Question 1

Which one of the following transactions would be included in GDP?

Accepted Answer

A)  Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B)  Mr. Doe donates $500 to his town's junior college scholarship fund. 
C)  Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D)  Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock. 
A)  Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B)  Mr. Doe donates $500 to his town's junior college scholarship fund. 
C)  Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D)  Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock.

Question 2

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. 
A)  $9,000 billion. 
B)  $9,900 billion. 
C)  $10,500 billion. 
D)  $11,000 billion.

Question 3

Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?

Accepted Answer

A)  The growth rate of real GDP will tend to understate the growth rate of total output. 
B)  The growth rate of real GDP will tend to overstate the growth rate of total output. 
C)  The GDP deflator will tend to overstate any increase in inflation. 
D)  The GDP deflator will tend to understate any increase in inflation. 
A)  The growth rate of real GDP will tend to understate the growth rate of total output. 
B)  The growth rate of real GDP will tend to overstate the growth rate of total output. 
C)  The GDP deflator will tend to overstate any increase in inflation. 
D)  The GDP deflator will tend to understate any increase in inflation.

Question 4

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. 
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.

Question 5

​ National income (NI) is calculated by adjusting GDP for:

Accepted Answer

A)  ​depreciation. 
B)  ​ investment and net exports. 
C)  ​Social Security insurance contributions and transfer payments. 
D)  ​corporate and personal income taxes. 
A)  ​depreciation. 
B)  ​ investment and net exports. 
C)  ​Social Security insurance contributions and transfer payments. 
D)  ​corporate and personal income taxes.

Question 6

Suppose in a given year, GDP was $7,242 billion and the GDP chain price index for that year is 117.5. Real GDP 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 7

Resources that flow through the circular flow model include all of the following except :

Accepted Answer

A)  land. 
B)  labor. 
C)  capital. 
D)  final goods. 
A)  land. 
B)  labor. 
C)  capital. 
D)  final goods.

Question 8

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending. 
A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending.

Question 9

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP? ​

Accepted Answer

A)  ​Purchases of products such as wine, beer, hard liquor, and cigarettes. 
B)  ​Secondhand transactions, such as when a used car is sold. 
C)  ​New purchase that a resident of one state makes in a different state. 
D)  ​Purchases of necessities such as groceries and rent. 
A)  ​Purchases of products such as wine, beer, hard liquor, and cigarettes. 
B)  ​Secondhand transactions, such as when a used car is sold. 
C)  ​New purchase that a resident of one state makes in a different state. 
D)  ​Purchases of necessities such as groceries and rent.

Question 10

Which one of the following would count as investment in the GDP accounts?

Accepted Answer

A)  Purchase of a new airplane by an airline. 
B)  Purchase of a U.S. government bond. 
C)  Purchase of 100 shares of Wal-Mart stock. 
D)  Purchase of an existing house. 
A)  Purchase of a new airplane by an airline. 
B)  Purchase of a U.S. government bond. 
C)  Purchase of 100 shares of Wal-Mart stock. 
D)  Purchase of an existing house.

Question 11

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 12

If an artisan sells handmade jewelry at a craft fair

Accepted Answer

A)  and does not report the income earned to the Internal Revenue Service, GDP is understated. 
B)  and does not report the income earned to the Internal Revenue Service, GDP is overstated. 
C)  and reports the income earned to the Internal Revenue Service, GDP is understated. 
D)  and reports the income earned to the Internal Revenue Service, GDP is overstated. 
A)  and does not report the income earned to the Internal Revenue Service, GDP is understated. 
B)  and does not report the income earned to the Internal Revenue Service, GDP is overstated. 
C)  and reports the income earned to the Internal Revenue Service, GDP is understated. 
D)  and reports the income earned to the Internal Revenue Service, GDP is overstated.

Question 13

New residential housing is counted in GDP as a(n):

Accepted Answer

A)  durable consumption good. 
B)  household durable good. 
C)  investment good. 
D)  inventory expansion. 
A)  durable consumption good. 
B)  household durable good. 
C)  investment good. 
D)  inventory expansion.

Question 14

Exhibit 5-1 Use the information below to answer the following question(s).
 
Refer to Exhibit 5-1. What is this country's gross domestic product?

Accepted Answer

A)  $1,225. 
B)  $1,305. 
C)  $1,365. 
D)  $1,440. 
A)  $1,225. 
B)  $1,305. 
C)  $1,365. 
D)  $1,440.

Question 15

Exhibit 5-7 GDP data (billions of dollars)
 
In Exhibit 5-7, disposable personal income (DI) is:

Accepted Answer

A)  $5,127 billion. 
B)  $5,608 billion. 
C)  $6,254 billion. 
D)  $6,495 billion. 
A)  $5,127 billion. 
B)  $5,608 billion. 
C)  $6,254 billion. 
D)  $6,495 billion.

Question 16

If GDP is $9,560 billion and depreciation is $50 billion, then national income is

Accepted Answer

A)  $9,610 billion. 
B)  $9,560 billion. 
C)  $9,510 billion. 
D)  $9,500 billion. 
A)  $9,610 billion. 
B)  $9,560 billion. 
C)  $9,510 billion. 
D)  $9,500 billion.

Question 17

Victor works as a manager of a clothing store. He is paid an annual salary of $55,000. As part of his employee benefits, he receives private health insurance and his company contributes a small amount each month to a pension plan in his name. The company also pays taxes for Social Security and unemployment insurance. When considering the compensation of employees category of the income approach to GDP, which of the following lists includes the correct components of Victor's compensation?

Accepted Answer

A)  salary and pension plan contribution only 
B)  salary, health insurance, and pension plan contribution only 
C)  Social Security taxes and unemployment insurance taxes only 
D)  salary, health insurance, pension plan contribution, Social Security taxes, unemployment insurance taxes 
A)  salary and pension plan contribution only 
B)  salary, health insurance, and pension plan contribution only 
C)  Social Security taxes and unemployment insurance taxes only 
D)  salary, health insurance, pension plan contribution, Social Security taxes, unemployment insurance taxes

Question 18

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP measures nonmarket transactions. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP includes an estimate of the value of household services. 
D)  GDP does not account for the distribution of consumption across a country's population. 
A)  GDP measures nonmarket transactions. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP includes an estimate of the value of household services. 
D)  GDP does not account for the distribution of consumption across a country's population.

Question 19

Your purchase of a Gucci purse made in Italy would be classified as:

Accepted Answer

A)  an export. 
B)  an investment good. 
C)  a durable good. 
D)  an import. 
A)  an export. 
B)  an investment good. 
C)  a durable good. 
D)  an import.

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

Exam 15: Gross Domestic Product

Which one of the following transactions would be included in GDP?

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

Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?

The circular flow model assumes:

​ National income (NI) is calculated by adjusting GDP for:

Suppose in a given year, GDP was $7,242 billion and the GDP chain price index for that year is 117.5. Real GDP is:

Resources that flow through the circular flow model include all of the following except :

Which of the following is a shortcoming of GDP?

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP? ​

Which one of the following would count as investment in the GDP accounts?

Intermediate goods are goods and services used:

If an artisan sells handmade jewelry at a craft fair

New residential housing is counted in GDP as a(n):

Exhibit 5-1 Use the information below to answer the following question(s). Refer to Exhibit 5-1. What is this country's gross domestic product?

Exhibit 5-7 GDP data (billions of dollars) In Exhibit 5-7, disposable personal income (DI) is:

If GDP is $9,560 billion and depreciation is $50 billion, then national income is

Which of the following is a shortcoming of GDP?

Your purchase of a Gucci purse made in Italy would be classified as:

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

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

National income (NI) is calculated by adjusting GDP for:

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP?