Question 1

National income is derived from gross domestic product by subtracting:

Accepted Answer

A) transfer payments. 
B) profits. 
C) an allowance for depreciation of capital equipment. 
D) net exports. 
A) transfer payments. 
B) profits. 
C) an allowance for depreciation of capital equipment. 
D) net exports.

Question 2

Exhibit 5-2 Gross domestic product data   As shown in Exhibit 5-2, total expenditures by households for domestically produced goods is:

Accepted Answer

A) $500 billion. 
B) $50 billion. 
C) $300 billion. 
D) $15 billion. 
A) $500 billion. 
B) $50 billion. 
C) $300 billion. 
D) $15 billion.

Question 3

Because GDP does not account for improvements in the quality of goods, the GDP calculation:

Accepted Answer

A) tends to overstate the true value of output in the United States. 
B) tends to understate the true value of output in the United States. 
C) provides an accurate value of output in the United States. 
D) provides the best measure of output in the United States. 
E) measures the value correctly because price changes always capture the value of quality changes. 
A) tends to overstate the true value of output in the United States. 
B) tends to understate the true value of output in the United States. 
C) provides an accurate value of output in the United States. 
D) provides the best measure of output in the United States. 
E) measures the value correctly because price changes always capture the value of quality changes.

Question 4

Suppose in 2000, GDP was $7,242 billion and the GDP chain price index is 117.5. Real GDP in constant 1996 dollars is:

Accepted Answer

A) $5,488 billion. 
B) $6,163 billion. 
C) $6,740 billion. 
D) $7,789 billion. 
A) $5,488 billion. 
B) $6,163 billion. 
C) $6,740 billion. 
D) $7,789 billion.

Question 5

When depreciation is subtracted from:

Accepted Answer

A) personal income, we get national income. 
B) gross domestic product, we get national income. 
C) gross domestic product, we get personal income. 
D) disposable personal income, we get gross domestic product. 
A) personal income, we get national income. 
B) gross domestic product, we get national income. 
C) gross domestic product, we get personal income. 
D) disposable personal income, we get gross domestic product.

Question 6

Consumption spending includes:

Accepted Answer

A) durable goods, nondurable goods, and housing. 
B) durable goods, nondurable goods, and imports. 
C) durable goods, services, and housing. 
D) durable goods, nondurable goods, and services. 
E) nondurable goods, services, and housing. 
A) durable goods, nondurable goods, and housing. 
B) durable goods, nondurable goods, and imports. 
C) durable goods, services, and housing. 
D) durable goods, nondurable goods, and services. 
E) nondurable goods, services, and housing.

Question 7

Net exports equal imports minus exports.

Accepted Answer

A) True 
 B)False

Question 8

The lower portion of the circular flow model contains factor markets in which households provide:

Accepted Answer

A) labor, money, and machines. 
B) savings, spending, and investment. 
C) natural resources, labor, and capital. 
D) output of all final goods and services produced. 
A) labor, money, and machines. 
B) savings, spending, and investment. 
C) natural resources, labor, and capital. 
D) output of all final goods and services produced.

Question 9

Gross private domestic investment includes business:

Accepted Answer

A) purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B) purchases of capital goods, all new construction, and inventory investment. 
C) purchases of capital goods, all new commercial construction, and inventory investment. 
D) purchases of capital goods, all new residential construction, and inventory investment. 
E) purchases of all types of durable goods, all new construction, and inventory investment. 
A) purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B) purchases of capital goods, all new construction, and inventory investment. 
C) purchases of capital goods, all new commercial construction, and inventory investment. 
D) purchases of capital goods, all new residential construction, and inventory investment. 
E) purchases of all types of durable goods, all new construction, and inventory investment.

Question 10

Exhibit 5-9 GDP data (billions of dollars)
  In Exhibit 5-10, compute personal income (PI). Which of the following is correct?

Accepted Answer

A) $7,110 billion. 
B) $7,410 billion. 
C) $6,740 billion. 
D) $7,760 billion. 
E) $6,780 billion. 
A) $7,110 billion. 
B) $7,410 billion. 
C) $6,740 billion. 
D) $7,760 billion. 
E) $6,780 billion.

Question 11

Which of the following would be counted as a final good for inclusion in GDP?

Accepted Answer

A) A piece of glass bought this year by a consumer to fix a broken window. 
B) A sheet of glass produced this year by Ford for windows in a new car. 
C) A tire produced this year and sold to a car maker for a new car sold this year. 
D) None of these would be counted in GDP. 
A) A piece of glass bought this year by a consumer to fix a broken window. 
B) A sheet of glass produced this year by Ford for windows in a new car. 
C) A tire produced this year and sold to a car maker for a new car sold this year. 
D) None of these would be counted in GDP.

