Question 1

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

Accepted Answer

A) $9,000 billion. 
B) $9,900 billion. 
C) $10,500 billion. 
D) $11,000 billion. 
E) None of these. 
A) $9,000 billion. 
B) $9,900 billion. 
C) $10,500 billion. 
D) $11,000 billion. 
E) None of these.

Question 2

Exhibit 5-3 Expenditure approach   As shown in Exhibit 5-3, total expenditures by businesses for fixed investment (capital)and inventories is:

Accepted Answer

A) $1,000 billion. 
B) $100 billion. 
C) $400 billion. 
D) $20 billion 
E) $75 billion. 
A) $1,000 billion. 
B) $100 billion. 
C) $400 billion. 
D) $20 billion 
E) $75 billion.

Question 3

Real GDP means GDP:

Accepted Answer

A) valued at prices in a base year. 
B) that does not change from year to year. 
C) corrected for changes in quality. 
D) valued at prices at which goods are actually sold. 
A) valued at prices in a base year. 
B) that does not change from year to year. 
C) corrected for changes in quality. 
D) valued at prices at which goods are actually sold.

Question 4

Which of the following is a shortcoming of GDP?

Accepted Answer

A) GDP measures used goods and services. 
B) GDP includes changes in inventories. 
C) GDP includes the value of net exports. 
D) GDP does not make an allowance for leisure time. 
A) GDP measures used goods and services. 
B) GDP includes changes in inventories. 
C) GDP includes the value of net exports. 
D) GDP does not make an allowance for leisure time.

Question 5

Personal consumption expenditures:

Accepted Answer

A) represent close to two-thirds of GDP. 
B) are equal to personal income minus individual taxes. 
C) include durable good purchases but not nondurable good purchases. 
D) do not include any intangible consumption items. 
E) include all goods and services bought by the government. 
A) represent close to two-thirds of GDP. 
B) are equal to personal income minus individual taxes. 
C) include durable good purchases but not nondurable good purchases. 
D) do not include any intangible consumption items. 
E) include all goods and services bought by the government.

Question 6

The circular flow model assumes:

Accepted Answer

A) businesses and households own the factors of production. 
B) businesses own the factors of production. 
C) government owns the factors of production. 
D) households own the factors of production. 
E) firms, households, and the government own the factors of production. 
A) businesses and households own the factors of production. 
B) businesses own the factors of production. 
C) government owns the factors of production. 
D) households own the factors of production. 
E) firms, households, and the government own the factors of production.

Question 7

Personal consumption expenditures are the largest component of GDP.

Accepted Answer

A) True 
 B)False

Question 8

The value of child-rearing and other household production are not included in GDP.

Accepted Answer

A) True 
 B)False

Question 9

The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:

Accepted Answer

A) product market. 
B) factor market. 
C) savings market. 
D) financial market. 
A) product market. 
B) factor market. 
C) savings market. 
D) financial market.

Question 10

Discuss the components of GDP using the expenditure approach.

Accepted Answer

GDP equals consumption spendin

Question 11

Which of the following is included in GDP?

Accepted Answer

A) The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter. 
B) The value of unpaid-for volunteer time. 
C) The unpaid-for services provided by the natural environment, such as breathable air. 
D) Net exports: (value of exports - value of imports). 
A) The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter. 
B) The value of unpaid-for volunteer time. 
C) The unpaid-for services provided by the natural environment, such as breathable air. 
D) Net exports: (value of exports - value of imports).

Question 12

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 13

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following activities would be calculated as part of GDP accounts?

Accepted Answer

A) Drug trafficking. 
B) Money laundry. 
C) Prostitution. 
D) Purchasing plastic surgery. 
E) Burglary. 
A) Drug trafficking. 
B) Money laundry. 
C) Prostitution. 
D) Purchasing plastic surgery. 
E) Burglary.

Question 15

Based on the circular flow model, goods and services flow from:

Accepted Answer

A) households to businesses in product markets. 
B) businesses to households in product markets. 
C) households to businesses in factor markets. 
D) businesses to households in factor markets. 
A) households to businesses in product markets. 
B) businesses to households in product markets. 
C) households to businesses in factor markets. 
D) businesses to households in factor markets.

Question 16

GDP underestimates our economic well-being:

Accepted Answer

A) for of all the following reasons. 
B) because it includes the value of work done by nannies. 
C) because it ignores leisure. 
D) because it includes the value of work done by householders. 
E) because it includes the value of work done by illegal immigrants. 
A) for of all the following reasons. 
B) because it includes the value of work done by nannies. 
C) because it ignores leisure. 
D) because it includes the value of work done by householders. 
E) because it includes the value of work done by illegal immigrants.

Question 17

In 1990, U.S. nominal GDP was $5,744 billion and the GDP chain price index is 93.6. Real GDP in 1996 dollars is:

Accepted Answer

A) $6,137 billion. 
B) $5,376 billion. 
C) $6,000 billion. 
D) $6,376 billion. 
A) $6,137 billion. 
B) $5,376 billion. 
C) $6,000 billion. 
D) $6,376 billion.

Question 18

The market value of all final goods and services in an economy produced by resources owned by people of that economy is:

Accepted Answer

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

Question 19

In the circular flow model, money flows from the business sector to the household sector through the:

Accepted Answer

A) product market. 
B) capital market. 
C) goods market. 
D) services market. 
E) resource market. 
A) product market. 
B) capital market. 
C) goods market. 
D) services market. 
E) resource market.

Question 20

In an economy with persistent inflation,

Accepted Answer

A) real GDP will grow faster than nominal GDP. 
B) nominal GDP will grow faster than real GDP. 
C) nominal and real GDP will grow at the same rate. 
D) nominal and real GDP will both fall. 
A) real GDP will grow faster than nominal GDP. 
B) nominal GDP will grow faster than real GDP. 
C) nominal and real GDP will grow at the same rate. 
D) nominal and real GDP will both fall.

Exam 5: Gross Domestic Product

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

Exhibit 5-3 Expenditure approach As shown in Exhibit 5-3, total expenditures by businesses for fixed investment (capital)and inventories is:

Real GDP means GDP:

Which of the following is a shortcoming of GDP?

Personal consumption expenditures:

The circular flow model assumes:

Personal consumption expenditures are the largest component of GDP.

The value of child-rearing and other household production are not included in GDP.

The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:

Discuss the components of GDP using the expenditure approach.

Which of the following is included in GDP?

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

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Which of the following activities would be calculated as part of GDP accounts?

Based on the circular flow model, goods and services flow from:

GDP underestimates our economic well-being:

In 1990, U.S. nominal GDP was $5,744 billion and the GDP chain price index is 93.6. Real GDP in 1996 dollars is:

The market value of all final goods and services in an economy produced by resources owned by people of that economy is:

In the circular flow model, money flows from the business sector to the household sector through the:

In an economy with persistent inflation,

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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