Question 1

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Accepted Answer

A)  selling price of a product includes these taxes, which are income to the government . 
B)  selling price of a product includes these taxes, which are resource payments. 
C)  selling price of a product excludes these taxes and therefore they have to be added. 
D)  selling price includes these taxes which are actually not income to any sector of the economy. 
A)  selling price of a product includes these taxes, which are income to the government . 
B)  selling price of a product includes these taxes, which are resource payments. 
C)  selling price of a product excludes these taxes and therefore they have to be added. 
D)  selling price includes these taxes which are actually not income to any sector of the economy.

Question 2

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year, but real GDP decreased by 3 percent. Which of the following best explains these events?

Accepted Answer

A)  The money supply decreased by approximately 5 percent. 
B)  Prices fell by approximately 5 percent. 
C)  Prices increased by approximately 5 percent. 
D)  The real productive capacity of the economy increased by approximately 5 percent. 
A)  The money supply decreased by approximately 5 percent. 
B)  Prices fell by approximately 5 percent. 
C)  Prices increased by approximately 5 percent. 
D)  The real productive capacity of the economy increased by approximately 5 percent.

Question 3

As per capita GDP has risen in the United States and other countries,

Accepted Answer

A)  life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B)  life expectancy has risen but leisure time has gone down, while infant mortality and illiteracy have remained the same. 
C)  various quality of life variables have been unaffected. 
D)  most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen. 
A)  life expectancy and leisure time have also risen and infant mortality and illiteracy have gone down.. 
B)  life expectancy has risen but leisure time has gone down, while infant mortality and illiteracy have remained the same. 
C)  various quality of life variables have been unaffected. 
D)  most quality of life variables such as life expectancy and expenditures on leisure time activities have fallen.

Question 4

How much would be added to this year's GDP if you sold your four-year-old automobile for $4,000 and purchased a two-year-old model from an acquaintance for $10,000.

Accepted Answer

A)  nothing 
B)  $6,000 
C)  $10,000 
D)  $14,000 
A)  nothing 
B)  $6,000 
C)  $10,000 
D)  $14,000

Question 5

Which of the following statements about gross domestic product and gross national product is true?

Accepted Answer

A)  Gross domestic product includes income payments to foreigners for their work domestically; gross national product does not. 
B)  Gross domestic product includes the income earned abroad by domestic citizens; gross national product does not. 
C)  Gross domestic product includes exports; gross national product does not. 
D)  GDP and GNP are equal. 
A)  Gross domestic product includes income payments to foreigners for their work domestically; gross national product does not. 
B)  Gross domestic product includes the income earned abroad by domestic citizens; gross national product does not. 
C)  Gross domestic product includes exports; gross national product does not. 
D)  GDP and GNP are equal.

Question 6

Gross private domestic investment

Accepted Answer

A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery. 
A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery.

Question 7

When economists speak of changes in GDP measured in constant dollars, they mean that

Accepted Answer

A)  money GDP is constant. 
B)  the price level is constant. 
C)  a price index has been used to adjust money GDP for the effects of inflation. 
D)  the growth rate of money GDP has been adjusted for changes in population. 
A)  money GDP is constant. 
B)  the price level is constant. 
C)  a price index has been used to adjust money GDP for the effects of inflation. 
D)  the growth rate of money GDP has been adjusted for changes in population.

Question 8

A price index is designed to measure

Accepted Answer

A)  changes in the general level of employment across time periods. 
B)  changes in the quantity of output produced across time periods. 
C)  the market value of output produced during the current period with the value of output produced during an earlier time period. 
D)  the cost of buying a market basket of goods at a point in time relative to the cost of buying the same market basket during an earlier time period. 
A)  changes in the general level of employment across time periods. 
B)  changes in the quantity of output produced across time periods. 
C)  the market value of output produced during the current period with the value of output produced during an earlier time period. 
D)  the cost of buying a market basket of goods at a point in time relative to the cost of buying the same market basket during an earlier time period.

Question 9

Over time, GDP may increase as the result of either (I) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

Accepted Answer

A)  (I) will generally increase living standards, but (ii) will not. 
B)  (ii) will generally increase living standards, but (I) will not. 
C)  Both (I) and (ii) will generally increase living standards. 
D)  Neither (I) nor (ii) will generally increase living standards. 
A)  (I) will generally increase living standards, but (ii) will not. 
B)  (ii) will generally increase living standards, but (I) will not. 
C)  Both (I) and (ii) will generally increase living standards. 
D)  Neither (I) nor (ii) will generally increase living standards.

Question 10

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Accepted Answer

A)  necessarily raises GDP. 
B)  necessarily decreases GDP. 
C)  doesn't change GDP because gambling is never included in GDP. 
D)  doesn't change GDP because in either case his income is included. 
A)  necessarily raises GDP. 
B)  necessarily decreases GDP. 
C)  doesn't change GDP because gambling is never included in GDP. 
D)  doesn't change GDP because in either case his income is included.

Question 11

If nominal GDP rises from one year to the next, then

Accepted Answer

A)  the economy must be producing a larger output of goods and services. 
B)  prices at which goods and services are sold must be higher. 
C)  either output, or the general level of prices, or both must be rising. 
D)  employment and productivity must be rising. 
A)  the economy must be producing a larger output of goods and services. 
B)  prices at which goods and services are sold must be higher. 
C)  either output, or the general level of prices, or both must be rising. 
D)  employment and productivity must be rising.

Question 12

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 13

GDP during a period can be calculated by summing either

Accepted Answer

A)  the purchases of domestically produced final goods and services or the cost incurred in the production of those goods. 
B)  the amount received by business firms for consumer goods and services or the spending of business firms on investment goods and services. 
C)  all household expenditures on final goods and services or all business purchases of factors of production. 
D)  sales of goods and services to foreigners or the purchase of goods and services from foreigners 
A)  the purchases of domestically produced final goods and services or the cost incurred in the production of those goods. 
B)  the amount received by business firms for consumer goods and services or the spending of business firms on investment goods and services. 
C)  all household expenditures on final goods and services or all business purchases of factors of production. 
D)  sales of goods and services to foreigners or the purchase of goods and services from foreigners

Question 14

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115, this indicates that the general level of prices

Accepted Answer

A)  declined by 15 percent between 2005 and 2011. 
B)  increased by 15 percent each year during 2005-2011. 
C)  was approximately 15 percent higher in 2011 than in 2005. 
D)  was approximately 115 percent higher in 2011 than in 2005. 
A)  declined by 15 percent between 2005 and 2011. 
B)  increased by 15 percent each year during 2005-2011. 
C)  was approximately 15 percent higher in 2011 than in 2005. 
D)  was approximately 115 percent higher in 2011 than in 2005.

Question 15

The amount of U.S. exports purchased by the rest of the world is primarily determined by

Accepted Answer

A)  real disposable income in the United States 
B)  real disposable income in other nations 
C)  the real interest rate in other nations 
D)  the real interest rate in the United States 
E)  the government budget deficits in other nations 
A)  real disposable income in the United States 
B)  real disposable income in other nations 
C)  the real interest rate in other nations 
D)  the real interest rate in the United States 
E)  the government budget deficits in other nations

Question 16

If the cost-of-living indices were 100 in Dallas, 150 in Boston, and 220 in San Francisco, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

Accepted Answer

A)  A $80,000 job in Boston. 
B)  A $110,000 job in San Francisco. 
C)  A $50,000 job in Dallas. 
D)  A $100,000 job in San Francisco. 
A)  A $80,000 job in Boston. 
B)  A $110,000 job in San Francisco. 
C)  A $50,000 job in Dallas. 
D)  A $100,000 job in San Francisco.

Question 17

If nominal GDP increases by 4 percent, then

Accepted Answer

A)  real output has increased by 4 percent 
B)  the price level has increased by 4 percent 
C)  consumer spending must have increased by 4 percent 
D)  it is possible that all of the increase was caused by an increase in the price level 
E)  net exports increased by 4 percent 
A)  real output has increased by 4 percent 
B)  the price level has increased by 4 percent 
C)  consumer spending must have increased by 4 percent 
D)  it is possible that all of the increase was caused by an increase in the price level 
E)  net exports increased by 4 percent

Question 18

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Accepted Answer

Real GDP is nominal GDP adjusted for the

Question 19

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Accepted Answer

A)  5 percent 
B)  8 percent 
C)  60 percent 
D)  68 percent 
A)  5 percent 
B)  8 percent 
C)  60 percent 
D)  68 percent

Question 20

Geri purchases a newly constructed house built by a private contractor. Her spending on the house is included in GDP as a part of

Accepted Answer

A)  personal consumption expenditures. 
B)  depreciation. 
C)  gross private investment. 
D)  personal saving. 
A)  personal consumption expenditures. 
B)  depreciation. 
C)  gross private investment. 
D)  personal saving.

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year, but real GDP decreased by 3 percent. Which of the following best explains these events?

As per capita GDP has risen in the United States and other countries,

How much would be added to this year's GDP if you sold your four-year-old automobile for $4,000 and purchased a two-year-old model from an acquaintance for $10,000.

Which of the following statements about gross domestic product and gross national product is true?

Gross private domestic investment

When economists speak of changes in GDP measured in constant dollars, they mean that

A price index is designed to measure

Over time, GDP may increase as the result of either (I) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

If nominal GDP rises from one year to the next, then

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

GDP during a period can be calculated by summing either

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115, this indicates that the general level of prices

The amount of U.S. exports purchased by the rest of the world is primarily determined by

If the cost-of-living indices were 100 in Dallas, 150 in Boston, and 220 in San Francisco, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

If nominal GDP increases by 4 percent, then

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Geri purchases a newly constructed house built by a private contractor. Her spending on the house is included in GDP as a part of

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

Using the resource cost-income approach, indirect business taxes have to be added to get gross domestic product because the

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year, but real GDP decreased by 3 percent. Which of the following best explains these events?

As per capita GDP has risen in the United States and other countries,

How much would be added to this year's GDP if you sold your four-year-old automobile for $4,000 and purchased a two-year-old model from an acquaintance for $10,000.

Which of the following statements about gross domestic product and gross national product is true?

Gross private domestic investment

When economists speak of changes in GDP measured in constant dollars, they mean that

A price index is designed to measure

Over time, GDP may increase as the result of either (I) expansion in the quantities of goods produced or (ii) higher prices. Which of the following is true?

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

If nominal GDP rises from one year to the next, then

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

GDP during a period can be calculated by summing either

If the base year for the GDP deflator is 2005 and the value of the deflator during 2011 is 115, this indicates that the general level of prices

The amount of U.S. exports purchased by the rest of the world is primarily determined by

If the cost-of-living indices were 100 in Dallas, 150 in Boston, and 220 in San Francisco, which of the following annual pay rates for jobs would provide you with the most purchasing power over goods and services?

If nominal GDP increases by 4 percent, then

What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Geri purchases a newly constructed house built by a private contractor. Her spending on the house is included in GDP as a part of

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