Question 1

Which of the following is included in personal income but not in national income?

Accepted Answer

A)  Compensation for workers. 
B)  Proprietors' income. 
C)  Corporate profits. 
D)  Social Security payments. 
E)  Rent. 
A)  Compensation for workers. 
B)  Proprietors' income. 
C)  Corporate profits. 
D)  Social Security payments. 
E)  Rent.

Question 2

In the circular flow model,

Accepted Answer

A)  money flows from the firms to the households through the product market. 
B)  money flows from the households to the firms through the product market. 
C)  money flows from the households to the firms through the resource market. 
D)  money flows from the households to the firms through both the product market and the resource market. 
E)  resources flow to the households from the firms through the product market. 
A)  money flows from the firms to the households through the product market. 
B)  money flows from the households to the firms through the product market. 
C)  money flows from the households to the firms through the resource market. 
D)  money flows from the households to the firms through both the product market and the resource market. 
E)  resources flow to the households from the firms through the product market.

Question 3

When depreciation is subtracted from:

Accepted Answer

A)  Personal income, we get national income. 
B)  Gross Domestic Product, we get national income. 
C)  Gross Domestic Product, we get personal income. 
D)  Disposable Personal Income, we get Gross Domestic Product. 
A)  Personal income, we get national income. 
B)  Gross Domestic Product, we get national income. 
C)  Gross Domestic Product, we get personal income. 
D)  Disposable Personal Income, we get Gross Domestic Product.

Question 4

Which of the following would be included in the government expenditures component of GDP?

Accepted Answer

A)  The export of 100 fighter jets to Japan 
B)  Construction costs of a new public school building 
C)  Food stamps used by the Smith family 
D)  A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school 
A)  The export of 100 fighter jets to Japan 
B)  Construction costs of a new public school building 
C)  Food stamps used by the Smith family 
D)  A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school

Question 5

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,national income (NI)equals:

Accepted Answer

A)  $3,628 billion. 
B)  $3,706 billion. 
C)  $4,446 billion. 
D)  $3,550 billion. 
E)  $5,344 billion. 
A)  $3,628 billion. 
B)  $3,706 billion. 
C)  $4,446 billion. 
D)  $3,550 billion. 
E)  $5,344 billion.

Question 6

The most broadly based price index is the:

Accepted Answer

A)  real GDP price index. 
B)  consumer price index. 
C)  producer price index. 
D)  GDP chain price index. 
A)  real GDP price index. 
B)  consumer price index. 
C)  producer price index. 
D)  GDP chain price index.

Question 7

Which of the following statements is true?

Accepted Answer

A)  National income is total income earned by households whereas personal income is total income received by households (including transfer payments). 
B)  Disposable personal income equals personal income minus personal taxes. 
C)  The expenditures approach and the income approach yield the same GDP figure. 
D)  All of the above. 
A)  National income is total income earned by households whereas personal income is total income received by households (including transfer payments). 
B)  Disposable personal income equals personal income minus personal taxes. 
C)  The expenditures approach and the income approach yield the same GDP figure. 
D)  All of the above.

Question 8

Based on the circular flow model,goods and services flow from:

Accepted Answer

A)  households to businesses in product markets. 
B)  businesses to households in product markets. 
C)  households to businesses in factor markets. 
D)  businesses to households in factor markets. 
A)  households to businesses in product markets. 
B)  businesses to households in product markets. 
C)  households to businesses in factor markets. 
D)  businesses to households in factor markets.

Question 9

Using the expenditure approach,total spending by households for durable goods,nondurable goods,and services is a category called:

Accepted Answer

A)  gross private domestic investment. 
B)  capital consumption allowance. 
C)  personal consumption expenditures. 
D)  household investment. 
A)  gross private domestic investment. 
B)  capital consumption allowance. 
C)  personal consumption expenditures. 
D)  household investment.

Question 10

The GDP chain price index is designed to adjust nominal GDP for changes in:

Accepted Answer

A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time. 
A)  the level of transfer payments. 
B)  the quality of goods over time. 
C)  the costs of economic bads such as pollution and crime. 
D)  the general level of prices over time.

Question 11

Exhibit 11-2 Gross domestic product data
  
-As shown in Exhibit 11-2,total expenditures by businesses for fixed investment and inventories is:

Accepted Answer

A)  $500 billion. 
B)  $50 billion. 
C)  $200 billion. 
D)  $15 billion. 
E)  $65 billion. 
A)  $500 billion. 
B)  $50 billion. 
C)  $200 billion. 
D)  $15 billion. 
E)  $65 billion.

Question 12

National income is derived from gross domestic product by subtracting:

Accepted Answer

A)  transfer payments. 
B)  profits. 
C)  an allowance for depreciation of capital equipment. 
D)  net exports. 
A)  transfer payments. 
B)  profits. 
C)  an allowance for depreciation of capital equipment. 
D)  net exports.

Question 13

The circular flow of economic activity is a model of the:

Accepted Answer

A)  flow of goods, resources, payments, and expenditures between the sectors of the economy. 
B)  influence of government on business behavior. 
C)  influence of business on consumers. 
D)  role of unions and government in the economy. 
A)  flow of goods, resources, payments, and expenditures between the sectors of the economy. 
B)  influence of government on business behavior. 
C)  influence of business on consumers. 
D)  role of unions and government in the economy.

Question 14

In order to compute national income from GDP,

Accepted Answer

A)  national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B)  GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C)  GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D)  GDP is first calculated, and then depreciation of capital is subtracted from it to get national income. 
A)  national income is first calculated, and then depreciation of capital and indirect business taxes are subtracted from it to get GDP. 
B)  GDP is first calculated, and then gross private domestic investment is subtracted from it to get national income. 
C)  GDP is first calculated, and then capital depreciation and proprietors' income are subtracted from it to get national income. 
D)  GDP is first calculated, and then depreciation of capital is subtracted from it to get national income.

Question 15

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending. 
A)  GDP excludes changes in inventories. 
B)  GDP includes an estimate of illegal transactions. 
C)  GDP excludes nonmarket transactions. 
D)  GDP excludes business investment spending.

Question 16

Economic values that are measured in units per period of time are referred to as:

Accepted Answer

A)  stocks. 
B)  flows. 
C)  unit values. 
D)  dollars. 
A)  stocks. 
B)  flows. 
C)  unit values. 
D)  dollars.

Question 17

Explain why GDP was never intended to be a measure of social well being.

Accepted Answer

GDP is simply a measure of total product

Question 18

Which of the following is true?

Accepted Answer

A)  GDP is a "flow" concept. 
B)  The purchase prices of both intermediate goods and final goods are included in GDP. 
C)  GDP measures economic welfare. 
D)  GDP is a measure of changes in the general level of prices. 
A)  GDP is a "flow" concept. 
B)  The purchase prices of both intermediate goods and final goods are included in GDP. 
C)  GDP measures economic welfare. 
D)  GDP is a measure of changes in the general level of prices.

Question 19

Net exports:

Accepted Answer

A)  will increase if exports of goods decline. 
B)  will increase if imports of goods rise. 
C)  in our GDP accounts permit estimation of foreign ownership of American businesses. 
D)  include budgetary outlays of the federal government. 
E)  is the net effect of the foreign trade sector on GDP. 
A)  will increase if exports of goods decline. 
B)  will increase if imports of goods rise. 
C)  in our GDP accounts permit estimation of foreign ownership of American businesses. 
D)  include budgetary outlays of the federal government. 
E)  is the net effect of the foreign trade sector on GDP.

Question 20

Payments to households not in exchange for goods and services currently produced are:

Accepted Answer

A)  transfer payments. 
B)  government purchases. 
C)  consumption expenditures. 
D)  investment expenditures. 
A)  transfer payments. 
B)  government purchases. 
C)  consumption expenditures. 
D)  investment expenditures.

Exam 11: Gross Domestic Product

Which of the following is included in personal income but not in national income?

In the circular flow model,

When depreciation is subtracted from:

Which of the following would be included in the government expenditures component of GDP?

The most broadly based price index is the:

Which of the following statements is true?

Based on the circular flow model,goods and services flow from:

Using the expenditure approach,total spending by households for durable goods,nondurable goods,and services is a category called:

The GDP chain price index is designed to adjust nominal GDP for changes in:

Exhibit 11-2 Gross domestic product data -As shown in Exhibit 11-2,total expenditures by businesses for fixed investment and inventories is:

National income is derived from gross domestic product by subtracting:

The circular flow of economic activity is a model of the:

In order to compute national income from GDP,

Which of the following is a shortcoming of GDP?

Economic values that are measured in units per period of time are referred to as:

Explain why GDP was never intended to be a measure of social well being.

Which of the following is true?

Net exports:

Payments to households not in exchange for goods and services currently produced are:

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