Question 1

To measure GDP using the expenditure approach you must collect data on

Accepted Answer

A)  inflation. 
B)  exports. 
C)  wages. 
D)  saving. 
A)  inflation. 
B)  exports. 
C)  wages. 
D)  saving.

Question 2

8 Extended Problems
 $$\begin{array} { | l | c | } 
\hline  { \text { Item } } & \begin{array} { c } 
\text { Amount } \
\text { (millions of dollars) }
\end{array} \
\hline \text { Wages paid } & 100 \
\hline \text { Consumption expenditure } & 120 \
\hline \text { Taxes } & 40 \
\hline \text { Transfer payments } & 15 \
\hline \text { Profits } & 35 \
\hline \text { Investment } & 30 \
\hline \text { Government expenditure } & 50 \
\hline \text { Exports } & 30 \
\hline \text { Imports } & 40 \
\hline
\end{array}$$
-The table above shows the transaction in Pinkland last year:
a) Calculate Pinkland's GDP.
b) What approach did you use to make this calculation?

Accepted Answer

a)GDP = C + I + G + (X - M) =

Question 3

Choose the best statement.

Accepted Answer

A)  GDP equals aggregate expenditure and equals aggregate income. 
B)  An increase in government purchases increases aggregate expenditure but does not change GDP. 
C)  An increase in compensation of employees increases aggregate income but does not change GDP. 
D)  GDP always equals aggregate expenditure and sometimes equals aggregate income. 
A)  GDP equals aggregate expenditure and equals aggregate income. 
B)  An increase in government purchases increases aggregate expenditure but does not change GDP. 
C)  An increase in compensation of employees increases aggregate income but does not change GDP. 
D)  GDP always equals aggregate expenditure and sometimes equals aggregate income.

Question 4

The circular flow diagram shows that the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would lead GDP to overstate economic welfare?

Accepted Answer

A)  the existence of home-cooked meals 
B)  restaurant workers that under-report tip income 
C)  a self-employed CPA who takes a longer than normal vacation 
D)  electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution 
A)  the existence of home-cooked meals 
B)  restaurant workers that under-report tip income 
C)  a self-employed CPA who takes a longer than normal vacation 
D)  electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution

Question 6

By common definition,a recession occurs when

Accepted Answer

A)  the international deficit worsens for at least two successive quarters. 
B)  the government budget deficit exceeds the national debt. 
C)  the inflation rate exceeds 3.5 percent. 
D)  real GDP decreases for at least two successive quarters. 
A)  the international deficit worsens for at least two successive quarters. 
B)  the government budget deficit exceeds the national debt. 
C)  the inflation rate exceeds 3.5 percent. 
D)  real GDP decreases for at least two successive quarters.

Question 7

Transfer payments

Accepted Answer

A)  are included in the government expenditure category in gross domestic product. 
B)  refer to all payments made to households by governments. 
C)  refer to payments made by the government that are not made to purchase a good or service. 
D)  are made by households to firms in exchange for goods and services. 
A)  are included in the government expenditure category in gross domestic product. 
B)  refer to all payments made to households by governments. 
C)  refer to payments made by the government that are not made to purchase a good or service. 
D)  are made by households to firms in exchange for goods and services.

Question 8

Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP?

Accepted Answer

A)  the sale of bonds to finance the construction of the assembly plant 
B)  the purchase of used welding robots to assemble to vehicles 
C)  the purchase of new tires to be installed on the new vehicles 
D)  the purchase of new machine tools to manufacture the engines 
A)  the sale of bonds to finance the construction of the assembly plant 
B)  the purchase of used welding robots to assemble to vehicles 
C)  the purchase of new tires to be installed on the new vehicles 
D)  the purchase of new machine tools to manufacture the engines

Question 9

The largest component of income is proprietors' income.

Accepted Answer

A) True 
 B)False

Question 10

What is the relationship between actual and potential real GDP?

Accepted Answer

Real GDP equals potential GDP when all r

Question 11

$$\begin{array} { | l | c | } 
\hline { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Personal consumption } & 3,720 \
 \text { expenditure } \
\hline \text { Government }& 430   \
\text { expenditure } &  \
\hline \text { Gross investment } &610 \
\hline \text { Net investment } & 520 \
\hline \text { Exports } &   650\
\hline \text { Imports } &720 \
\hline
\end{array}$$
-Using the information in the table above,depreciation equals

Accepted Answer

A)  -$90 billion. 
B)  $90 billion. 
C)  -$70 billion. 
D)  some amount that cannot be determined. 
A)  -$90 billion. 
B)  $90 billion. 
C)  -$70 billion. 
D)  some amount that cannot be determined.

Question 12

Because pollution reduces economic welfare,on this count real GDP as measured

Accepted Answer

A)  decreases as pollution increases. 
B)  increases to take into account the expenditures that will be made in the future to clean up the pollution. 
C)  overstates economic welfare. 
D)  understates economic welfare. 
A)  decreases as pollution increases. 
B)  increases to take into account the expenditures that will be made in the future to clean up the pollution. 
C)  overstates economic welfare. 
D)  understates economic welfare.

Question 13

A recession occurs when real GDP decreases for at least 6 months.

Accepted Answer

A) True 
 B)False

Question 14

Define and distinguish between final goods and intermediate goods.

Accepted Answer

Final goods are those goods that are pur

Question 15

Which of the following items is not a component of the expenditure approach to measuring U.S.GDP?

Accepted Answer

A)  purchases of food made by families 
B)  social security payments made by the government 
C)  purchases of U.S.-made movies by Europeans 
D)  purchases of new homes made by families 
A)  purchases of food made by families 
B)  social security payments made by the government 
C)  purchases of U.S.-made movies by Europeans 
D)  purchases of new homes made by families

Question 16

11 Appendix: Numeric and Graphing Questions
  
-A trend is a general tendency for a variable to increase or decrease over time.

Accepted Answer

A) True 
 B)False

Question 17

The circular flow diagram indicates that

Accepted Answer

A)  households sell the services of factors of production to firms. 
B)  firms buy the services of factors of production from the government. 
C)  households sell goods and services to the government. 
D)  firms buy goods and services from households. 
A)  households sell the services of factors of production to firms. 
B)  firms buy the services of factors of production from the government. 
C)  households sell goods and services to the government. 
D)  firms buy goods and services from households.

Question 18

Purchasing power parity prices are used to construct GDP data that

Accepted Answer

A)  do not omit the underground economy. 
B)  can be used to make more valid comparisons between one country and another. 
C)  is a proper measure of economic welfare. 
D)  adjust for differences in population. 
A)  do not omit the underground economy. 
B)  can be used to make more valid comparisons between one country and another. 
C)  is a proper measure of economic welfare. 
D)  adjust for differences in population.

Question 19

Goods that are produced this year,stored in inventories,and then sold to consumers next year

Accepted Answer

A)  count in this year's GDP. 
B)  count in next year's GDP. 
C)  count in both this year's and next year's GDP. 
D)  are not counted as a part of GDP. 
A)  count in this year's GDP. 
B)  count in next year's GDP. 
C)  count in both this year's and next year's GDP. 
D)  are not counted as a part of GDP.

Question 20

Gross Domestic Product is equal to the sum of consumption expenditure,investment,net exports,and ________.

Accepted Answer

A)  government expenditures on goods and services 
B)  saving 
C)  profits 
D)  net taxes 
A)  government expenditures on goods and services 
B)  saving 
C)  profits 
D)  net taxes

To measure GDP using the expenditure approach you must collect data on

Choose the best statement.

The circular flow diagram shows that the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services.

Which of the following would lead GDP to overstate economic welfare?

By common definition,a recession occurs when

Transfer payments

Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP?

The largest component of income is proprietors' income.

What is the relationship between actual and potential real GDP?

Component Amount (billions of dollars) Personal consumption 3,720 expenditure Government 430 expenditure Gross investment 610 Net investment 520 Exports 650 Imports 720 -Using the information in the table above,depreciation equals

Because pollution reduces economic welfare,on this count real GDP as measured

A recession occurs when real GDP decreases for at least 6 months.

Define and distinguish between final goods and intermediate goods.

Which of the following items is not a component of the expenditure approach to measuring U.S.GDP?

11 Appendix: Numeric and Graphing Questions -A trend is a general tendency for a variable to increase or decrease over time.

The circular flow diagram indicates that

Purchasing power parity prices are used to construct GDP data that

Goods that are produced this year,stored in inventories,and then sold to consumers next year

Gross Domestic Product is equal to the sum of consumption expenditure,investment,net exports,and ________.

What Is Economics

The Economic Problem

Demand and Supply

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 4: Measuring GDP and Economic Growth

To measure GDP using the expenditure approach you must collect data on

Choose the best statement.

The circular flow diagram shows that the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services.

Which of the following would lead GDP to overstate economic welfare?

By common definition,a recession occurs when

Transfer payments

Which of the following expenditures associated with the production of a new high-performance SUV will be directly included in GDP?

The largest component of income is proprietors' income.

What is the relationship between actual and potential real GDP?

Component Amount (billions of dollars) Personal consumption 3,720 expenditure Government 430 expenditure Gross investment 610 Net investment 520 Exports 650 Imports 720 -Using the information in the table above,depreciation equals

Because pollution reduces economic welfare,on this count real GDP as measured

A recession occurs when real GDP decreases for at least 6 months.

Define and distinguish between final goods and intermediate goods.

Which of the following items is not a component of the expenditure approach to measuring U.S.GDP?

11 Appendix: Numeric and Graphing Questions -A trend is a general tendency for a variable to increase or decrease over time.

The circular flow diagram indicates that

Purchasing power parity prices are used to construct GDP data that

Goods that are produced this year,stored in inventories,and then sold to consumers next year

Gross Domestic Product is equal to the sum of consumption expenditure,investment,net exports,and ________.

What Is Economics

The Economic Problem

Demand and Supply

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, The Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters