Question 1

All changes in nominal GDP are due to price changes.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following statements is true?

Accepted Answer

A)  The inclusion of intermediate goods and services into GDP calculations would underestimate our nation's production level. 
B)  The expenditures approach sums the compensation of employees, rents, profits, net interest, and nonincome expenses for depreciation and indirect business taxes. 
C)  Real GDP has been adjusted for changes in the general level of prices due to inflation. 
D)  Real GDP equals nominal GDP multiplied by the GDP deflator. 
A)  The inclusion of intermediate goods and services into GDP calculations would underestimate our nation's production level. 
B)  The expenditures approach sums the compensation of employees, rents, profits, net interest, and nonincome expenses for depreciation and indirect business taxes. 
C)  Real GDP has been adjusted for changes in the general level of prices due to inflation. 
D)  Real GDP equals nominal GDP multiplied by the GDP deflator. C

Question 3

Suppose in a given year,GDP was $7,242 billion and the GDP chain price index for that year is 117.5.Real GDP is:

Accepted Answer

A)  $5,488 billion. 
B)  $6,163 billion. 
C)  $6,740 billion. 
D)  $7,789 billion. 
A)  $5,488 billion. 
B)  $6,163 billion. 
C)  $6,740 billion. 
D)  $7,789 billion. B

Question 4

The government (G)category of gross domestic product (GDP)excludes welfare and other transfer payments.

Accepted Answer

A) True 
 B)False

Question 5

GDP measures the economy's production of:

Accepted Answer

A)  final goods and services. 
B)  intermediate goods. 
C)  consumer goods and services. 
D)  capital goods. 
A)  final goods and services. 
B)  intermediate goods. 
C)  consumer goods and services. 
D)  capital goods.

Question 6

Which of the following would be counted as a final good for inclusion in GDP?

Accepted Answer

A)  A piece of glass bought this year by a consumer to fix a broken window. 
B)  A sheet of glass produced this year by Ford for windows in a new car. 
C)  A tire produced this year and sold to a car maker for a new car sold this year. 
D)  None of the above would be counted in GDP. 
A)  A piece of glass bought this year by a consumer to fix a broken window. 
B)  A sheet of glass produced this year by Ford for windows in a new car. 
C)  A tire produced this year and sold to a car maker for a new car sold this year. 
D)  None of the above would be counted in GDP.

Question 7

The expenditure approach for the calculation of GDP includes spending on:

Accepted Answer

A)  consumption, investment, durable goods and exports. 
B)  consumption, gross private domestic investment, government spending for goods and services, and exports. 
C)  consumption, gross private domestic investment, government spending for goods and services, and net exports. 
D)  consumption, net private domestic investment, government spending for goods and services, and net exports. 
E)  consumption, gross private domestic investment, all government spending including transfer payments, and net exports. 
A)  consumption, investment, durable goods and exports. 
B)  consumption, gross private domestic investment, government spending for goods and services, and exports. 
C)  consumption, gross private domestic investment, government spending for goods and services, and net exports. 
D)  consumption, net private domestic investment, government spending for goods and services, and net exports. 
E)  consumption, gross private domestic investment, all government spending including transfer payments, and net exports.

Question 8

To construct GDP,exports:

Accepted Answer

A)  and imports must be subtracted. 
B)  and imports must be included. 
C)  must be included and imports must be ignored. 
D)  must be included and imports must be subtracted. 
A)  and imports must be subtracted. 
B)  and imports must be included. 
C)  must be included and imports must be ignored. 
D)  must be included and imports must be subtracted.

Question 9

Which of the following would be classified as a personal consumption expenditure?

Accepted Answer

A)  All of the following. 
B)  Your purchase of a newly constructed house 
C)  Your purchase of a preowned house. 
D)  Your purchase of one share of Microsoft stock. 
E)  Your purchase of this economics course. 
A)  All of the following. 
B)  Your purchase of a newly constructed house 
C)  Your purchase of a preowned house. 
D)  Your purchase of one share of Microsoft stock. 
E)  Your purchase of this economics course.

Question 10

Gross domestic product (GDP)is a satisfactory measure of both economic "goods" and "bads".

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 11-7 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Depreciation } & \$ 438 \
\hline \text { Compensation af employees } & 2,000 \
\hline \text { Rental income } & 100 \
\hline \text { Net interest } & 300 \
\hline \text { Corparate profits } & 700 \
\hline \text { Sacial Security taxes } & 519 \
\hline \text { Transfer payments } & 650 \
\hline \text { Personal consumption exgenditures } & 2,582 \
\hline \text { Grass Private Domestic Investment } & 669 \
\hline \text { Government 5pending } & 815 \
\hline \text { Net exparts } & - 7 a \
\hline \text { Personal taxes } & 590 \
\hline \text { Indirect business taxes } & 450 \
\hline
\end{array}$$
-In Exhibit 11-7,and using the expenditures approach,gross domestic product (GDP)equals:

Accepted Answer

A)  $4,066 billion. 
B)  $4,144 billion. 
C)  $3,988 billion. 
D)  $4,884 billion. 
E)  $5,782 billion. 
A)  $4,066 billion. 
B)  $4,144 billion. 
C)  $3,988 billion. 
D)  $4,884 billion. 
E)  $5,782 billion.

Question 12

In the circular flow model,who is a seller in the factor markets and a buyer in the product markets?

Accepted Answer

A)  Businesses. 
B)  Transnational corporations. 
C)  Foreign producers who export final goods and services into the U.S. 
D)  Households. 
A)  Businesses. 
B)  Transnational corporations. 
C)  Foreign producers who export final goods and services into the U.S. 
D)  Households.

Question 13

The three components of personal consumption expenditures are:

Accepted Answer

A)  durable goods, nondurable goods, and services. 
B)  durable goods, food, and housing. 
C)  durable goods, nondurable goods, and housing. 
D)  durable goods, services, and food. 
E)  durable goods, services, and transportation. 
A)  durable goods, nondurable goods, and services. 
B)  durable goods, food, and housing. 
C)  durable goods, nondurable goods, and housing. 
D)  durable goods, services, and food. 
E)  durable goods, services, and transportation.

Question 14

The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:

Accepted Answer

A)  product market. 
B)  factor market. 
C)  savings market. 
D)  financial market. 
A)  product market. 
B)  factor market. 
C)  savings market. 
D)  financial market.

Question 15

Which of the following spending is larger for U.S.GDP?

Accepted Answer

A)  State and local government. 
B)  Federal government. 
C)  Net exports. 
D)  Change in business inventories. 
A)  State and local government. 
B)  Federal government. 
C)  Net exports. 
D)  Change in business inventories.

Question 16

GDP provides substantial information about an economy's income distribution.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 11-9 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption expenditures } & \$ 4,750 \
\hline \text { Exgarts } & 810 \
\hline \text { Govemment spending } & 1,400 \
\hline \text { Social Security taxes } & 600 \
\hline \text { Depreciation } & 450 \
\hline \text { Indirect business taxes } & 550 \
\hline \text { Imparts } & 850 \
\hline \text { Gross private domestic investment } & 900 \
\hline \text { Corparate income taxes } & 200 \
\hline \text { Persanal taxes } & 800 \
\hline \text { Corporate profits } & 50 \
\hline \text { Transfer payments } & 700 \
\hline
\end{array}$$
-In Exhibit 11-9,personal income (PI)is:

Accepted Answer

A)  $9,210 billion. 
B)  $8,510 billion. 
C)  $6,560 billion. 
D)  $6,610 billion. 
E)  $10,910 billion. 
A)  $9,210 billion. 
B)  $8,510 billion. 
C)  $6,560 billion. 
D)  $6,610 billion. 
E)  $10,910 billion.

Question 18

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 19

Personal income is:

Accepted Answer

A)  total income received by households before taxes. 
B)  the amount households have available for consumption, savings, and payment of personal taxes. 
C)  national income minus corporate profits and Social Security (FIC
A)  plus transfer payments, and other income. 
D)  all of the above. 
A)  total income received by households before taxes. 
B)  the amount households have available for consumption, savings, and payment of personal taxes. 
C)  national income minus corporate profits and Social Security (FIC
A)  plus transfer payments, and other income. 
D)  all of the above.

Question 20

Nominal values are values measured in terms of the prices at which goods and services are actually sold.

Accepted Answer

A) True 
 B)False

Exam 11: Gross Domestic Product

All changes in nominal GDP are due to price changes.

Which of the following statements is true?

Suppose in a given year,GDP was $7,242 billion and the GDP chain price index for that year is 117.5.Real GDP is:

The government (G)category of gross domestic product (GDP)excludes welfare and other transfer payments.

GDP measures the economy's production of:

Which of the following would be counted as a final good for inclusion in GDP?

The expenditure approach for the calculation of GDP includes spending on:

To construct GDP,exports:

Which of the following would be classified as a personal consumption expenditure?

Gross domestic product (GDP)is a satisfactory measure of both economic "goods" and "bads".

In the circular flow model,who is a seller in the factor markets and a buyer in the product markets?

The three components of personal consumption expenditures are:

The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:

Which of the following spending is larger for U.S.GDP?

GDP provides substantial information about an economy's income distribution.

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

Personal income is:

Nominal values are values measured in terms of the prices at which goods and services are actually sold.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters