Question 1

National income is derived from gross domestic product by subtracting:

Accepted Answer

A)  transfer payments. 
B)  profits. 
C)  an allowance for depreciation of capital equipment. 
D)  net exports. 
A)  transfer payments. 
B)  profits. 
C)  an allowance for depreciation of capital equipment. 
D)  net exports.

Question 2

Exhibit 11-6  GDP data (billions of dollars)   In Exhibit 11-6, and using the expenditures approach, gross domestic product (GDP) equals:

Accepted Answer

A)  $1,540 billion. 
B)  $2,460 billion. 
C)  $2,430 billion. 
D)  $1,450 billion. 
E)  $1,420 billion. 
A)  $1,540 billion. 
B)  $2,460 billion. 
C)  $2,430 billion. 
D)  $1,450 billion. 
E)  $1,420 billion.

Question 3

GDP:

Accepted Answer

A)  is the dollar value of all the final goods and services produced within the borders of a nation. 
B)  includes intermediate and final goods and services. 
C)  minus an allowance for depreciation of fixed capital equals GNP. 
D)  is a less-than-perfect measure of social well-being because it does not include exports and imports. 
E)  all of the above. 
A)  is the dollar value of all the final goods and services produced within the borders of a nation. 
B)  includes intermediate and final goods and services. 
C)  minus an allowance for depreciation of fixed capital equals GNP. 
D)  is a less-than-perfect measure of social well-being because it does not include exports and imports. 
E)  all of the above.

Question 4

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true ?

Accepted Answer

A)  GDP is a "flow" concept. 
B)  The purchase prices of both intermediate goods and final goods are included in GDP. 
C)  GDP measures economic welfare. 
D)  GDP is a measure of changes in the general level of prices. 
A)  GDP is a "flow" concept. 
B)  The purchase prices of both intermediate goods and final goods are included in GDP. 
C)  GDP measures economic welfare. 
D)  GDP is a measure of changes in the general level of prices.

Question 6

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 7

Net exports:

Accepted Answer

A)  will increase if exports of goods decline. 
B)  will increase if imports of goods rise. 
C)  in our GDP accounts permit estimation of foreign ownership of American businesses. 
D)  include budgetary outlays of the federal government. 
E)  is the net effect of the foreign trade sector on GDP. 
A)  will increase if exports of goods decline. 
B)  will increase if imports of goods rise. 
C)  in our GDP accounts permit estimation of foreign ownership of American businesses. 
D)  include budgetary outlays of the federal government. 
E)  is the net effect of the foreign trade sector on GDP.

Question 8

The market value of all final goods and services in an economy produced by resources owned by people of that economy:

Accepted Answer

A)  personal income. 
B)  national income. 
C)  capital income. 
D)  gross national product. 
E)  gross domestic product. 
A)  personal income. 
B)  national income. 
C)  capital income. 
D)  gross national product. 
E)  gross domestic product.

Question 9

The largest component of GDP is:

Accepted Answer

A)  personal consumption expenditures. 
B)  government spending. 
C)  durable goods. 
D)  net exports. 
E)  gross private domestic investment. 
A)  personal consumption expenditures. 
B)  government spending. 
C)  durable goods. 
D)  net exports. 
E)  gross private domestic investment.

Question 10

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

Accepted Answer

A)  $5,178 billion. 
B)  $6,450 billion. 
C)  $5,740 billion. 
D)  $7,740 billion. 
E)  $8,350 billion. 
A)  $5,178 billion. 
B)  $6,450 billion. 
C)  $5,740 billion. 
D)  $7,740 billion. 
E)  $8,350 billion.

Question 11

Because GDP does not account for improvements in the quality of goods, the GDP calculation:

Accepted Answer

A)  tends to overstate the true value of output in the United States. 
B)  tends to understate the true value of output in the United States. 
C)  provides an accurate value of output in the United States. 
D)  provides the best measure of output in the United States. 
E)  measures the value correctly because price changes always capture the value of quality changes. 
A)  tends to overstate the true value of output in the United States. 
B)  tends to understate the true value of output in the United States. 
C)  provides an accurate value of output in the United States. 
D)  provides the best measure of output in the United States. 
E)  measures the value correctly because price changes always capture the value of quality changes.

Question 12

The income that people receive is called:

Accepted Answer

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

Question 13

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 14

In the circular flow model, money flows from the business sector to the household sector through the:

Accepted Answer

A)  product market. 
B)  capital market. 
C)  goods market. 
D)  services market. 
E)  resource market. 
A)  product market. 
B)  capital market. 
C)  goods market. 
D)  services market. 
E)  resource market.

Question 15

National income (NI) is the total income earned by resource owners, including wages, rents, interest, and profits.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 11-2  Gross domestic product data   As shown in Exhibit 11-2, total expenditures by households for domestically produced goods is:

Accepted Answer

A)  $500 billion. 
B)  $50 billion. 
C)  $300 billion. 
D)  $15 billion. 
A)  $500 billion. 
B)  $50 billion. 
C)  $300 billion. 
D)  $15 billion.

Question 17

The expenditure approach for the calculation of GDP includes spending on:

Accepted Answer

A)  consumption, investment, durable goods and exports. 
B)  consumption, gross private domestic investment, government spending for goods and services, and exports. 
C)  consumption, gross private domestic investment, government spending for goods and services, and net exports. 
D)  consumption, net private domestic investment, government spending for goods and services, and net exports. 
E)  consumption, gross private domestic investment, all government spending including transfer payments, and net exports. 
A)  consumption, investment, durable goods and exports. 
B)  consumption, gross private domestic investment, government spending for goods and services, and exports. 
C)  consumption, gross private domestic investment, government spending for goods and services, and net exports. 
D)  consumption, net private domestic investment, government spending for goods and services, and net exports. 
E)  consumption, gross private domestic investment, all government spending including transfer payments, and net exports.

Question 18

In recent years, people have benefited from greater amounts of leisure time. This trend:

Accepted Answer

A)  has caused GDP to rise. 
B)  has caused GDP to fall. 
C)  made GDP fluctuate randomly 
D)  is not accounted for in GDP. 
A)  has caused GDP to rise. 
B)  has caused GDP to fall. 
C)  made GDP fluctuate randomly 
D)  is not accounted for in GDP.

Question 19

Gross domestic product (GDP) is a satisfactory measure of both economic "goods" and "bads".

Accepted Answer

A) True 
 B)False

Question 20

The income that people earn in resource or factor markets 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.

Exam 11: Gross Domestic Product

National income is derived from gross domestic product by subtracting:

Exhibit 11-6 GDP data (billions of dollars) In Exhibit 11-6, and using the expenditures approach, gross domestic product (GDP) equals:

GDP:

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Which of the following is true ?

Disposable personal income:

Net exports:

The market value of all final goods and services in an economy produced by resources owned by people of that economy:

The largest component of GDP is:

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

Because GDP does not account for improvements in the quality of goods, the GDP calculation:

The income that people receive is called:

Intermediate goods are goods and services used:

In the circular flow model, money flows from the business sector to the household sector through the:

National income (NI) is the total income earned by resource owners, including wages, rents, interest, and profits.

Exhibit 11-2 Gross domestic product data As shown in Exhibit 11-2, total expenditures by households for domestically produced goods is:

The expenditure approach for the calculation of GDP includes spending on:

In recent years, people have benefited from greater amounts of leisure time. This trend:

Gross domestic product (GDP) is a satisfactory measure of both economic "goods" and "bads".

The income that people earn in resource or factor markets is called:

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