Question 1

Income received minus personal taxes is called:

Accepted Answer

A)  national income. 
B)  personal income. 
C)  disposable personal income. 
D)  transfer payments. 
E)  net national product. 
A)  national income. 
B)  personal income. 
C)  disposable personal income. 
D)  transfer payments. 
E)  net national product.

Question 2

Exhibit 11-8  GDP data (billions of dollars)   In Exhibit 11-8, using the expenditure approach, compute business investment spending (I). Which of the following is correct?

Accepted Answer

A)  $950 billion. 
B)  $50 billion. 
C)  $600 billion. 
D)  $1,000 billion. 
A)  $950 billion. 
B)  $50 billion. 
C)  $600 billion. 
D)  $1,000 billion.

Question 3

National income is equal to Gross Domestic Product minus:

Accepted Answer

A)  indirect business taxes. 
B)  depreciation. 
C)  personal taxes. 
D)  retained earnings. 
E)  consumption spending. 
A)  indirect business taxes. 
B)  depreciation. 
C)  personal taxes. 
D)  retained earnings. 
E)  consumption spending.

Question 4

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 5

In order to compute national income from GDP,

Accepted Answer

A)  national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B)  GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C)  GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D)  GDP is first calculated, and then depreciation of capital is subtracted from it to get national income. 
A)  national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B)  GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C)  GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D)  GDP is first calculated, and then depreciation of capital is subtracted from it to get national income.

Question 6

Exhibit 11-7  GDP data (billions of dollars)   In Exhibit 11-7, personal disposable personal income (DI) equals:

Accepted Answer

A)  $2,882 billion. 
B)  $3,101 billion. 
C)  $2,794 billion. 
D)  $3,701 billion. 
E)  $4,588 billion. 
A)  $2,882 billion. 
B)  $3,101 billion. 
C)  $2,794 billion. 
D)  $3,701 billion. 
E)  $4,588 billion.

Question 7

Which of the following would be included in the government expenditures component of GDP?

Accepted Answer

A)  The export of 100 fighter jets to Japan 
B)  Construction costs of a new public school building 
C)  Food stamps used by the Smith family 
D)  A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school 
A)  The export of 100 fighter jets to Japan 
B)  Construction costs of a new public school building 
C)  Food stamps used by the Smith family 
D)  A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school

Question 8

Gross domestic product (GDP) includes:

Accepted Answer

A)  intermediate as well as final goods. 
B)  foreign goods as well as domestically produced goods. 
C)  used goods sold in the current time period. 
D)  only final goods and services. 
A)  intermediate as well as final goods. 
B)  foreign goods as well as domestically produced goods. 
C)  used goods sold in the current time period. 
D)  only final goods and services.

Question 9

GDP does count:

Accepted Answer

A)  state and local government purchases. 
B)  spending for new homes. 
C)  changes in inventories. 
D)  none of the above. 
E)  all of the above. 
A)  state and local government purchases. 
B)  spending for new homes. 
C)  changes in inventories. 
D)  none of the above. 
E)  all of the above.

Question 10

The government (G) category of gross domestic product (GDP) excludes welfare and other transfer payments.

Accepted Answer

A) True 
 B)False

Question 11

Nominal values are values measured in terms of the prices at which goods and services are actually sold.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would be counted as a final good for inclusion in GDP?

Accepted Answer

A)  A piece of glass bought this year by a consumer to fix a broken window. 
B)  A sheet of glass produced this year by Ford for windows in a new car. 
C)  A tire produced this year and sold to a car maker for a new car sold this year. 
D)  None of the above would be counted in GDP. 
A)  A piece of glass bought this year by a consumer to fix a broken window. 
B)  A sheet of glass produced this year by Ford for windows in a new car. 
C)  A tire produced this year and sold to a car maker for a new car sold this year. 
D)  None of the above would be counted in GDP.

Question 13

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 14

The lower portion of the circular flow model contains factor markets in which households provide:

Accepted Answer

A)  output of all final goods and services produced. 
B)  savings, spending, and investment. 
C)  labor, money, and machines. 
D)  none of the above. 
A)  output of all final goods and services produced. 
B)  savings, spending, and investment. 
C)  labor, money, and machines. 
D)  none of the above.

Question 15

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 16

Social Security payments are included in personal income.

Accepted Answer

A) True 
 B)False

Question 17

Consumption spending includes:

Accepted Answer

A)  durable goods, nondurable goods, and housing. 
B)  durable goods, nondurable goods, and imports. 
C)  durable goods, services, and housing. 
D)  durable goods, nondurable goods, and services. 
E)  nondurable goods, services, and housing. 
A)  durable goods, nondurable goods, and housing. 
B)  durable goods, nondurable goods, and imports. 
C)  durable goods, services, and housing. 
D)  durable goods, nondurable goods, and services. 
E)  nondurable goods, services, and housing.

Question 18

Nominal gross domestic product is based on:

Accepted Answer

A)  the existing prices at which final goods and services are actually sold. 
B)  prices of final goods and services adjusted for inflation. 
C)  prices at which intermediate goods are sold. 
D)  none of the above. 
A)  the existing prices at which final goods and services are actually sold. 
B)  prices of final goods and services adjusted for inflation. 
C)  prices at which intermediate goods are sold. 
D)  none of the above.

Question 19

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP measures used goods and services. 
B)  GDP includes changes in inventories. 
C)  GDP includes the value of net exports. 
D)  GDP does not make an allowance for leisure time. 
A)  GDP measures used goods and services. 
B)  GDP includes changes in inventories. 
C)  GDP includes the value of net exports. 
D)  GDP does not make an allowance for leisure time.

Question 20

Exhibit 11-9  GDP data (billions of dollars)   In Exhibit 11-9, 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.

Exam 11: Gross Domestic Product

Income received minus personal taxes is called:

Exhibit 11-8 GDP data (billions of dollars) In Exhibit 11-8, using the expenditure approach, compute business investment spending (I). Which of the following is correct?

National income is equal to Gross Domestic Product minus:

To construct GDP, exports:

In order to compute national income from GDP,

Exhibit 11-7 GDP data (billions of dollars) In Exhibit 11-7, personal disposable personal income (DI) equals:

Which of the following would be included in the government expenditures component of GDP?

Gross domestic product (GDP) includes:

GDP does count:

The government (G) category of gross domestic product (GDP) excludes welfare and other transfer payments.

Nominal values are values measured in terms of the prices at which goods and services are actually sold.

Which of the following would be counted as a final good for inclusion in GDP?

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

The lower portion of the circular flow model contains factor markets in which households provide:

Which of the following statements is true ?

Social Security payments are included in personal income.

Consumption spending includes:

Nominal gross domestic product is based on:

Which of the following is a shortcoming of GDP?

Exhibit 11-9 GDP data (billions of dollars) In Exhibit 11-9, personal income (PI) 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

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

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