Question 1

If the underground economy is sizable, then GDP will:

Accepted Answer

A)  understate the economy's performance. 
B)  overstate the economy's performance. 
C)  fluctuate unpredictably. 
D)  accurately reflect this subterranean activity. 
A)  understate the economy's performance. 
B)  overstate the economy's performance. 
C)  fluctuate unpredictably. 
D)  accurately reflect this subterranean activity.

Question 2

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 3

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 4

Using the expenditure approach, GDP equals:

Accepted Answer

A)  C + I + G + (X − M). 
B)  C + I + G + (X + M). 
C)  C + I − G + (X − M). 
D)  C + I + G − (X − M). 
A)  C + I + G + (X − M). 
B)  C + I + G + (X + M). 
C)  C + I − G + (X − M). 
D)  C + I + G − (X − M).

Question 5

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

Question 6

Which of the following would be classified as a personal consumption expenditure?

Accepted Answer

A)  Your purchase of this economics course. 
B)  Your purchase of a newly constructed house 
C)  Your purchase of a preowned house. 
D)  Your purchase of one share of Microsoft stock. 
A)  Your purchase of this economics course. 
B)  Your purchase of a newly constructed house 
C)  Your purchase of a preowned house. 
D)  Your purchase of one share of Microsoft stock.

Question 7

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 8

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). 
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).

Question 9

Dividends, retained earnings, and corporate income taxes sum to which of the income categories in the income approach to computing GDP?

Accepted Answer

A)  corporate profits 
B)  net interest 
C)  indirect business taxes 
D)  compensation of employees 
A)  corporate profits 
B)  net interest 
C)  indirect business taxes 
D)  compensation of employees

Question 10

Which of the following statements is true ?

Accepted Answer

A)  The inclusion of intermediate goods and services into GDP calculations would underestimate our nation's production level. 
B)  The expenditures approach sums the compensation of employees, rents, profits, net interest, and nonincome expenses for depreciation and indirect business taxes. 
C)  Real GDP has been adjusted for changes in the general level of prices due to inflation. 
D)  Real GDP equals nominal GDP multiplied by the GDP deflator. 
A)  The inclusion of intermediate goods and services into GDP calculations would underestimate our nation's production level. 
B)  The expenditures approach sums the compensation of employees, rents, profits, net interest, and nonincome expenses for depreciation and indirect business taxes. 
C)  Real GDP has been adjusted for changes in the general level of prices due to inflation. 
D)  Real GDP equals nominal GDP multiplied by the GDP deflator.

Question 11

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. 
A)  $6,000 billion. 
B)  $6,600 billion. 
C)  $7,200 billion. 
D)  $8,000 billion.

Question 12

Discuss how economists calculate NI, PI and DI.

Accepted Answer

GDP − depreciation = NI − prof

Question 13

Exhibit 5-10 GDP data (billions of dollars)
 
In Exhibit 5-10, GDP calculated using the income approach,

Accepted Answer

A)  is greater than GDP calculated using the expenditure approach. 
B)  is equal to GDP calculated using the expenditure approach. 
C)  is less than GDP calculated using the expenditure approach. 
D)  is unrelated to GDP calculated using the expenditure approach. 
A)  is greater than GDP calculated using the expenditure approach. 
B)  is equal to GDP calculated using the expenditure approach. 
C)  is less than GDP calculated using the expenditure approach. 
D)  is unrelated to GDP calculated using the expenditure approach.

Question 14

GDP underestimates our economic well-being:

Accepted Answer

A)  because it includes the value of work done by illegal immigrants. 
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. 
A)  because it includes the value of work done by illegal immigrants. 
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.

Question 15

Depreciation or consumption of fixed capital measures:

Accepted Answer

A)  the decline in the value of inventories caused by inflation. 
B)  the loss of productive ability due to capital intensive production. 
C)  capital that is wasted in the production process. 
D)  the value of existing capital stock used up in the production process. 
A)  the decline in the value of inventories caused by inflation. 
B)  the loss of productive ability due to capital intensive production. 
C)  capital that is wasted in the production process. 
D)  the value of existing capital stock used up in the production process.

Question 16

Which national income account should be examined to discover trends in the after-tax income that people have to save and spend?

Accepted Answer

A)  Gross domestic product (GDP). 
B)  Personal income (PI). 
C)  National income (NI). 
D)  Disposable personal income (DI). 
A)  Gross domestic product (GDP). 
B)  Personal income (PI). 
C)  National income (NI). 
D)  Disposable personal income (DI).

Question 17

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 18

Disposable personal income:

Accepted Answer

A)  includes personal income taxes. 
B)  excludes personal income taxes. 
C)  excludes transfer payments. 
D)  is income spent for personal items such as homes and cars. 
A)  includes personal income taxes. 
B)  excludes personal income taxes. 
C)  excludes transfer payments. 
D)  is income spent for personal items such as homes and cars.

Question 19

Exhibit 5-8 GDP data (billions of dollars)
 
In Exhibit 5-8, disposable personal income (PI) is:

Accepted Answer

A)  $2,180 billion. 
B)  $1,200 billion. 
C)  $2,210 billion. 
D)  $1,180 billion. 
A)  $2,180 billion. 
B)  $1,200 billion. 
C)  $2,210 billion. 
D)  $1,180 billion.

Question 20

The equation for determining real GDP for year X is:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 15: Gross Domestic Product

If the underground economy is sizable, then GDP will:

GDP overstates the productive capacity of a country when:

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

Using the expenditure approach, GDP equals:

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

Which of the following would be classified as a personal consumption expenditure?

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

National income:

Dividends, retained earnings, and corporate income taxes sum to which of the income categories in the income approach to computing GDP?

Which of the following statements is true ?

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

Discuss how economists calculate NI, PI and DI.

Exhibit 5-10 GDP data (billions of dollars) In Exhibit 5-10, GDP calculated using the income approach,

GDP underestimates our economic well-being:

Depreciation or consumption of fixed capital measures:

Which national income account should be examined to discover trends in the after-tax income that people have to save and spend?

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

Disposable personal income:

Exhibit 5-8 GDP data (billions of dollars) In Exhibit 5-8, disposable personal income (PI) is:

The equation for determining real GDP for year X is:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters