GDP?

In any year, nominal GDP divided by the GDP chain price index equals real GDP.

Using the income approach, general sales taxes, excise taxes, customs duties, business property taxes, and license fees are termed:

Exhibit 5-6 Use the table below to answer the following question(s). Refer to Exhibit 5-6. Between 2003 and 2008, the general level of prices increased by approximately:

Gross domestic product (GDP)includes:

Activities that are directly included in GDP accounts include:

The expenditure approach to GDP accounting includes:

The effect of the Environment Protection Agency (EPA)ordering a firm to clean-up damages from pollution would have which of the following effects?

The expenditure approach measures GDP by adding the spending of households, businesses, government, and foreigners.

In the four-sector circular flow model, households will use their incomes to do all but which one of the following?

Gross private domestic investment does not include:

Disposable personal income:

Exhibit 5-2 Gross domestic product data As shown in Exhibit 5-2, total spending by government is:

Which one of the following is not a component of GDP, as measured using the expenditure approach?

GDP:

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