Question 1

GDP is a measure of:

Accepted Answer

A)  domestic production. 
B)  changes in the general level of prices. 
C)  material well-being. 
D)  social welfare. 
A)  domestic production. 
B)  changes in the general level of prices. 
C)  material well-being. 
D)  social welfare.

Question 2

Personal income minus personal taxes is:

Accepted Answer

A)  disposable personal income. 
B)  net national income. 
C)  proprietors' income. 
D)  indirect business taxes. 
E)  savings income. 
A)  disposable personal income. 
B)  net national income. 
C)  proprietors' income. 
D)  indirect business taxes. 
E)  savings income.

Question 3

Real GDP means GDP:

Accepted Answer

A)  valued at prices in a base year. 
B)  that does not change from year to year. 
C)  corrected for changes in quality. 
D)  valued at prices at which goods are actually sold. 
A)  valued at prices in a base year. 
B)  that does not change from year to year. 
C)  corrected for changes in quality. 
D)  valued at prices at which goods are actually sold.

Question 4

Nominal GDP is greater than GDP because of the effects of inflation as measured by the GDP chain price index.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 11-3  Expenditure approach   As shown in Exhibit 11-3, total expenditures by households for domestically produced goods is:

Accepted Answer

A)  $1,000 billion. 
B)  $100 billion. 
C)  $600 billion. 
D)  $20 billion. 
A)  $1,000 billion. 
B)  $100 billion. 
C)  $600 billion. 
D)  $20 billion.

Question 6

Because of transactions which take place in the underground economy, the:

Accepted Answer

A)  GDP calculation tends to overstate the actual value of goods sold in the economy. 
B)  GDP calculation tends to accurately portray the value of goods sold in the economy. 
C)  GDP calculation tends to understate the actual value of goods sold in the economy. 
D)  value of the GDP calculation will be equal to the value of the national income calculation. 
E)  value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach. 
A)  GDP calculation tends to overstate the actual value of goods sold in the economy. 
B)  GDP calculation tends to accurately portray the value of goods sold in the economy. 
C)  GDP calculation tends to understate the actual value of goods sold in the economy. 
D)  value of the GDP calculation will be equal to the value of the national income calculation. 
E)  value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.

Question 7

Exhibit 11-3  Expenditure approach   As shown in Exhibit 11-3, net exports are:

Accepted Answer

A)  $75 billion. 
B)  $100 billion. 
C)  $20 billion. 
D)  $120 billion. 
A)  $75 billion. 
B)  $100 billion. 
C)  $20 billion. 
D)  $120 billion.

Question 8

GDP provides substantial information about an economy's income distribution.

Accepted Answer

A) True 
 B)False

Question 9

Gross domestic product is equal to the market value of all final goods and services:

Accepted Answer

A)  exchanged during a period. 
B)  produced domestically during a period. 
C)  produced by the citizens of a nation during a period. 
D)  produced domestically during a period minus the depreciation of productive assets. 
A)  exchanged during a period. 
B)  produced domestically during a period. 
C)  produced by the citizens of a nation during a period. 
D)  produced domestically during a period minus the depreciation of productive assets.

Question 10

Personal consumption expenditures:

Accepted Answer

A)  represent close to two-thirds of GDP. 
B)  are equal to personal income minus individual taxes. 
C)  include durable good purchases but not nondurable good purchases. 
D)  do not include any intangible consumption items. 
E)  include all goods and services bought by the government. 
A)  represent close to two-thirds of GDP. 
B)  are equal to personal income minus individual taxes. 
C)  include durable good purchases but not nondurable good purchases. 
D)  do not include any intangible consumption items. 
E)  include all goods and services bought by the government.

Question 11

Gross domestic product that is based on existing prices is called:

Accepted Answer

A)  nominal GDP. 
B)  current GDP. 
C)  money GDP. 
D)  all of the above. 
A)  nominal GDP. 
B)  current GDP. 
C)  money GDP. 
D)  all of the above.

