Question 1

Which of the following is true of real GDP?

Accepted Answer

A)  It measures a nation's output in terms of current year prices. 
B)  It measures a nation's output in constant prices. 
C)  It measures the degree of change in the general price level in an economy. 
D)  It measures the change in the value of an economy's output. 
E)  It measures the value of both intermediate and final goods and services produced in an economy. 
A)  It measures a nation's output in terms of current year prices. 
B)  It measures a nation's output in constant prices. 
C)  It measures the degree of change in the general price level in an economy. 
D)  It measures the change in the value of an economy's output. 
E)  It measures the value of both intermediate and final goods and services produced in an economy.

Question 2

Which of the following can be a valid reason for Canada's GDP exceeding its GNP in 2001?

Accepted Answer

A)  Net factor income from abroad in Canada was negative. 
B)  Canada's GNP measurements were flawed. 
C)  Canada's indirect business taxes were exceptionally high. 
D)  The World Bank underestimated Canada's net exports. 
E)  Canada's residents received more foreign aid than they could spend. 
A)  Net factor income from abroad in Canada was negative. 
B)  Canada's GNP measurements were flawed. 
C)  Canada's indirect business taxes were exceptionally high. 
D)  The World Bank underestimated Canada's net exports. 
E)  Canada's residents received more foreign aid than they could spend.

Question 3

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation) for the years 1995 and 2003.?
  
-Refer to Table 5.6. Calculate the nominal GDP for 1995.

Accepted Answer

A)  $223,000 
B)  $254,000 
C)  $448,000 
D)  $520,000 
E)  $110,000 
A)  $223,000 
B)  $254,000 
C)  $448,000 
D)  $520,000 
E)  $110,000

Question 4

Bill Gates' recent purchase of a new Rolls-Royce automobile produced in Great Britain will:

Accepted Answer

A)  increase the gross domestic product of the United States. 
B)  have no effect on either country's GDP. 
C)  decrease Great Britain's GDP. 
D)  increase the net export component of U.S. gross domestic product. 
E)  have to be subtracted from the U.S. GDP. 
A)  increase the gross domestic product of the United States. 
B)  have no effect on either country's GDP. 
C)  decrease Great Britain's GDP. 
D)  increase the net export component of U.S. gross domestic product. 
E)  have to be subtracted from the U.S. GDP.

Question 5

Productive activity in the underground economy:

Accepted Answer

A)  results in an overstatement of actual income and production in the national accounting system. 
B)  consists of unrecorded cash transactions. 
C)  is estimated and included in the national income accounting system. 
D)  poses no problem for the measurement of gross domestic product. 
E)  does not affect GDP but is included in the value-added computations. 
A)  results in an overstatement of actual income and production in the national accounting system. 
B)  consists of unrecorded cash transactions. 
C)  is estimated and included in the national income accounting system. 
D)  poses no problem for the measurement of gross domestic product. 
E)  does not affect GDP but is included in the value-added computations.

Question 6

Which of the following would be included in the calculation of the GDP for the year 2010?

Accepted Answer

A)  Purchase of a 2004 model Volkswagen sedan in 2010 
B)  Swapping of baseball cards among two college students 
C)  Car repairs done by a person 
D)  Fresh lemonade sold at a local diner 
E)  A lamp sold at a garage sale 
A)  Purchase of a 2004 model Volkswagen sedan in 2010 
B)  Swapping of baseball cards among two college students 
C)  Car repairs done by a person 
D)  Fresh lemonade sold at a local diner 
E)  A lamp sold at a garage sale

Question 7

Which of the following industrial countries experienced a relatively slower growth of real GDP in the latter half of the 1990s?

Accepted Answer

A)  Canada 
B)  United States 
C)  Italy 
D)  France 
E)  Japan 
A)  Canada 
B)  United States 
C)  Italy 
D)  France 
E)  Japan

Question 8

Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?

Accepted Answer

A)  Imports 
B)  Consumption 
C)  Exports 
D)  Investment 
E)  Government spending 
A)  Imports 
B)  Consumption 
C)  Exports 
D)  Investment 
E)  Government spending

Question 9

Which of the following is true of nominal GDP?

Accepted Answer

A)  It acts as an indicator of the general price level in the economy. 
B)  It measures the real level of output in the economy. 
C)  It measures national output based on the current year's prices. 
D)  It tends to rise by a smaller amount than real GDP when the general price level increases. 
E)  It measures changes in the output of intermediate goods and services. 
A)  It acts as an indicator of the general price level in the economy. 
B)  It measures the real level of output in the economy. 
C)  It measures national output based on the current year's prices. 
D)  It tends to rise by a smaller amount than real GDP when the general price level increases. 
E)  It measures changes in the output of intermediate goods and services.

Question 10

The table given below shows various stages of production of a Corvette, a sports car produced by General Motors Company (GMC):?
  
-According to Table 5.2, the contribution to GDP from the production of this car is:

Accepted Answer

A)  $2,350. 
B)  $16,300. 
C)  $19,700. 
D)  $36,000. 
E)  $59,550. 
A)  $2,350. 
B)  $16,300. 
C)  $19,700. 
D)  $36,000. 
E)  $59,550.

Question 11

Refer to Table 5.7. By what percentage did the price of soda increase from the third to the fourth year?

Accepted Answer

A)  15 percent 
B)  30 percent 
C)  35 percent 
D)  18 percent 
E)  65 percent 
A)  15 percent 
B)  30 percent 
C)  35 percent 
D)  18 percent 
E)  65 percent

Question 12

The national income accounting system provides a measure of:

Accepted Answer

A)  only the total amount of profits made by business firms. 
B)  the total value of all inputs used in production. 
C)  the government budget surplus and deficit. 
D)  the net exports of a nation. 
E)  the output of an entire economy. 
A)  only the total amount of profits made by business firms. 
B)  the total value of all inputs used in production. 
C)  the government budget surplus and deficit. 
D)  the net exports of a nation. 
E)  the output of an entire economy.

Question 13

The stock of unused goods held by a firm is called a(n):

Accepted Answer

A)  depreciation. 
B)  supplement. 
C)  deadweight loss. 
D)  excess capacity. 
E)  inventory. 
A)  depreciation. 
B)  supplement. 
C)  deadweight loss. 
D)  excess capacity. 
E)  inventory.

Question 14

Suppose the current price of DVDs is $16, while its base-year price is $11.50. The value of the price index for the current year is approximately:

Accepted Answer

A)  139 
B)  39 
C)  25 
D)  160 
E)  172 
A)  139 
B)  39 
C)  25 
D)  160 
E)  172

Question 15

Which of the following must be included in the calculation of GDP?

Accepted Answer

A)  The sale of a used car to an auto dealer 
B)  Bartering lawn care services for car washes 
C)  A father staying at home to attend to his child 
D)  The sale of an illegal cable box 
E)  Payment made for a SAT preparation class 
A)  The sale of a used car to an auto dealer 
B)  Bartering lawn care services for car washes 
C)  A father staying at home to attend to his child 
D)  The sale of an illegal cable box 
E)  Payment made for a SAT preparation class

Question 16

The consumer price index [CPI] is considered the best measure of the cost of living of individuals in a country.

Accepted Answer

A) True 
 B)False

Question 17

Personal income and property taxes paid by individuals are not included in the income approach of gross domestic product calculation.

Accepted Answer

A) True 
 B)False

Question 18

The circular flow diagram shows the flow of money and goods and services between households, firms, government, and foreign countries.

Accepted Answer

A) True 
 B)False

Question 19

A reduction in the value of capital goods over time due to their use in production is called:

Accepted Answer

A)  amortization. 
B)  erosion. 
C)  consumption. 
D)  investment. 
E)  depreciation. 
A)  amortization. 
B)  erosion. 
C)  consumption. 
D)  investment. 
E)  depreciation.

Question 20

Depreciation must be subtracted from the calculation of gross domestic product.

Accepted Answer

A) True 
 B)False

Exam 5: National Income Accounting

Which of the following is true of real GDP?

Which of the following can be a valid reason for Canada's GDP exceeding its GNP in 2001?

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation) for the years 1995 and 2003.? -Refer to Table 5.6. Calculate the nominal GDP for 1995.

Bill Gates' recent purchase of a new Rolls-Royce automobile produced in Great Britain will:

Productive activity in the underground economy:

Which of the following would be included in the calculation of the GDP for the year 2010?

Which of the following industrial countries experienced a relatively slower growth of real GDP in the latter half of the 1990s?

Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?

Which of the following is true of nominal GDP?

The table given below shows various stages of production of a Corvette, a sports car produced by General Motors Company (GMC):? -According to Table 5.2, the contribution to GDP from the production of this car is:

Refer to Table 5.7. By what percentage did the price of soda increase from the third to the fourth year?

The national income accounting system provides a measure of:

The stock of unused goods held by a firm is called a(n):

Suppose the current price of DVDs is $16, while its base-year price is $11.50. The value of the price index for the current year is approximately:

Which of the following must be included in the calculation of GDP?

The consumer price index [CPI] is considered the best measure of the cost of living of individuals in a country.

Personal income and property taxes paid by individuals are not included in the income approach of gross domestic product calculation.

The circular flow diagram shows the flow of money and goods and services between households, firms, government, and foreign countries.

A reduction in the value of capital goods over time due to their use in production is called:

Depreciation must be subtracted from the calculation of gross domestic product.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

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