Question 1

The GDP of a country can be derived by summing the:

Accepted Answer

A) expenditures on final goods and services produced domestically during the year. 
B) payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C) market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D) income payments to the resource suppliers and net exports. 
A) expenditures on final goods and services produced domestically during the year. 
B) payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C) market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D) income payments to the resource suppliers and net exports.

Question 2

In the circular flow model,

Accepted Answer

A) money flows from the firms to the households through the product market. 
B) money flows from the households to the firms through the product market. 
C) money flows from the households to the firms through the resource market. 
D) money flows from the households to the firms through both the product market and the resource market. 
E) resources flow to the households from the firms through the product market. 
A) money flows from the firms to the households through the product market. 
B) money flows from the households to the firms through the product market. 
C) money flows from the households to the firms through the resource market. 
D) money flows from the households to the firms through both the product market and the resource market. 
E) resources flow to the households from the firms through the product market.

Question 3

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

Accepted Answer

A) $5,178 billion. 
B) $6,450 billion. 
C) $5,740 billion. 
D) $7,740 billion. 
E) $8,350 billion. 
A) $5,178 billion. 
B) $6,450 billion. 
C) $5,740 billion. 
D) $7,740 billion. 
E) $8,350 billion.

Question 4

National income:

Accepted Answer

A) is included in gross private domestic investment. 
B) includes the sum of all payments made to resource owners for the use of their resources. 
C) includes depreciation. 
D) is often measured as C + I + G + (X - M). 
A) is included in gross private domestic investment. 
B) includes the sum of all payments made to resource owners for the use of their resources. 
C) includes depreciation. 
D) is often measured as C + I + G + (X - M).

Question 5

Gross domestic product that is based on existing prices is called:

Accepted Answer

A) nominal GDP. 
B) current GDP. 
C) money GDP. 
D) all of these. 
A) nominal GDP. 
B) current GDP. 
C) money GDP. 
D) all of these.

Question 6

Nominal GDP is greater than GDP because of the effects of inflation as measured by the GDP chain price index.

Accepted Answer

A) True 
 B)False

Question 7

To construct GDP, exports:

Accepted Answer

A) and imports must be subtracted. 
B) and imports must be included. 
C) must be included and imports must be ignored. 
D) must be included and imports must be subtracted. 
A) and imports must be subtracted. 
B) and imports must be included. 
C) must be included and imports must be ignored. 
D) must be included and imports must be subtracted.

Question 8

Exhibit 5-11 GDP data (billions of dollars)
  In Exhibit 5-11, personal income (PI)is:

Accepted Answer

A) $9,210 billion. 
B) $8,510 billion. 
C) $6,560 billion. 
D) $6,610 billion. 
E) $10,910 billion. 
A) $9,210 billion. 
B) $8,510 billion. 
C) $6,560 billion. 
D) $6,610 billion. 
E) $10,910 billion.

Question 9

Which one of the following statements is true ?

Accepted Answer

A) Money flows from households to firms for resources. 
B) Money flows from households to foreign economies for exports. 
C) Money flows from government to firms for resources. 
D) Money flows from foreign economies to firms for imports. 
E) Money flows from firms to households for resources. 
A) Money flows from households to firms for resources. 
B) Money flows from households to foreign economies for exports. 
C) Money flows from government to firms for resources. 
D) Money flows from foreign economies to firms for imports. 
E) Money flows from firms to households for resources.

Question 10

The largest component of GDP is:

Accepted Answer

A) personal consumption expenditures. 
B) government spending. 
C) durable goods. 
D) net exports. 
E) gross private domestic investment. 
A) personal consumption expenditures. 
B) government spending. 
C) durable goods. 
D) net exports. 
E) gross private domestic investment.

Question 11

According to the income approach, the largest component of national income is:

Accepted Answer

A) government spending. 
B) proprietor's income. 
C) net interest. 
D) personal consumption expenditures. 
E) compensation of employees. 
A) government spending. 
B) proprietor's income. 
C) net interest. 
D) personal consumption expenditures. 
E) compensation of employees.

Question 12

Exhibit 5-2 Gross domestic product data  
As shown in Exhibit 5-2, net exports are:

Accepted Answer

A) $50 billion. 
B) $15 billion. 
C) $35 billion. 
D) $65 billion. 
A) $50 billion. 
B) $15 billion. 
C) $35 billion. 
D) $65 billion.

Question 13

Based on the circular flow model, money flows from households to businesses in:

Accepted Answer

A) factor markets. 
B) product markets. 
C) neither factor nor product markets. 
D) both factor and product markets. 
A) factor markets. 
B) product markets. 
C) neither factor nor product markets. 
D) both factor and product markets.

Question 14

Exhibit 5-8 GDP data (billions of dollars)   In Exhibit 5-8, national income (NI)equals:

Accepted Answer

A) $2,330 billion. 
B) $1,350 billion. 
C) $1,320 billion. 
D) $2,360 billion. 
E) $1,440 billion. 
A) $2,330 billion. 
B) $1,350 billion. 
C) $1,320 billion. 
D) $2,360 billion. 
E) $1,440 billion.

Question 15

Exhibit 5-2 Gross domestic product data   Using the expenditure approach in Exhibit 5-2, gross domestic product (GDP)is:

Accepted Answer

A) $600 billion. 
B) $100 billion. 
C) $500 billion. 
D) $915 billion. 
E) $800 billion. 
A) $600 billion. 
B) $100 billion. 
C) $500 billion. 
D) $915 billion. 
E) $800 billion.

Question 16

When economists speak of changes in GDP measured in constant dollars, they mean that:

Accepted Answer

A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population. 
A) money GDP is constant. 
B) the price level is constant. 
C) a price index has been used to adjust money GDP for the effects of inflation. 
D) the growth rate of money GDP has been adjusted for changes in population.

Question 17

Intermediate goods are goods and services used:

Accepted Answer

A) by the ultimate user. 
B) by state and local governments. 
C) as inputs. 
D) both as inputs and final goods. 
A) by the ultimate user. 
B) by state and local governments. 
C) as inputs. 
D) both as inputs and final goods.

Question 18

Which of the following is included in personal income but not in national income?

Accepted Answer

A) Compensation for workers. 
B) Proprietors' income. 
C) Corporate profits. 
D) Social Security payments. 
E) Rent. 
A) Compensation for workers. 
B) Proprietors' income. 
C) Corporate profits. 
D) Social Security payments. 
E) Rent.

Question 19

Why is it important to use real GDP rather than nominal GDP figures when making comparisons of output across time periods?

Accepted Answer

A) The real GDP figures are a better measure of changes in the general level of prices. 
B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices. 
C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output. 
D) The real GDP figures adjust for changes in the level of employment. 
A) The real GDP figures are a better measure of changes in the general level of prices. 
B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices. 
C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output. 
D) The real GDP figures adjust for changes in the level of employment.

Question 20

Exhibit 5-2 Gross domestic product data   As shown in Exhibit 5-2, total expenditures by businesses for fixed investment and inventories is:

Accepted Answer

A) $500 billion. 
B) $50 billion. 
C) $200 billion. 
D) $15 billion. 
E) $65 billion. 
A) $500 billion. 
B) $50 billion. 
C) $200 billion. 
D) $15 billion. 
E) $65 billion.

Exam 5: Gross Domestic Product

The GDP of a country can be derived by summing the:

In the circular flow model,

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

National income:

Gross domestic product that is based on existing prices is called:

Nominal GDP is greater than GDP because of the effects of inflation as measured by the GDP chain price index.

To construct GDP, exports:

Exhibit 5-11 GDP data (billions of dollars) In Exhibit 5-11, personal income (PI)is:

Which one of the following statements is true ?

The largest component of GDP is:

According to the income approach, the largest component of national income is:

Exhibit 5-2 Gross domestic product data As shown in Exhibit 5-2, net exports are:

Based on the circular flow model, money flows from households to businesses in:

Exhibit 5-8 GDP data (billions of dollars) In Exhibit 5-8, national income (NI)equals:

Exhibit 5-2 Gross domestic product data Using the expenditure approach in Exhibit 5-2, gross domestic product (GDP)is:

When economists speak of changes in GDP measured in constant dollars, they mean that:

Intermediate goods are goods and services used:

Which of the following is included in personal income but not in national income?

Why is it important to use real GDP rather than nominal GDP figures when making comparisons of output across time periods?

Exhibit 5-2 Gross domestic product data As shown in Exhibit 5-2, total expenditures by businesses for fixed investment and inventories 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

Filters