Question 1

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Accepted Answer

A) True 
 B)False

Question 2

Gross domestic product (GDP) does not include:

Accepted Answer

A)  used goods sold in the current time period. 
B)  foreign produced goods. 
C)  intermediate as well as final goods. 
D)  None of the above would be included. 
A)  used goods sold in the current time period. 
B)  foreign produced goods. 
C)  intermediate as well as final goods. 
D)  None of the above would be included.

Question 3

The largest component of household consumption spending is expenditures on:

Accepted Answer

A)  services. 
B)  durable goods. 
C)  nondurable goods. 
D)  food. 
E)  transportation. 
A)  services. 
B)  durable goods. 
C)  nondurable goods. 
D)  food. 
E)  transportation.

Question 4

The expenditure approach to GDP accounting includes:

Accepted Answer

A)  wages and salaries. 
B)  net exports. 
C)  net interest. 
D)  corporate profit. 
E)  proprietors' income. 
A)  wages and salaries. 
B)  net exports. 
C)  net interest. 
D)  corporate profit. 
E)  proprietors' income.

Question 5

Gross private domestic investment includes business:

Accepted Answer

A)  purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B)  purchases of capital goods, all new construction, and inventory investment. 
C)  purchases of capital goods, all new commercial construction, and inventory investment. 
D)  purchases of capital goods, all new residential construction, and inventory investment. 
E)  purchases of all types of durable goods, all new construction, and inventory investment. 
A)  purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B)  purchases of capital goods, all new construction, and inventory investment. 
C)  purchases of capital goods, all new commercial construction, and inventory investment. 
D)  purchases of capital goods, all new residential construction, and inventory investment. 
E)  purchases of all types of durable goods, all new construction, and inventory investment.

Question 6

GDP measures the economy's production of:

Accepted Answer

A)  final goods and services. 
B)  intermediate goods. 
C)  consumer goods and services. 
D)  capital goods. 
A)  final goods and services. 
B)  intermediate goods. 
C)  consumer goods and services. 
D)  capital goods.

Question 7

The circular flow model represents the establishment of market value for:

Accepted Answer

A)  goods and services. 
B)  wages and salaries. 
C)  profits and rents. 
D)  all of the above. 
A)  goods and services. 
B)  wages and salaries. 
C)  profits and rents. 
D)  all of the above.

Question 8

If you buy a commemorative Princess Diana stamp issued by the British government, the purchase is considered part of:

Accepted Answer

A)  C. 
B)  I. 
C)  G. 
D)  X. 
E)  M. 
A)  C. 
B)  I. 
C)  G. 
D)  X. 
E)  M.

Question 9

Exhibit 11-8  GDP data (billions of dollars)   In Exhibit 11-8, compute national income (NI). Which of the following is correct?

Accepted Answer

A)  $7,400 billion. 
B)  $7,250 billion. 
C)  $8,150 billion. 
D)  $8,200 billion. 
E)  $8,350 billion. 
A)  $7,400 billion. 
B)  $7,250 billion. 
C)  $8,150 billion. 
D)  $8,200 billion. 
E)  $8,350 billion.

Question 10

The most broadly based price index is the:

Accepted Answer

A)  real GDP price index. 
B)  consumer price index. 
C)  producer price index. 
D)  GDP chain price index. 
A)  real GDP price index. 
B)  consumer price index. 
C)  producer price index. 
D)  GDP chain price index.

Question 11

Exhibit 11-2  Gross domestic product data   As shown in Exhibit 11-2, 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 12

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 13

National income is calculated as GDP:

Accepted Answer

A)  plus depreciation. 
B)  plus exports. 
C)  minus imports. 
D)  minus depreciation. 
A)  plus depreciation. 
B)  plus exports. 
C)  minus imports. 
D)  minus depreciation.

Question 14

According to the expenditure approach, the largest component of GDP 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 15

Exhibit 11-8  GDP data (billions of dollars)   In Exhibit 11-8, and using the expenditures approach, compute gross domestic product (GDP). Which of the following is correct?

Accepted Answer

A)  $8,500 billion. 
B)  $8,400 billion. 
C)  $7,400 billion. 
D)  $8,650 billion. 
E)  $8,350 billion. 
A)  $8,500 billion. 
B)  $8,400 billion. 
C)  $7,400 billion. 
D)  $8,650 billion. 
E)  $8,350 billion.

Question 16

Personal consumption expenditures include:

Accepted Answer

A)  all commodities that business firms buy. 
B)  the purchase prices paid for stocks and bonds by individual households. 
C)  the construction of residential housing. 
D)  all goods and services bought by households. 
E)  the corrected value of housewives' services. 
A)  all commodities that business firms buy. 
B)  the purchase prices paid for stocks and bonds by individual households. 
C)  the construction of residential housing. 
D)  all goods and services bought by households. 
E)  the corrected value of housewives' services.

Question 17

Exhibit 11-2  Gross domestic product data   As shown in Exhibit 11-2, total spending by government is:

Accepted Answer

A)  $600 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  $300 billion. 
E)  $800 billion. 
A)  $600 billion. 
B)  $100 billion. 
C)  $200 billion. 
D)  $300 billion. 
E)  $800 billion.

Question 18

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 19

Exhibit 11-8  GDP data (billions of dollars)   In Exhibit 11-8, and using the expenditures approach, compute personal consumption expenditures. Which of the following is correct?

Accepted Answer

A)  $6,750 billion. 
B)  $6,600 billion. 
C)  $6,550 billion. 
D)  $6,100 billion. 
E)  $5,000 billion. 
A)  $6,750 billion. 
B)  $6,600 billion. 
C)  $6,550 billion. 
D)  $6,100 billion. 
E)  $5,000 billion.

Question 20

Nominal gross domestic product is based on the existing prices at which final goods are actually sold.

Accepted Answer

A) True 
 B)False

Exam 11: Gross Domestic Product

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Gross domestic product (GDP) does not include:

The largest component of household consumption spending is expenditures on:

The expenditure approach to GDP accounting includes:

Gross private domestic investment includes business:

GDP measures the economy's production of:

The circular flow model represents the establishment of market value for:

If you buy a commemorative Princess Diana stamp issued by the British government, the purchase is considered part of:

Exhibit 11-8 GDP data (billions of dollars) In Exhibit 11-8, compute national income (NI). Which of the following is correct?

The most broadly based price index is the:

Exhibit 11-2 Gross domestic product data As shown in Exhibit 11-2, net exports are:

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

National income is calculated as GDP:

According to the expenditure approach, the largest component of GDP is:

Exhibit 11-8 GDP data (billions of dollars) In Exhibit 11-8, and using the expenditures approach, compute gross domestic product (GDP). Which of the following is correct?

Personal consumption expenditures include:

Exhibit 11-2 Gross domestic product data As shown in Exhibit 11-2, total spending by government is:

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

Exhibit 11-8 GDP data (billions of dollars) In Exhibit 11-8, and using the expenditures approach, compute personal consumption expenditures. Which of the following is correct?

Nominal gross domestic product is based on the existing prices at which final goods are actually sold.

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

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