Question 1

Which of the following is a shortcoming of GDP?

Accepted Answer

A) GDP excludes changes in inventories. 
B) GDP includes an estimate of illegal transactions. 
C) GDP excludes nonmarket transactions. 
D) GDP excludes business investment spending. 
A) GDP excludes changes in inventories. 
B) GDP includes an estimate of illegal transactions. 
C) GDP excludes nonmarket transactions. 
D) GDP excludes business investment spending.

Question 2

All changes in nominal GDP are due to price changes.

Accepted Answer

A) True 
 B)False

Question 3

In 1960, U.S. nominal GDP was $527 billion and the GDP chain price index is 23.3. Real GDP in 1996 dollars is:

Accepted Answer

A) $1,228 billion. 
B) $2,262 billion. 
C) $3,000 billion. 
D) $3,262 billion. 
A) $1,228 billion. 
B) $2,262 billion. 
C) $3,000 billion. 
D) $3,262 billion.

Question 4

The circular flow of economic activity is a model of the:

Accepted Answer

A) flow of goods, resources, payments, and expenditures between the sectors of the economy. 
B) influence of government on business behavior. 
C) influence of business on consumers. 
D) role of unions and government in the economy. 
A) flow of goods, resources, payments, and expenditures between the sectors of the economy. 
B) influence of government on business behavior. 
C) influence of business on consumers. 
D) role of unions and government in the economy.

Question 5

New residential housing is counted in GDP as a(n):

Accepted Answer

A) durable consumption good. 
B) household durable good. 
C) investment good. 
D) inventory expansion. 
E) long-term durable good. 
A) durable consumption good. 
B) household durable good. 
C) investment good. 
D) inventory expansion. 
E) long-term durable good.

Question 6

The sum of payments made to resource owners for the use of their resources is:

Accepted Answer

A) gross domestic product. 
B) net domestic product. 
C) national income. 
D) personal income. 
E) disposable personal income. 
A) gross domestic product. 
B) net domestic product. 
C) national income. 
D) personal income. 
E) disposable personal income.

Question 7

Using the income approach, the largest portion of GDP is:

Accepted Answer

A) employee compensation. 
B) net interest. 
C) rent. 
D) profits. 
E) depreciation. 
A) employee compensation. 
B) net interest. 
C) rent. 
D) profits. 
E) depreciation.

Question 8

Because of transactions which take place in the underground economy, the:

Accepted Answer

A) GDP calculation tends to overstate the actual value of goods sold in the economy. 
B) GDP calculation tends to accurately portray the value of goods sold in the economy. 
C) GDP calculation tends to understate the actual value of goods sold in the economy. 
D) value of the GDP calculation will be equal to the value of the national income calculation. 
E) value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach. 
A) GDP calculation tends to overstate the actual value of goods sold in the economy. 
B) GDP calculation tends to accurately portray the value of goods sold in the economy. 
C) GDP calculation tends to understate the actual value of goods sold in the economy. 
D) value of the GDP calculation will be equal to the value of the national income calculation. 
E) value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.

Question 9

Which of the following would count as an investment expenditure in the GDP expenditures approach?

Accepted Answer

A) General Motors hires 10 electrical engineers. 
B) Boeing purchases a new metal stretching machine used to produce airplane wings. 
C) Ms. Quantum buys 100 shares of Microsoft stock. 
D) A large corporation spends $10,000 per month on long-distance phone charges. 
A) General Motors hires 10 electrical engineers. 
B) Boeing purchases a new metal stretching machine used to produce airplane wings. 
C) Ms. Quantum buys 100 shares of Microsoft stock. 
D) A large corporation spends $10,000 per month on long-distance phone charges.

Question 10

Which of the following expenditures would be included in GDP for this year?

Accepted Answer

A) The purchase of a new car. 
B) The purchase of a new tire by General Motors for a new car. 
C) The purchase of a used car. 
D) All of these would be included. 
A) The purchase of a new car. 
B) The purchase of a new tire by General Motors for a new car. 
C) The purchase of a used car. 
D) All of these would be included.

Question 11

Which of the following spending is larger for U.S. GDP?

Accepted Answer

A) State and local government. 
B) Federal government. 
C) Net exports. 
D) Change in business inventories. 
A) State and local government. 
B) Federal government. 
C) Net exports. 
D) Change in business inventories.

Question 12

The government (G)category of gross domestic product (GDP)excludes welfare and other transfer payments.

Accepted Answer

A) True 
 B)False

Question 13

If net exports are a negative number, then:

Accepted Answer

A) we are not buying enough exports. 
B) we are buying too many exports. 
C) GDP will underestimated when measured using the expenditure approach. 
D) we are exporting more than we are importing. 
E) we are exporting less than we are importing. 
A) we are not buying enough exports. 
B) we are buying too many exports. 
C) GDP will underestimated when measured using the expenditure approach. 
D) we are exporting more than we are importing. 
E) we are exporting less than we are importing.

Question 14

Exhibit 5-7 GDP data (billions of dollars)
  In Exhibit 5-7, disposable personal income (DI)is:

Accepted Answer

A) $5,127 billion. 
B) $5,608 billion. 
C) $6,254 billion. 
D) $6,495 billion. 
E) $7,082 billion. 
A) $5,127 billion. 
B) $5,608 billion. 
C) $6,254 billion. 
D) $6,495 billion. 
E) $7,082 billion.

Question 15

Exhibit 5-4 Gross domestic product data
 
As shown in Exhibit 5-4, using the income approach, gross domestic product (GDP)is:

Accepted Answer

A) $9,000 billion. 
B) $6,600 billion. 
C) $7,400 billion. 
D) $8,000 billion. 
A) $9,000 billion. 
B) $6,600 billion. 
C) $7,400 billion. 
D) $8,000 billion.

Question 16

Which of the following items is included in the calculation of GDP?

Accepted Answer

A) Purchase of 100 shares of General Motors stock. 
B) Purchase of a used car. 
C) The value of a homemaker's services. 
D) Sale of Gulf War military surplus. 
E) None of these would be included. 
A) Purchase of 100 shares of General Motors stock. 
B) Purchase of a used car. 
C) The value of a homemaker's services. 
D) Sale of Gulf War military surplus. 
E) None of these would be included.

Question 17

Which of the following best describes gross domestic product (GDP)?

Accepted Answer

A) The market value of all inputs used to produce all final goods and services in a nation during a period of time. 
B) The market value of all final goods and services produced in a nation during a period of time. 
C) The quantity of all goods and services produced in a nation during a period of time. 
D) The average price of all goods and serviced produced in a nation during a period of time. 
A) The market value of all inputs used to produce all final goods and services in a nation during a period of time. 
B) The market value of all final goods and services produced in a nation during a period of time. 
C) The quantity of all goods and services produced in a nation during a period of time. 
D) The average price of all goods and serviced produced in a nation during a period of time.

Question 18

Gross domestic product is equal to the market value of all final goods and services:

Accepted Answer

A) exchanged during a period. 
B) produced domestically during a period. 
C) produced by the citizens of a nation during a period. 
D) produced domestically during a period minus the depreciation of productive assets. 
A) exchanged during a period. 
B) produced domestically during a period. 
C) produced by the citizens of a nation during a period. 
D) produced domestically during a period minus the depreciation of productive assets.

Question 19

If Lacy buys a smoothie at the corner store, which of the following best relates this transaction to the circular flow model?

Accepted Answer

A) Goods flow from firms and money flows from households through the product markets. 
B) Resources (land, labor, or capital)flows from households, and money flows from business in the product markets. 
C) Income flows from the factor markets, and goods flow into the factor markets. 
D) Resources flow into households, and back into the goods and services markets. 
A) Goods flow from firms and money flows from households through the product markets. 
B) Resources (land, labor, or capital)flows from households, and money flows from business in the product markets. 
C) Income flows from the factor markets, and goods flow into the factor markets. 
D) Resources flow into households, and back into the goods and services markets.

Question 20

Which of the following would not be included in the government consumption expenditures and gross investment (G)category of GDP?

Accepted Answer

A) The payments made to Social Security recipients. 
B) The expenditures made to repair a highway. 
C) The spending for professors at state universities. 
D) The purchase of new china for White House functions. 
A) The payments made to Social Security recipients. 
B) The expenditures made to repair a highway. 
C) The spending for professors at state universities. 
D) The purchase of new china for White House functions.

Exam 5: Gross Domestic Product

Which of the following is a shortcoming of GDP?

All changes in nominal GDP are due to price changes.

In 1960, U.S. nominal GDP was $527 billion and the GDP chain price index is 23.3. Real GDP in 1996 dollars is:

The circular flow of economic activity is a model of the:

New residential housing is counted in GDP as a(n):

The sum of payments made to resource owners for the use of their resources is:

Using the income approach, the largest portion of GDP is:

Because of transactions which take place in the underground economy, the:

Which of the following would count as an investment expenditure in the GDP expenditures approach?

Which of the following expenditures would be included in GDP for this year?

Which of the following spending is larger for U.S. GDP?

The government (G)category of gross domestic product (GDP)excludes welfare and other transfer payments.

If net exports are a negative number, then:

Exhibit 5-7 GDP data (billions of dollars) In Exhibit 5-7, disposable personal income (DI)is:

Exhibit 5-4 Gross domestic product data As shown in Exhibit 5-4, using the income approach, gross domestic product (GDP)is:

Which of the following items is included in the calculation of GDP?

Which of the following best describes gross domestic product (GDP)?

Gross domestic product is equal to the market value of all final goods and services:

If Lacy buys a smoothie at the corner store, which of the following best relates this transaction to the circular flow model?

Which of the following would not be included in the government consumption expenditures and gross investment (G)category of 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