Question 12

National income:

Accepted Answer

A)  represents total wages and salaries in an economy. 
B)  equals GDP minus indirect business taxes. 
C)  equals GDP minus depreciation. 
D)  equals C + I + G + (X − M). 
E)  is the value of existing capital stock used up in making goods. 
A)  represents total wages and salaries in an economy. 
B)  equals GDP minus indirect business taxes. 
C)  equals GDP minus depreciation. 
D)  equals C + I + G + (X − M). 
E)  is the value of existing capital stock used up in making goods.

Question 13

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 14

Capital goods, like factories and machinery, are classified as intermediate goods.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 11-3  Expenditure approach   As shown in Exhibit 11-3, using the expenditure approach, GDP is:

Accepted Answer

A)  $1,000 billion. 
B)  $1,500 billion. 
C)  $1,775 billion. 
D)  $2,000 billion. 
A)  $1,000 billion. 
B)  $1,500 billion. 
C)  $1,775 billion. 
D)  $2,000 billion.

Question 16

In the circular flow model, which of the following is true ?

Accepted Answer

A)  Household spending flows into the factor markets. 
B)  Household spending flows back to households. 
C)  Household spending flows into product markets. 
D)  Dollar payments for factors of production flow into households. 
A)  Household spending flows into the factor markets. 
B)  Household spending flows back to households. 
C)  Household spending flows into product markets. 
D)  Dollar payments for factors of production flow into households.

Question 17

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

Accepted Answer

A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,013 billion. 
D)  $7,082 billion. 
E)  $7,637 billion. 
A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,013 billion. 
D)  $7,082 billion. 
E)  $7,637 billion.

Question 18

Durable and nondurable goods and services lumped together in the expenditure approach to measuring GDP are called:

Accepted Answer

A)  Personal consumption. 
B)  Gross private domestic investment. 
C)  Government spending. 
D)  Inventory. 
E)  Employee compensation. 
A)  Personal consumption. 
B)  Gross private domestic investment. 
C)  Government spending. 
D)  Inventory. 
E)  Employee compensation.

Question 19

Using the expenditure approach, "gross private domestic investment" is the sum of:

Accepted Answer

A)  newly produced capital goods. 
B)  fixed investment. 
C)  changes in business inventories. 
D)  all of the above. 
A)  newly produced capital goods. 
B)  fixed investment. 
C)  changes in business inventories. 
D)  all of the above.

Question 20

In the four-sector circular flow model, households will use their incomes to do all but which one of the following?

Accepted Answer

A)  Save. 
B)  Pay taxes. 
C)  Buy domestic goods and services. 
D)  Buy imported goods and services. 
E)  Invest. 
A)  Save. 
B)  Pay taxes. 
C)  Buy domestic goods and services. 
D)  Buy imported goods and services. 
E)  Invest.

Exam 11: Gross Domestic Product

GDP is a measure of:

Personal income minus personal taxes is:

Real GDP means GDP:

Nominal GDP is greater than GDP because of the effects of inflation as measured by the GDP chain price index.

Exhibit 11-3 Expenditure approach As shown in Exhibit 11-3, total expenditures by households for domestically produced goods is:

Because of transactions which take place in the underground economy, the:

Exhibit 11-3 Expenditure approach As shown in Exhibit 11-3, net exports are:

GDP provides substantial information about an economy's income distribution.

Gross domestic product is equal to the market value of all final goods and services:

Personal consumption expenditures:

Gross domestic product that is based on existing prices is called:

National income:

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?

Capital goods, like factories and machinery, are classified as intermediate goods.

Exhibit 11-3 Expenditure approach As shown in Exhibit 11-3, using the expenditure approach, GDP is:

In the circular flow model, which of the following is true ?

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

Durable and nondurable goods and services lumped together in the expenditure approach to measuring GDP are called:

Using the expenditure approach, "gross private domestic investment" is the sum of:

In the four-sector circular flow model, households will use their incomes to do all but which one of the following?

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