Question 1

Which of the following would be counted in the calculation of GDP?

Accepted Answer

A)  the sale of a rare, old coin to a coin collector 
B)  the damage to a house caused by a hurricane 
C)  the brokerage commission from the sale of 100 shares of Microsoft stock 
D)  the sale of cocaine in the black market 
A)  the sale of a rare, old coin to a coin collector 
B)  the damage to a house caused by a hurricane 
C)  the brokerage commission from the sale of 100 shares of Microsoft stock 
D)  the sale of cocaine in the black market

Question 2

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

Accepted Answer

A)  fails to account for consumer spending on housing. 
B)  accounts only for consumer spending on food, clothing, and energy. 
C)  fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D)  fails to account for the introduction of new goods. 
A)  fails to account for consumer spending on housing. 
B)  accounts only for consumer spending on food, clothing, and energy. 
C)  fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods. 
D)  fails to account for the introduction of new goods.

Question 3

U.S. exports are

Accepted Answer

A)  not included in U.S. GDP because they are consumed abroad 
B)  included in U.S. GDP because they are produced domestically 
C)  included in U.S. GDP because they represent an increase in inventories 
D)  included in U.S. GDP as government purchases because the government decides what goods may be exported 
E)  not included in U.S. GDP because they are not subject to a tariff 
A)  not included in U.S. GDP because they are consumed abroad 
B)  included in U.S. GDP because they are produced domestically 
C)  included in U.S. GDP because they represent an increase in inventories 
D)  included in U.S. GDP as government purchases because the government decides what goods may be exported 
E)  not included in U.S. GDP because they are not subject to a tariff

Question 4

Because GDP does not fully 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)  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)  measures the value correctly because price changes always capture the value of quality changes.

Question 5

U.S. imports are

Accepted Answer

A)  not added to U.S. GDP because they are produced abroad 
B)  added to U.S. GDP because they are consumed domestically 
C)  added to U.S. GDP because they represent an increase in inventories 
D)  added to U.S. GDP as government purchases because the government decides what goods may be imported 
E)  not added to U.S. GDP because they are intermediate goods 
A)  not added to U.S. GDP because they are produced abroad 
B)  added to U.S. GDP because they are consumed domestically 
C)  added to U.S. GDP because they represent an increase in inventories 
D)  added to U.S. GDP as government purchases because the government decides what goods may be imported 
E)  not added to U.S. GDP because they are intermediate goods

Question 6

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Accepted Answer

A)  producers are likely to change the number of goods they sell from year to year. 
B)  producers will generally reduce the quality of goods as prices increase over time. 
C)  consumers will tend to substitute away from goods that become more expensive. 
D)  consumers will usually reduce their consumption of goods when they become relatively cheaper. 
A)  producers are likely to change the number of goods they sell from year to year. 
B)  producers will generally reduce the quality of goods as prices increase over time. 
C)  consumers will tend to substitute away from goods that become more expensive. 
D)  consumers will usually reduce their consumption of goods when they become relatively cheaper.

Question 7

Madison, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

Accepted Answer

A)  in U.S. GDP, but it is not included in German GDP. 
B)  in German GDP, but it is not included in U.S. GDP. 
C)  in both German GDP and U.S. GDP. 
D)  in neither German GDP nor U.S. GDP. 
A)  in U.S. GDP, but it is not included in German GDP. 
B)  in German GDP, but it is not included in U.S. GDP. 
C)  in both German GDP and U.S. GDP. 
D)  in neither German GDP nor U.S. GDP.

Question 8

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

Accepted Answer

A)  opportunity cost approach. 
B)  resource cost-income approach. 
C)  expenditure approach. 
D)  monetarist approach. 
A)  opportunity cost approach. 
B)  resource cost-income approach. 
C)  expenditure approach. 
D)  monetarist approach.

Question 9

Which of the following would count as an investment expenditure in national income accounting?

Accepted Answer

A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges. 
A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges.

Question 10

The dollar value of GDP increased approximately 4 percent during the year, but real GDP fell 2 percent. Which of the following best explains this data?

Accepted Answer

A)  The real capacity of the economy increased more rapidly than money output. 
B)  In the international sector, there was a balance of trade deficit of approximately 2 percent of GDP. 
C)  The inflation rate was approximately 6 percent during the year. 
D)  The general level of prices rose approximately 2 percent. 
A)  The real capacity of the economy increased more rapidly than money output. 
B)  In the international sector, there was a balance of trade deficit of approximately 2 percent of GDP. 
C)  The inflation rate was approximately 6 percent during the year. 
D)  The general level of prices rose approximately 2 percent.

Question 11

Government purchases include spending on goods and services by

Accepted Answer

A)  the federal government only. 
B)  state and federal governments only. 
C)  local, state and federal governments. 
D)  local, state and federal governments, as well household spending by employees of those governments. 
A)  the federal government only. 
B)  state and federal governments only. 
C)  local, state and federal governments. 
D)  local, state and federal governments, as well household spending by employees of those governments.

Question 12

Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 10 percent, which of the following is correct?

Accepted Answer

A)  The Jones' nominal income and real income have both fallen. 
B)  The Jones' nominal income and real income have both risen. 
C)  The Jones' nominal income has increased and their real income has fallen. 
D)  The Jones' nominal income has decreased and their real income has risen. 
A)  The Jones' nominal income and real income have both fallen. 
B)  The Jones' nominal income and real income have both risen. 
C)  The Jones' nominal income has increased and their real income has fallen. 
D)  The Jones' nominal income has decreased and their real income has risen.

Question 13

Which one of the following events will leave GDP unchanged?

Accepted Answer

A)  You pay $500 to repair your car damaged in an accident. 
B)  You buy a new domestic car to replace one that was stolen. 
C)  You lose $500 playing blackjack with friends. 
D)  You work extra hours this month to help make up for the money you lost playing blackjack. 
A)  You pay $500 to repair your car damaged in an accident. 
B)  You buy a new domestic car to replace one that was stolen. 
C)  You lose $500 playing blackjack with friends. 
D)  You work extra hours this month to help make up for the money you lost playing blackjack.

Question 14

If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, the

Accepted Answer

A)  price level must have increased approximately 2 percent compared to the prior year. 
B)  price level must have decreased approximately 2 percent compared to the prior year. 
C)  price level must have decreased approximately 50 percent compared to the prior year. 
D)  unemployment rate must have increased during the year. 
A)  price level must have increased approximately 2 percent compared to the prior year. 
B)  price level must have decreased approximately 2 percent compared to the prior year. 
C)  price level must have decreased approximately 50 percent compared to the prior year. 
D)  unemployment rate must have increased during the year.

Question 15

Which of the following would increase the GDP of the United States?

Accepted Answer

A)  A resident of California buys a case of wine from a winery in France. 
B)  A resident of Germany buys a software program from a company in Washington. 
C)  A resident of Florida spends $3,000 on a vacation in Mexico. 
D)  A Japanese investor purchases 100 shares of a computer company located in Illinois. 
A)  A resident of California buys a case of wine from a winery in France. 
B)  A resident of Germany buys a software program from a company in Washington. 
C)  A resident of Florida spends $3,000 on a vacation in Mexico. 
D)  A Japanese investor purchases 100 shares of a computer company located in Illinois.

Question 16

One difficulty of computing the value of GDP is that there are no market prices for

Accepted Answer

A)  exports and imports. 
B)  business investments. 
C)  government goods and services. 
D)  resource values. 
A)  exports and imports. 
B)  business investments. 
C)  government goods and services. 
D)  resource values.

Question 17

Double counting in the resource cost-income approach to GDP refers to

Accepted Answer

A)  corporate income being taxed twice 
B)  the amount of income taxes paid to states that is taxable by the federal government 
C)  calculating GDP twice using the income and expenditures methods 
D)  adding the value of exports to GDP and subtracting the value of imports 
E)  counting the total value of a final output in addition to the value of the inputs used to make it 
A)  corporate income being taxed twice 
B)  the amount of income taxes paid to states that is taxable by the federal government 
C)  calculating GDP twice using the income and expenditures methods 
D)  adding the value of exports to GDP and subtracting the value of imports 
E)  counting the total value of a final output in addition to the value of the inputs used to make it

Question 18

Determine whether each of the following transactions will be counted in the 2005 GDP of the United States. If the transaction is counted, identify which expenditure component (personal consumption, gross investment, government consumption and gross investment, or net exports) will be affected.
a.Norm, a frequent visitor to a local bar, purchases a Budweiser beer. (Budweiser beer is domestically produced.)
b.The owner of the local bar purchases a new domestically made cooler unit in which to store his beer.
c.Carla, a U.S. foreign exchange student, works her way through college in Germany as a waitress in a bar.
d.On her night off, Carla purchases a Budweiser beer for her friend in the German bar.

Accepted Answer

a.This is counted in U.S. GDP as a perso

Question 19

Which of the following events will increase GDP?

Accepted Answer

A)  losing $500 playing blackjack in your dorm 
B)  selling an antique writing desk for $500 cash 
C)  a burglar stealing your CD player 
D)  the police department hiring an extra detective to track down the burglar who stole your CD player 
A)  losing $500 playing blackjack in your dorm 
B)  selling an antique writing desk for $500 cash 
C)  a burglar stealing your CD player 
D)  the police department hiring an extra detective to track down the burglar who stole your CD player

Question 20

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000
Aiden's 2005 money income = $55,000
2004 CPI = 120.0
2005 CPI = 128.0

Accepted Answer

A)  zero 
B)  3.1 percent 
C)  6.7 percent 
D)  10 percent 
A)  zero 
B)  3.1 percent 
C)  6.7 percent 
D)  10 percent

Which of the following would be counted in the calculation of GDP?

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

U.S. exports are

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

U.S. imports are

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Madison, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

Which of the following would count as an investment expenditure in national income accounting?

The dollar value of GDP increased approximately 4 percent during the year, but real GDP fell 2 percent. Which of the following best explains this data?

Government purchases include spending on goods and services by

Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 10 percent, which of the following is correct?

Which one of the following events will leave GDP unchanged?

If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, the

Which of the following would increase the GDP of the United States?

One difficulty of computing the value of GDP is that there are no market prices for

Double counting in the resource cost-income approach to GDP refers to

Which of the following events will increase GDP?

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000 Aiden's 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 7: Taking the Nations Economic Pulse

Which of the following would be counted in the calculation of GDP?

One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

U.S. exports are

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

U.S. imports are

A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because

Madison, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

Which of the following would count as an investment expenditure in national income accounting?

The dollar value of GDP increased approximately 4 percent during the year, but real GDP fell 2 percent. Which of the following best explains this data?

Government purchases include spending on goods and services by

Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 10 percent, which of the following is correct?

Which one of the following events will leave GDP unchanged?

If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, the

Which of the following would increase the GDP of the United States?

One difficulty of computing the value of GDP is that there are no market prices for

Double counting in the resource cost-income approach to GDP refers to

Which of the following events will increase GDP?

Given the following figures, by approximately what percentage did Aiden's real income increase between 2004 and 2005? Aiden's 2004 money income = $50,000 Aiden's 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters