Question 1

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

Accepted Answer

A) $3,628 billion. 
B) $3,706 billion. 
C) $4,446 billion. 
D) $3,550 billion. 
E) $5,344 billion. 
A) $3,628 billion. 
B) $3,706 billion. 
C) $4,446 billion. 
D) $3,550 billion. 
E) $5,344 billion.

Question 2

Personal income minus personal taxes is:

Accepted Answer

A) disposable personal income. 
B) net national income. 
C) proprietors' income. 
D) indirect business taxes. 
E) savings income. 
A) disposable personal income. 
B) net national income. 
C) proprietors' income. 
D) indirect business taxes. 
E) savings income.

Question 3

Gross domestic product (GDP)does not include:

Accepted Answer

A) used goods sold in the current time period. 
B) foreign produced goods. 
C) intermediate as well as final goods. 
D) None of these would be included. 
A) used goods sold in the current time period. 
B) foreign produced goods. 
C) intermediate as well as final goods. 
D) None of these would be included.

Question 4

GDP overstates the productive capacity of a country when:

Accepted Answer

A) economic bads like pollution are produced and then must be cleaned up. 
B) there is a sizable underground economy. 
C) nonmarket production represents a large portion of the economy. 
D) working conditions improve, allowing jobs to be completed safer and faster. 
A) economic bads like pollution are produced and then must be cleaned up. 
B) there is a sizable underground economy. 
C) nonmarket production represents a large portion of the economy. 
D) working conditions improve, allowing jobs to be completed safer and faster.

Question 5

If you buy a book of U.S. postage stamps to use to mail love letters to your sweetheart, the purchase is considered part of:

Accepted Answer

A) C. 
B) I. 
C) G. 
D) X. 
E) M. 
A) C. 
B) I. 
C) G. 
D) X. 
E) M.

Question 6

National income:

Accepted Answer

A) represents total wages and salaries in an economy. 
B) equals GDP minus indirect business taxes. 
C) equals GDP minus depreciation. 
D) equals C + I + G + (X - M). 
E) is the value of existing capital stock used up in making goods. 
A) represents total wages and salaries in an economy. 
B) equals GDP minus indirect business taxes. 
C) equals GDP minus depreciation. 
D) equals C + I + G + (X - M). 
E) is the value of existing capital stock used up in making goods.

Question 7

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

Accepted Answer

A) money laundering. 
B) the underground economy. 
C) disposable personal income. 
D) indirect national income. 
E) unreported capital consumption. 
A) money laundering. 
B) the underground economy. 
C) disposable personal income. 
D) indirect national income. 
E) unreported capital consumption.

Question 8

In order to compute national income from GDP,

Accepted Answer

A) national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B) GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C) GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D) GDP is first calculated, and then depreciation of capital is subtracted from it to get national income. 
A) national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B) GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C) GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D) GDP is first calculated, and then depreciation of capital is subtracted from it to get national income.

Question 9

Exhibit 5-3 Expenditure approach   As shown in Exhibit 5-3, using the expenditure approach, GDP is:

Accepted Answer

A) $1,000 billion. 
B) $1,500 billion. 
C) $1,775 billion. 
D) $2,000 billion. 
A) $1,000 billion. 
B) $1,500 billion. 
C) $1,775 billion. 
D) $2,000 billion.

Question 10

The largest component of household consumption spending is expenditures on:

Accepted Answer

A) services. 
B) durable goods. 
C) nondurable goods. 
D) food. 
E) transportation. 
A) services. 
B) durable goods. 
C) nondurable goods. 
D) food. 
E) transportation.

Question 11

Using the income approach, indirect business taxes have to be added to get gross domestic product because the:

Accepted Answer

A) selling price of a product includes these taxes, which are income to the government representing the public interest of households. 
B) selling price of a product includes these taxes, which are resource payments. 
C) selling price of a product excludes these taxes and therefore they have to be added. 
D) selling price includes these taxes which are actually not income to any sector of the economy. 
A) selling price of a product includes these taxes, which are income to the government representing the public interest of households. 
B) selling price of a product includes these taxes, which are resource payments. 
C) selling price of a product excludes these taxes and therefore they have to be added. 
D) selling price includes these taxes which are actually not income to any sector of the economy.

Question 12

Exhibit 5-4 Gross domestic product data
 
As shown in Exhibit 5-4, national income (NI)is:

Accepted Answer

A) $6,000 billion. 
B) $6,600 billion. 
C) $7,200 billion. 
D) $8,000 billion. 
E) none of these is correct. 
A) $6,000 billion. 
B) $6,600 billion. 
C) $7,200 billion. 
D) $8,000 billion. 
E) none of these is correct.

Question 13

The three components of personal consumption expenditures are:

Accepted Answer

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

Question 14

Compensation of employees is the largest component of GDP using the income approach.

Accepted Answer

A) True 
 B)False

Question 15

In 1980, U.S. nominal GDP was $2,784 billion and the GDP chain price index is 60.4. Real GDP in 1996 dollars is:

Accepted Answer

A) $1,682 billion. 
B) $4,609 billion. 
C) $3,889 billion. 
D) $4,000 billion. 
A) $1,682 billion. 
B) $4,609 billion. 
C) $3,889 billion. 
D) $4,000 billion.

Question 16

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

Accepted Answer

A) $2,882 billion. 
B) $3,101 billion. 
C) $2,794 billion. 
D) $3,701 billion. 
E) $4,588 billion. 
A) $2,882 billion. 
B) $3,101 billion. 
C) $2,794 billion. 
D) $3,701 billion. 
E) $4,588 billion.

Question 17

Explain why GDP was never intended to be a measure of social well being.

Accepted Answer

GDP is simply a measure of total product

Question 18

Personal income minus personal taxes equals disposable personal income.

Accepted Answer

A) True 
 B)False

Question 19

In contrast with nominal GDP, real GDP refers to nominal GDP:

Accepted Answer

A) minus exports. 
B) minus personal income taxes. 
C) corrected for price changes. 
D) corrected for depreciation. 
A) minus exports. 
B) minus personal income taxes. 
C) corrected for price changes. 
D) corrected for depreciation.

Question 20

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

Accepted Answer

A) goods and services exchanged during the period. 
B) final goods and services produced domestically during the period. 
C) goods and services produced domestically during the period minus the depreciation of productive assets. 
D) final goods and services plus intermediate goods produced domestically during the period. 
A) goods and services exchanged during the period. 
B) final goods and services produced domestically during the period. 
C) goods and services produced domestically during the period minus the depreciation of productive assets. 
D) final goods and services plus intermediate goods produced domestically during the period.

Exam 5: Gross Domestic Product

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

Personal income minus personal taxes is:

Gross domestic product (GDP)does not include:

GDP overstates the productive capacity of a country when:

If you buy a book of U.S. postage stamps to use to mail love letters to your sweetheart, the purchase is considered part of:

National income:

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

In order to compute national income from GDP,

Exhibit 5-3 Expenditure approach As shown in Exhibit 5-3, using the expenditure approach, GDP is:

The largest component of household consumption spending is expenditures on:

Using the income approach, indirect business taxes have to be added to get gross domestic product because the:

Exhibit 5-4 Gross domestic product data As shown in Exhibit 5-4, national income (NI)is:

The three components of personal consumption expenditures are:

Compensation of employees is the largest component of GDP using the income approach.

In 1980, U.S. nominal GDP was $2,784 billion and the GDP chain price index is 60.4. Real GDP in 1996 dollars is:

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

Explain why GDP was never intended to be a measure of social well being.

Personal income minus personal taxes equals disposable personal income.

In contrast with nominal GDP, real GDP refers to nominal GDP:

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

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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