Question 12

Economic values that are measured in units per period of time are referred to as:

Accepted Answer

A) stocks. 
B) flows. 
C) unit values. 
D) dollars. 
A) stocks. 
B) flows. 
C) unit values. 
D) dollars.

Question 13

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

Accepted Answer

A) Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms. 
B) The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C) Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms. 
D) The firms in the factor markets pay to households in the form of wages, interest, rent and profit ¾ for resources demanded. 
E) The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand. 
A) Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms. 
B) The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C) Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms. 
D) The firms in the factor markets pay to households in the form of wages, interest, rent and profit ¾ for resources demanded. 
E) The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand.

Question 14

GDP is a measure of:

Accepted Answer

A) domestic production. 
B) changes in the general level of prices. 
C) material well-being. 
D) social welfare. 
A) domestic production. 
B) changes in the general level of prices. 
C) material well-being. 
D) social welfare.

Question 15

GDP provides substantial information about an economy's income distribution.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 5-7 GDP data (billions of dollars)   In Exhibit 5-7, and using the expenditures approach, gross domestic product (GDP)is:

Accepted Answer

A) $6,807 billion. 
B) $7,082 billion. 
C) $7,634 billion. 
D) $7,637 billion. 
E) $7,730 billion. 
A) $6,807 billion. 
B) $7,082 billion. 
C) $7,634 billion. 
D) $7,637 billion. 
E) $7,730 billion.

Question 17

Which of the following would not be included in the gross private domestic investment (I)category of GDP?

Accepted Answer

A) A bakery's purchase of a new oven. 
B) A retailer's additions to its inventories. 
C) Newly built residential construction. 
D) A bank's purchase of a U.S. Treasury bond. 
A) A bakery's purchase of a new oven. 
B) A retailer's additions to its inventories. 
C) Newly built residential construction. 
D) A bank's purchase of a U.S. Treasury bond.

Question 18

Capital goods, like factories and machinery, are classified as intermediate goods.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 5-11 GDP data (billions of dollars)   In Exhibit 5-11, national income (NI)equals:

Accepted Answer

A) $9,910 billion. 
B) $6,210 billion. 
C) $9,210 billion. 
D) $7,410 billion. 
E) $6,560 billion. 
A) $9,910 billion. 
B) $6,210 billion. 
C) $9,210 billion. 
D) $7,410 billion. 
E) $6,560 billion.

Question 20

Exhibit 5-7 GDP data (billions of dollars)   In Exhibit 5-7, national income (NI)is:

Accepted Answer

A) $6,254 billion. 
B) $6,495 billion. 
C) $6,805 billion. 
D) $7,082 billion. 
E) $7,637.7 billion. 
A) $6,254 billion. 
B) $6,495 billion. 
C) $6,805 billion. 
D) $7,082 billion. 
E) $7,637.7 billion.

Exam 5: Gross Domestic Product

National income is derived from gross domestic product by subtracting:

Exhibit 5-2 Gross domestic product data As shown in Exhibit 5-2, total expenditures by households for domestically produced goods is:

Because GDP does not account for improvements in the quality of goods, the GDP calculation:

Suppose in 2000, GDP was $7,242 billion and the GDP chain price index is 117.5. Real GDP in constant 1996 dollars is:

When depreciation is subtracted from:

Consumption spending includes:

Net exports equal imports minus exports.

The lower portion of the circular flow model contains factor markets in which households provide:

Gross private domestic investment includes business:

Exhibit 5-9 GDP data (billions of dollars) In Exhibit 5-10, compute personal income (PI). Which of the following is correct?

Which of the following would be counted as a final good for inclusion in GDP?

Economic values that are measured in units per period of time are referred to as:

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

GDP is a measure of:

GDP provides substantial information about an economy's income distribution.

Exhibit 5-7 GDP data (billions of dollars) In Exhibit 5-7, and using the expenditures approach, gross domestic product (GDP)is:

Which of the following would not be included in the gross private domestic investment (I)category of GDP?

Capital goods, like factories and machinery, are classified as intermediate goods.

Exhibit 5-11 GDP data (billions of dollars) In Exhibit 5-11, national income (NI)equals:

Exhibit 5-7 GDP data (billions of dollars) In Exhibit 5-7, national income (NI)is:

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

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