Question 1

Which of the following would be included in the government consumption and investment 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 2

Gross domestic product during a period is measured by adding

Accepted Answer

A)  incomes received by households minus the sale of factor services supplied domestically. 
B)  factor payments made by domestic firms minus retained earnings and indirect business taxes. 
C)  expenditures on new final goods and services produced domestically. 
D)  the market value of all goods and services produced domestically and then subtracting net exports from that figure. 
A)  incomes received by households minus the sale of factor services supplied domestically. 
B)  factor payments made by domestic firms minus retained earnings and indirect business taxes. 
C)  expenditures on new final goods and services produced domestically. 
D)  the market value of all goods and services produced domestically and then subtracting net exports from that figure.

Question 3

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Accepted Answer

A)  Sweden and the United States 
B)  The United States because it was sold there 
C)  The United States because GM is a U.S. company 
D)  Sweden because it was produced there 
A)  Sweden and the United States 
B)  The United States because it was sold there 
C)  The United States because GM is a U.S. company 
D)  Sweden because it was produced there

Question 4

Gross domestic product (measured in real dollars) is an important social tool because it provides

Accepted Answer

A)  observers with a reasonably good index of social progress. 
B)  policy makers with a measure of the nation's total wealth. 
C)  policy makers with information about the economy's current rate of output and the direction of recent changes. 
D)  economists with a reasonably good measure of income inequality. 
A)  observers with a reasonably good index of social progress. 
B)  policy makers with a measure of the nation's total wealth. 
C)  policy makers with information about the economy's current rate of output and the direction of recent changes. 
D)  economists with a reasonably good measure of income inequality.

Question 5

Which one of the following would count as investment in the national income accounts?

Accepted Answer

A)  purchase of a new airplane by an airline 
B)  purchase of a U.S. government bond 
C)  purchase of 100 shares of Wal-Mart stock 
D)  purchase of an existing house 
A)  purchase of a new airplane by an airline 
B)  purchase of a U.S. government bond 
C)  purchase of 100 shares of Wal-Mart stock 
D)  purchase of an existing house

Question 6

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Accepted Answer

A)  a greater share of their total production in the household sector, which understates their GDP relative to developed countries. 
B)  a smaller share of their total production in the household sector, which understates their GDP relative to developed countries. 
C)  a greater share of their total production in the household sector, which overstates their GDP relative to developed countries. 
D)  a smaller share of their total production in the household sector, which overstates their GDP relative to developed countries. 
A)  a greater share of their total production in the household sector, which understates their GDP relative to developed countries. 
B)  a smaller share of their total production in the household sector, which understates their GDP relative to developed countries. 
C)  a greater share of their total production in the household sector, which overstates their GDP relative to developed countries. 
D)  a smaller share of their total production in the household sector, which overstates their GDP relative to developed countries.

Question 7

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

Accepted Answer

A)  Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B)  Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C)  Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals, they exert no impact on GDP. 
D)  Since terrorism is merely a redistribution of output, expenditures on the prevention of terrorism do not contribute to GDP. 
A)  Additional expenditures on security designed to protect individuals from terrorist attacks are subtracted from GDP. 
B)  Additional expenditures on security designed to protect individuals from terrorist attacks are added to GDP as part of output. 
C)  Since expenditures on the prevention of terrorism do not contribute to the well-being of individuals, they exert no impact on GDP. 
D)  Since terrorism is merely a redistribution of output, expenditures on the prevention of terrorism do not contribute to GDP.

Question 8

Indicate whether the following transactions would be included in GDP. If they are included, indicate which component (consumption, investment, government consumption and gross investment, or net exports) of GDP would be affected.
a.A Czech student attending school in Florida takes a summer job as a lifeguard.
b.A New York company buys welding equipment from a St. Louis firm to help it build jet fighters.
c.The IRS purchases a new computer from the GATS computer company (an American-owned business producing and operating in Germany) that will allow it to better detect income tax evasion.

Accepted Answer

a.This counts as production of consumpti

Question 9

Economists generally use GDP to measure a nation's total output because it is

Accepted Answer

A)  equal to the sales value of all transactions conducted during a period and thus can be easily calculated. 
B)  the best available measure of the true costs of producing consumer goods. 
C)  unaffected by changes in the prices of products over time. 
D)  a relatively reliable measure of the value of all final product goods and services produced during a specific time period. 
A)  equal to the sales value of all transactions conducted during a period and thus can be easily calculated. 
B)  the best available measure of the true costs of producing consumer goods. 
C)  unaffected by changes in the prices of products over time. 
D)  a relatively reliable measure of the value of all final product goods and services produced during a specific time period.

Question 10

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

Accepted Answer

A)  The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2006 sale affected neither 2005 GDP nor 2006 GDP. 
A)  The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2006 sale affected neither 2005 GDP nor 2006 GDP.

Question 11

The consumer price index (CPI) is calculated

Accepted Answer

A)  using a fixed basket of goods and, therefore, will tend to understate inflation. 
B)  using a fixed basket of goods and, therefore, will tend to overstate inflation. 
C)  using a constantly changing basket of goods and, therefore, will tend to understate inflation. 
D)  using a constantly changing basket of goods and, therefore, will tend to overstate inflation. 
A)  using a fixed basket of goods and, therefore, will tend to understate inflation. 
B)  using a fixed basket of goods and, therefore, will tend to overstate inflation. 
C)  using a constantly changing basket of goods and, therefore, will tend to understate inflation. 
D)  using a constantly changing basket of goods and, therefore, will tend to overstate inflation.

Question 12

Which of the following is GDP designed to measure?

Accepted Answer

A)  the total market value of goods and services produced domestically during the year 
B)  changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C)  the total size of the domestic underground economy 
D)  the standard of living of the average citizen 
A)  the total market value of goods and services produced domestically during the year 
B)  changes in the cost of purchasing the typical consumer market basket of goods from one year to another 
C)  the total size of the domestic underground economy 
D)  the standard of living of the average citizen

Question 13

If an economy's capital stock is greater at the end of the year than at the beginning of the year, over this period,

Accepted Answer

A)  net investment has been positive. 
B)  depreciation has exceeded net investment. 
C)  depreciation has exceeded gross investment. 
D)  net investment has exceeded gross investment. 
A)  net investment has been positive. 
B)  depreciation has exceeded net investment. 
C)  depreciation has exceeded gross investment. 
D)  net investment has exceeded gross investment.

Question 14

Use the table below to answer the following question(s). Table 7-5
  Refer to Table 7-5. Gross national product equals

Accepted Answer

A)  $1,860. 
B)  $1,910. 
C)  $1,380. 
D)  $4,170. 
A)  $1,860. 
B)  $1,910. 
C)  $1,380. 
D)  $4,170.

Question 15

Which of the following would increase U.S. GDP?

Accepted Answer

A)  Ford Motor Company begins to produce and sell cars in China. 
B)  Mercedes-Benz begins to produce and sell cars in Mississippi. 
C)  An American investor buys 100 shares of Ford stock. 
D)  An American investor purchases 100 shares of Mercedes-Benz stock. 
A)  Ford Motor Company begins to produce and sell cars in China. 
B)  Mercedes-Benz begins to produce and sell cars in Mississippi. 
C)  An American investor buys 100 shares of Ford stock. 
D)  An American investor purchases 100 shares of Mercedes-Benz stock.

Question 16

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Accepted Answer

A)  The base year is always the first year among the years for which computations are being made. 
B)  It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year. 
C)  The value of the consumer price index is always 100 in the base year. 
D)  All of the above are correct. 
A)  The base year is always the first year among the years for which computations are being made. 
B)  It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year. 
C)  The value of the consumer price index is always 100 in the base year. 
D)  All of the above are correct.

Question 17

Consider the following information for the U.S. economy (figures in billions). Table 7-2
  Refer to Table 7-2. Gross domestic product is equal to

Accepted Answer

A)  $7,761. 
B)  $11,004. 
C)  $13,557. 
D)  $14,055 
A)  $7,761. 
B)  $11,004. 
C)  $13,557. 
D)  $14,055

Question 18

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly

Accepted Answer

A)  worse off because of inflation. 
B)  worse off because the phone call is now relatively more expensive. 
C)  better off because your wage rate went up. 
D)  better off because the phone call now costs less work. 
A)  worse off because of inflation. 
B)  worse off because the phone call is now relatively more expensive. 
C)  better off because your wage rate went up. 
D)  better off because the phone call now costs less work.

Question 19

When the expenditure approach is used to measure GDP, the major components of GDP are

Accepted Answer

A)  consumption, investment, indirect business taxes, and depreciation. 
B)  employee compensation, rents, interest, self-employment income, and corporate profits. 
C)  employee compensation, corporate profits, depreciation, and indirect business taxes. 
D)  consumption, investment, government consumption and gross investment, and net exports. 
A)  consumption, investment, indirect business taxes, and depreciation. 
B)  employee compensation, rents, interest, self-employment income, and corporate profits. 
C)  employee compensation, corporate profits, depreciation, and indirect business taxes. 
D)  consumption, investment, government consumption and gross investment, and net exports.

Question 20

The annual rate of inflation is

Accepted Answer

A)  a change in real income of workers from one year to the next. 
B)  the percentage change in the general level of prices from one year to the next. 
C)  the increase in the purchasing power of the dollar from one year to the next. 
D)  the percentage increase in the total value of the goods and services produced from one year to the next. 
A)  a change in real income of workers from one year to the next. 
B)  the percentage change in the general level of prices from one year to the next. 
C)  the increase in the purchasing power of the dollar from one year to the next. 
D)  the percentage increase in the total value of the goods and services produced from one year to the next.

Which of the following would be included in the government consumption and investment component of GDP?

Gross domestic product during a period is measured by adding

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Gross domestic product (measured in real dollars) is an important social tool because it provides

Which one of the following would count as investment in the national income accounts?

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

Economists generally use GDP to measure a nation's total output because it is

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

The consumer price index (CPI) is calculated

Which of the following is GDP designed to measure?

If an economy's capital stock is greater at the end of the year than at the beginning of the year, over this period,

Use the table below to answer the following question(s). Table 7-5 Refer to Table 7-5. Gross national product equals

Which of the following would increase U.S. GDP?

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Consider the following information for the U.S. economy (figures in billions). Table 7-2 Refer to Table 7-2. Gross domestic product is equal to

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly

When the expenditure approach is used to measure GDP, the major components of GDP are

The annual rate of inflation is

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 included in the government consumption and investment component of GDP?

Gross domestic product during a period is measured by adding

General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?

Gross domestic product (measured in real dollars) is an important social tool because it provides

Which one of the following would count as investment in the national income accounts?

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Which of the following accurately indicates how the recent outbreaks of terrorism have influenced the GDP of western nations?

Economists generally use GDP to measure a nation's total output because it is

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

The consumer price index (CPI) is calculated

Which of the following is GDP designed to measure?

If an economy's capital stock is greater at the end of the year than at the beginning of the year, over this period,

Use the table below to answer the following question(s). Table 7-5 Refer to Table 7-5. Gross national product equals

Which of the following would increase U.S. GDP?

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?

Consider the following information for the U.S. economy (figures in billions). Table 7-2 Refer to Table 7-2. Gross domestic product is equal to

Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly

When the expenditure approach is used to measure GDP, the major components of GDP are

The annual rate of inflation is

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