Question 1

For the purpose of calculating GDP,investment is spending on

Accepted Answer

A) stocks, bonds, and other financial assets. 
B) real estate and financial assets. 
C) new capital equipment, inventories, and structures, including new housing. 
D) capital equipment, inventories, and structures, excluding household purchases of new housing. 
A) stocks, bonds, and other financial assets. 
B) real estate and financial assets. 
C) new capital equipment, inventories, and structures, including new housing. 
D) capital equipment, inventories, and structures, excluding household purchases of new housing.

Question 2

Which of the following items is counted as part of government purchases?

Accepted Answer

A) The federal government pays $2,000 in Social Security benefits to a retired person. 
B) The city of Des Moines, Iowa pays $10,000 to a tree-trimming firm to trim trees along city boulevards. 
C) The state of Iowa pays $1,000 to help a low-income family pay its medical bills. 
D) All of the above are correct. 
A) The federal government pays $2,000 in Social Security benefits to a retired person. 
B) The city of Des Moines, Iowa pays $10,000 to a tree-trimming firm to trim trees along city boulevards. 
C) The state of Iowa pays $1,000 to help a low-income family pay its medical bills. 
D) All of the above are correct.

Question 3

Table 23-3
  
-Refer to Table 23-3.Using 2006 as the base year,for 2007,

Accepted Answer

A) real GDP is $880 and the GDP deflator is 80. 
B) real GDP is $880 and the GDP deflator is 125. 
C) real GDP is $950 and the GDP deflator is 95. 
D) real GDP is $950 and the GDP deflator is 116. 
A) real GDP is $880 and the GDP deflator is 80. 
B) real GDP is $880 and the GDP deflator is 125. 
C) real GDP is $950 and the GDP deflator is 95. 
D) real GDP is $950 and the GDP deflator is 116.

Question 4

In a given year an economy has consumption of $3,000,investment of $2,000,government purchases of $1,500,exports of $500,imports of $600,taxes of $1200,transfer payments of $400,and depreciation of $300.This economy's GDP is

Accepted Answer

A) $6,400. 
B) $7,000. 
C) $7,600. 
D) $8,900. 
A) $6,400. 
B) $7,000. 
C) $7,600. 
D) $8,900.

Question 5

Retained earnings is the part of income that

Accepted Answer

A) households retain after paying taxes. 
B) businesses retain after paying taxes. 
C) corporations have earned but have not used to invest in plant, equipment, and inventories. 
D) corporations have earned but have not paid out to their owners. 
A) households retain after paying taxes. 
B) businesses retain after paying taxes. 
C) corporations have earned but have not used to invest in plant, equipment, and inventories. 
D) corporations have earned but have not paid out to their owners.

Question 6

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size.In the meantime,population grew by 40 percent and prices rose by 100 percent.What happened to real GDP per person?

Accepted Answer

A) It more than doubled. 
B) It increased, but it less than doubled. 
C) It was unchanged. 
D) It decreased. 
A) It more than doubled. 
B) It increased, but it less than doubled. 
C) It was unchanged. 
D) It decreased.

Question 7

How does U.S.gross domestic product (GDP)differ from U.S.gross national product (GNP)?

Accepted Answer

A) GNP = GDP minus losses from depreciation 
B) GNP = GDP + income earned by U.S.citizens abroad - income that foreign citizens earned in the U.S. 
C) GNP = GDP + income earned by corporations 
D) GNP = GDP - indirect business taxes + business subsidies 
A) GNP = GDP minus losses from depreciation 
B) GNP = GDP + income earned by U.S.citizens abroad - income that foreign citizens earned in the U.S. 
C) GNP = GDP + income earned by corporations 
D) GNP = GDP - indirect business taxes + business subsidies

Question 8

If someone in the United States buys a surfboard produced in Australia,that purchase is included in both the consumption component of U.S.GDP and the import component of U.S.GDP.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following components or sub-components of GDP can be either positive or negative?

Accepted Answer

A) consumers' spending on durable goods 
B) firms' spending on capital equipment 
C) net exports 
D) All of the above are correct. 
A) consumers' spending on durable goods 
B) firms' spending on capital equipment 
C) net exports 
D) All of the above are correct.

Question 10

If the GDP deflator is 200 and nominal GDP is $10,000 billion,then real GDP is

Accepted Answer

A) $5,000 billion. 
B) $2,000 billion. 
C) $50 billion. 
D) None of the above is correct. 
A) $5,000 billion. 
B) $2,000 billion. 
C) $50 billion. 
D) None of the above is correct.

Question 11

Between 1929 and 1933,NNP measured in current prices fell from $96 billion to $48 billion.Over the same period,the relevant price index fell from 100 to 75.
a.What was the percentage decline in nominal NNP from 1929 to1933?
b.What was the percentage decline in real NNP from 1929 to 1933? Show your work.

Accepted Answer

a. NNP measured in current prices is nom

Question 12

Table 23-1. The data pertain to the nation of Simplia for the year 2006.
  
-Refer to Table 23-1.Personal income for this economy is

Accepted Answer

A) $91. 
B) $81 
C) $80. 
D) $51. 
A) $91. 
B) $81 
C) $80. 
D) $51.

Question 13

How is Net National Product (NNP)calculated?

Accepted Answer

A) Saving is subtracted from the total income of a nation's citizens. 
B) Saving is subtracted from the total income of a nation's permanent residents. 
C) Depreciation losses are subtracted from the total income of a nation's citizens. 
D) Depreciation losses are subtracted from the total income of a nation's permanent residents. 
A) Saving is subtracted from the total income of a nation's citizens. 
B) Saving is subtracted from the total income of a nation's permanent residents. 
C) Depreciation losses are subtracted from the total income of a nation's citizens. 
D) Depreciation losses are subtracted from the total income of a nation's permanent residents.

Question 14

Suppose there are only two firms in an economy: Cowhide,Inc.produces leather and sells it to Couches,Inc.,which produces and sells leather furniture.With each $1,000 of leather that it buys from Cowhide,Inc.,Couches,Inc.produces a couch and sells it for $2,000.Neither firm had any inventory at the beginning of 2006.During that year,Cowhide produced enough leather for 20 couches.Couches,Inc.bought 80% of that leather for $16,000 and promised to buy the remaining 20% for $4,000 in 2007.Couches,Inc.produced 16 couches during 2006 and sold each one during that year for $2,000.What was the economy's GDP for the year?

Accepted Answer

A) $32,000 
B) $36,000 
C) $40,000 
D) $52,000 
A) $32,000 
B) $36,000 
C) $40,000 
D) $52,000

Question 15

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself,then GDP

Accepted Answer

A) necessarily rises. 
B) necessarily falls. 
C) will be unaffected because the same service is produced in either case. 
D) will be unaffected because car maintenance is not included in GDP. 
A) necessarily rises. 
B) necessarily falls. 
C) will be unaffected because the same service is produced in either case. 
D) will be unaffected because car maintenance is not included in GDP.

Question 16

If you buy a burger and fries at your favorite fast food restaurant,

Accepted Answer

A) neither GDP nor consumption will be affected because you would have eaten at home had you not bought the meal at the restaurant. 
B) GDP will be higher, but consumption spending will be unchanged. 
C) GDP will be unchanged, but consumption spending will be higher. 
D) both GDP and consumption spending will be higher. 
A) neither GDP nor consumption will be affected because you would have eaten at home had you not bought the meal at the restaurant. 
B) GDP will be higher, but consumption spending will be unchanged. 
C) GDP will be unchanged, but consumption spending will be higher. 
D) both GDP and consumption spending will be higher.

Question 17

A German citizen buys an automobile produced in the United States by a Japanese company.As a result,

Accepted Answer

A) U.S.net exports increase, U.S.GNP and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
B) U.S.net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and German GDP is unaffected. 
C) U.S.net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GDP and GNP are unaffected. 
D) U.S.net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GDP and GNP fall. 
A) U.S.net exports increase, U.S.GNP and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected. 
B) U.S.net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and German GDP is unaffected. 
C) U.S.net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GDP and GNP are unaffected. 
D) U.S.net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports decrease, and German GDP and GNP fall.

Question 18

Over time,people have come to rely more on market-produced goods and less on goods that they produce for themselves.For example,busy people with high incomes,rather than cleaning their own houses,hire people to clean their houses.By itself,this change has

Accepted Answer

A) caused GDP to fall. 
B) not caused any change in GDP. 
C) caused GDP to rise. 
D) probably changed GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted. 
A) caused GDP to fall. 
B) not caused any change in GDP. 
C) caused GDP to rise. 
D) probably changed GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

Question 19

GDP is not a perfect measure of well-being;for example,

Accepted Answer

A) GDP excludes the value of volunteer work. 
B) GDP does not address the distribution of income. 
C) GDP does not address environmental quality. 
D) All of the above are correct. 
A) GDP excludes the value of volunteer work. 
B) GDP does not address the distribution of income. 
C) GDP does not address environmental quality. 
D) All of the above are correct.

Question 20

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 $225,0000.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.

Exam 23: Measuring a Nations Income

For the purpose of calculating GDP,investment is spending on

Which of the following items is counted as part of government purchases?

Table 23-3 -Refer to Table 23-3.Using 2006 as the base year,for 2007,

In a given year an economy has consumption of $3,000,investment of $2,000,government purchases of $1,500,exports of $500,imports of $600,taxes of $1200,transfer payments of $400,and depreciation of $300.This economy's GDP is

Retained earnings is the part of income that

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size.In the meantime,population grew by 40 percent and prices rose by 100 percent.What happened to real GDP per person?

How does U.S.gross domestic product (GDP)differ from U.S.gross national product (GNP)?

If someone in the United States buys a surfboard produced in Australia,that purchase is included in both the consumption component of U.S.GDP and the import component of U.S.GDP.

Which of the following components or sub-components of GDP can be either positive or negative?

If the GDP deflator is 200 and nominal GDP is $10,000 billion,then real GDP is

Table 23-1. The data pertain to the nation of Simplia for the year 2006. -Refer to Table 23-1.Personal income for this economy is

How is Net National Product (NNP)calculated?

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself,then GDP

If you buy a burger and fries at your favorite fast food restaurant,

A German citizen buys an automobile produced in the United States by a Japanese company.As a result,

Over time,people have come to rely more on market-produced goods and less on goods that they produce for themselves.For example,busy people with high incomes,rather than cleaning their own houses,hire people to clean their houses.By itself,this change has

GDP is not a perfect measure of well-being;for example,

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 $225,0000.Which of the following statements is correct regarding the sale of the house?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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