Question 1

Fixed investment refers to investment in stocks, bonds, and improvements to land.

Accepted Answer

A) True 
 B)False

Question 2

Why is it important to distinguish nominal GDP from real GDP?

Accepted Answer

A distinction between nominal GDP and re

Question 3

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP? ​

Accepted Answer

A)  ​ Purchases of products such as wine, beer, hard liquor, and cigarettes. 
B)  ​ Secondhand transactions, such as when a used car is sold. 
C)  ​ New purchase that a resident of one state makes in a different state. 
D)  ​ Purchases of necessities such as groceries and rent. 
A)  ​ Purchases of products such as wine, beer, hard liquor, and cigarettes. 
B)  ​ Secondhand transactions, such as when a used car is sold. 
C)  ​ New purchase that a resident of one state makes in a different state. 
D)  ​ Purchases of necessities such as groceries and rent.

Question 4

The effect of the Environment Protection Agency (EPA) ordering a firm to clean-up damages from pollution would have which of the following effects?

Accepted Answer

A)  GDP would increase. 
B)  GDP would decrease. 
C)  GDP remains unchanged. 
A)  GDP would increase. 
B)  GDP would decrease. 
C)  GDP remains unchanged.

Question 5

The expenditure approach measures GDP by adding the spending of households, businesses, government, and foreigners.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following expenditures would not be included in GDP?

Accepted Answer

A)  Purchase of a new lawnmower. 
B)  Purchase of a silver cup previously sold new in 1950. 
C)  Purchase of a ticket to the latest movie. 
D)  All of the above would be counted in GDP. 
A)  Purchase of a new lawnmower. 
B)  Purchase of a silver cup previously sold new in 1950. 
C)  Purchase of a ticket to the latest movie. 
D)  All of the above would be counted in GDP.

Question 7

All final goods and services that make up GDP can be expressed in the form:

Accepted Answer

A)  GDP = C + I − G + (X + M). 
B)  GDP = C + I + G + (X + M). 
C)  GDP = C + I + G + (X − M). 
D)  GDP = C + I + (X − M). 
E)  GDP = C + I + G. 
A)  GDP = C + I − G + (X + M). 
B)  GDP = C + I + G + (X + M). 
C)  GDP = C + I + G + (X − M). 
D)  GDP = C + I + (X − M). 
E)  GDP = C + I + G.

Question 8

If Lacy buys a smoothie at the corner store, which of the following best relates this transaction to the circular flow model?

Accepted Answer

A)  Goods flow from firms and money flows from households through the product markets. 
B)  Resources (land, labor, or capital) flows from households, and money flows from business in the product markets. 
C)  Income flows from the factor markets, and goods flow into the factor markets. 
D)  Resources flow into households, and back into the goods and services markets. 
A)  Goods flow from firms and money flows from households through the product markets. 
B)  Resources (land, labor, or capital) flows from households, and money flows from business in the product markets. 
C)  Income flows from the factor markets, and goods flow into the factor markets. 
D)  Resources flow into households, and back into the goods and services markets.

Question 9

Disposable personal income measures the after-tax income received by households.

Accepted Answer

A) True 
 B)False

Question 10

In an economy with persistent inflation,

Accepted Answer

A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall. 
A)  real GDP will grow faster than nominal GDP. 
B)  nominal GDP will grow faster than real GDP. 
C)  nominal and real GDP will grow at the same rate. 
D)  nominal and real GDP will both fall.

Question 11

Based on the circular flow model, goods and services flow from:

Accepted Answer

A)  households to businesses in product markets. 
B)  businesses to households in product markets. 
C)  households to businesses in factor markets. 
D)  businesses to households in factor markets. 
A)  households to businesses in product markets. 
B)  businesses to households in product markets. 
C)  households to businesses in factor markets. 
D)  businesses to households in factor markets.

Question 12

Exhibit 11-7  GDP data (billions of dollars)   In Exhibit 11-7, national income (NI) equals:

Accepted Answer

A)  $3,628 billion. 
B)  $3,706 billion. 
C)  $4,446 billion. 
D)  $3,550 billion. 
E)  $5,344 billion. 
A)  $3,628 billion. 
B)  $3,706 billion. 
C)  $4,446 billion. 
D)  $3,550 billion. 
E)  $5,344 billion.

Question 13

If you buy a book of U.S. postage stamps to use to mail love letters to your sweetheart, 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 14

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

Accepted Answer

A)  -$100 billion. 
B)  $150 billion. 
C)  $250 billion. 
D)  -$50 billion. 
E)  -$60 billion. 
A)  -$100 billion. 
B)  $150 billion. 
C)  $250 billion. 
D)  -$50 billion. 
E)  -$60 billion.

Question 15

Which of the following is included in GDP?

Accepted Answer

A)  The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter. 
B)  The value of unpaid-for volunteer time. 
C)  The unpaid-for services provided by the natural environment, such as breathable air. 
D)  Net exports: (value of exports − value of imports). 
A)  The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter. 
B)  The value of unpaid-for volunteer time. 
C)  The unpaid-for services provided by the natural environment, such as breathable air. 
D)  Net exports: (value of exports − value of imports).

Question 16

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

Accepted Answer

A)  $5,127 billion. 
B)  $5,608 billion. 
C)  $6,254 billion. 
D)  $6,495 billion. 
E)  $7,082 billion. 
A)  $5,127 billion. 
B)  $5,608 billion. 
C)  $6,254 billion. 
D)  $6,495 billion. 
E)  $7,082 billion.

Question 17

Gross domestic product (GDP) is defined as:

Accepted Answer

A)  the market value of all final goods and services produced within the borders of a nation. 
B)  incomes received by all a nation's households. 
C)  the quantity of each good and service produced by U.S. residents. 
D)  none of the above. 
A)  the market value of all final goods and services produced within the borders of a nation. 
B)  incomes received by all a nation's households. 
C)  the quantity of each good and service produced by U.S. residents. 
D)  none of the above.

Question 18

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 19

Exhibit 11-9  GDP data (billions of dollars)   In Exhibit 11-9, disposable personal income (DI) equals:

Accepted Answer

A)  $5,810 billion. 
B)  $7,710 billion. 
C)  $5,910 billion. 
D)  $5,310 billion. 
E)  $5,060 billion. 
A)  $5,810 billion. 
B)  $7,710 billion. 
C)  $5,910 billion. 
D)  $5,310 billion. 
E)  $5,060 billion.

Question 20

GDP does not count:

Accepted Answer

A)  the estimated value of homemaker production. 
B)  state and local government purchases. 
C)  spending for new homes. 
D)  changes in inventories. 
A)  the estimated value of homemaker production. 
B)  state and local government purchases. 
C)  spending for new homes. 
D)  changes in inventories.

Exam 11: Gross Domestic Product

Fixed investment refers to investment in stocks, bonds, and improvements to land.

Why is it important to distinguish nominal GDP from real GDP?

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP? ​

The effect of the Environment Protection Agency (EPA) ordering a firm to clean-up damages from pollution would have which of the following effects?

The expenditure approach measures GDP by adding the spending of households, businesses, government, and foreigners.

Which of the following expenditures would not be included in GDP?

All final goods and services that make up GDP can be expressed in the form:

If Lacy buys a smoothie at the corner store, which of the following best relates this transaction to the circular flow model?

Disposable personal income measures the after-tax income received by households.

In an economy with persistent inflation,

Based on the circular flow model, goods and services flow from:

Exhibit 11-7 GDP data (billions of dollars) In Exhibit 11-7, national income (NI) equals:

If you buy a book of U.S. postage stamps to use to mail love letters to your sweetheart, the purchase is considered part of:

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

Which of the following is included in GDP?

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

Gross domestic product (GDP) is defined as:

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

Exhibit 11-9 GDP data (billions of dollars) In Exhibit 11-9, disposable personal income (DI) equals:

GDP does not count:

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

Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP?