Question 1

Exhibit 11-6  GDP data (billions of dollars)   In Exhibit 11-6, disposable personal income (PI) is:

Accepted Answer

A)  $2,180 billion. 
B)  $1,200 billion. 
C)  $2,210 billion. 
D)  $1,180 billion. 
E)  $1,290 billion. 
A)  $2,180 billion. 
B)  $1,200 billion. 
C)  $2,210 billion. 
D)  $1,180 billion. 
E)  $1,290 billion.

Question 2

In any year, nominal GDP divided by the GDP chain price index equals real GDP.

Accepted Answer

A) True 
 B)False

Question 3

All changes in nominal GDP are due to price changes.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would count as an investment expenditure in the GDP expenditures approach?

Accepted Answer

A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges. 
A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges.

Question 5

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

Accepted Answer

A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,805 billion. 
D)  $7,082 billion. 
E)  $7,637.7 billion. 
A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,805 billion. 
D)  $7,082 billion. 
E)  $7,637.7 billion.

Question 6

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

Accepted Answer

A)  both c and d 
B)  an investment good. 
C)  a durable good. 
D)  an import. 
E)  an export. 
A)  both c and d 
B)  an investment good. 
C)  a durable good. 
D)  an import. 
E)  an export.

Question 7

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 8

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)  None of the above are true. 
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)  None of the above are true.

Question 9

Personal consumption expenditures are the largest component of GDP.

Accepted Answer

A) True 
 B)False

Question 10

Gross private domestic investment or simply business investment spending (I):

Accepted Answer

A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery. 
A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery.

Question 11

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

Question 12

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 13

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 14

If net exports are a negative number, then:

Accepted Answer

A)  we are not buying enough exports. 
B)  we are buying too many exports. 
C)  GDP will underestimated when measured using the expenditure approach. 
D)  we are exporting more than we are importing. 
E)  we are exporting less than we are importing. 
A)  we are not buying enough exports. 
B)  we are buying too many exports. 
C)  GDP will underestimated when measured using the expenditure approach. 
D)  we are exporting more than we are importing. 
E)  we are exporting less than we are importing.

Question 15

In a given year, U.S. nominal GDP was $527 billion and the GDP chain price index for that year is 23.3. Real GDP is:

Accepted Answer

A)  $1,228 billion. 
B)  $2,262 billion. 
C)  $3,000 billion. 
D)  $3,262 billion. 
A)  $1,228 billion. 
B)  $2,262 billion. 
C)  $3,000 billion. 
D)  $3,262 billion.

Question 16

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 17

Using the expenditure approach, total spending by households for durable goods, nondurable goods, and services is a category called:

Accepted Answer

A)  gross private domestic investment. 
B)  capital consumption allowance. 
C)  personal consumption expenditures. 
D)  household investment. 
A)  gross private domestic investment. 
B)  capital consumption allowance. 
C)  personal consumption expenditures. 
D)  household investment.

Question 18

The GDP chain price index is designed to adjust nominal GDP for changes in:

Accepted Answer

A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time. 
A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

If exports rise and imports fall, then:

Accepted Answer

A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP may remain unchanged. 
D)  net exports will fall. 
E)  transfer will rise. 
A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP may remain unchanged. 
D)  net exports will fall. 
E)  transfer will rise.

Exam 11: Gross Domestic Product

Exhibit 11-6 GDP data (billions of dollars) In Exhibit 11-6, disposable personal income (PI) is:

In any year, nominal GDP divided by the GDP chain price index equals real GDP.

All changes in nominal GDP are due to price changes.

Which of the following would count as an investment expenditure in the GDP expenditures approach?

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

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

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

Which of the following is a shortcoming of GDP?

Personal consumption expenditures are the largest component of GDP.

Gross private domestic investment or simply business investment spending (I):

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

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

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

If net exports are a negative number, then:

In a given year, U.S. nominal GDP was $527 billion and the GDP chain price index for that year is 23.3. Real GDP is:

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

Using the expenditure approach, total spending by households for durable goods, nondurable goods, and services is a category called:

The GDP chain price index is designed to adjust nominal GDP for changes in:

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

If exports rise and imports fall, then:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters