Question 1

Which one of the following statements is true?

Accepted Answer

A)  Resources flow from the government to households. 
B)  Resources flow from firms to households. 
C)  Taxes flow from firms to the government. 
D)  Resource payments flow from firms to households 
E)  Imports flow from firms to foreign economies. 
A)  Resources flow from the government to households. 
B)  Resources flow from firms to households. 
C)  Taxes flow from firms to the government. 
D)  Resource payments flow from firms to households 
E)  Imports flow from firms to foreign economies.

Question 2

The GDP of a country can be derived by summing the:

Accepted Answer

A)  expenditures on final goods and services produced domestically during the year. 
B)  payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C)  market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D)  income payments to the resource suppliers and net exports. 
A)  expenditures on final goods and services produced domestically during the year. 
B)  payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes. 
C)  market value of all goods and services produced domestically during the period and then subtracting net exports from that figure. 
D)  income payments to the resource suppliers and net exports.

Question 3

Which one of the following transactions would be included in GDP?

Accepted Answer

A)  Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B)  Mr. Doe donates $500 to his town's junior college scholarship fund. 
C)  Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D)  Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock. 
A)  Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. 
B)  Mr. Doe donates $500 to his town's junior college scholarship fund. 
C)  Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. 
D)  Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock.

Question 4

GDP does count:

Accepted Answer

A)  state and local government purchases. 
B)  spending for new homes. 
C)  changes in inventories. 
D)  none of the above. 
E)  all of the above. 
A)  state and local government purchases. 
B)  spending for new homes. 
C)  changes in inventories. 
D)  none of the above. 
E)  all of the above.

Question 5

Exhibit 11-5 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption exgenfitures } & \$ 5,207 \
\hline \text { Interest } & 425 \
\hline \text { Corporate profits } & 735 \
\hline \text { Government 5pending } & 1,406 \
\hline \text { Depreciation } & 830 \
\hline \text { Rental income } & 146 \
\hline \text { Grass private dometic investment } & 1,116 \
\hline \text { Compensation of emplayees } & 4,426 \
\hline \text { Exparts } & 870 \
\hline \text { Imparts } & 965 \
\hline \text { Indirect business taxes } & 553 \
\hline \text { Proprietars' income } & 520 \
\hline \text { Personal taxes } & 886 \
\hline \text { Social Security taxes } & 432 \
\hline \text { Transfer payments } & 376 \
\hline
\end{array}$$
-In Exhibit 11-5,and using the expenditures approach,gross domestic product (GDP)is:

Accepted Answer

A)  $6,807 billion. 
B)  $7,082 billion. 
C)  $7,634 billion. 
D)  $7,637 billion. 
E)  $7,730 billion. 
A)  $6,807 billion. 
B)  $7,082 billion. 
C)  $7,634 billion. 
D)  $7,637 billion. 
E)  $7,730 billion.

Question 6

Gross private domestic investment or simply business investment spending (I):

Accepted Answer

A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery. 
A)  excludes all investment in the United States by foreign firms. 
B)  includes all capital in the United States. 
C)  includes net additions to the capital stock plus all new corporate stocks and bonds. 
D)  includes business expenditures on new factories, tools, and machinery.

Question 7

The largest component of GDP as measured by the expenditure approach is:

Accepted Answer

A)  wages and salary earnings. 
B)  personal consumption. 
C)  net profits of corporations. 
D)  gross private investment. 
A)  wages and salary earnings. 
B)  personal consumption. 
C)  net profits of corporations. 
D)  gross private investment.

Question 8

Exhibit 11-5 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption exgenfitures } & \$ 5,207 \
\hline \text { Interest } & 425 \
\hline \text { Corporate profits } & 735 \
\hline \text { Government 5pending } & 1,406 \
\hline \text { Depreciation } & 830 \
\hline \text { Rental income } & 146 \
\hline \text { Grass private dometic investment } & 1,116 \
\hline \text { Compensation of emplayees } & 4,426 \
\hline \text { Exparts } & 870 \
\hline \text { Imparts } & 965 \
\hline \text { Indirect business taxes } & 553 \
\hline \text { Proprietars' income } & 520 \
\hline \text { Personal taxes } & 886 \
\hline \text { Social Security taxes } & 432 \
\hline \text { Transfer payments } & 376 \
\hline
\end{array}$$
-In Exhibit 11-5,national income (NI)is:

Accepted Answer

A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,805 billion. 
D)  $7,082 billion. 
E)  $7,637.7 billion. 
A)  $6,254 billion. 
B)  $6,495 billion. 
C)  $6,805 billion. 
D)  $7,082 billion. 
E)  $7,637.7 billion.

Question 9

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

Accepted Answer

A)  Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms. 
B)  The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C)  Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms. 
D)  The firms in the factor markets pay to households in the form of wages, interest, rent and profit-for resources demanded. 
E)  The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand. 
A)  Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms. 
B)  The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C)  Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms. 
D)  The firms in the factor markets pay to households in the form of wages, interest, rent and profit-for resources demanded. 
E)  The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand.

Question 10

GDP is a measure of:

Accepted Answer

A)  domestic production. 
B)  changes in the general level of prices. 
C)  material well-being. 
D)  social welfare. 
A)  domestic production. 
B)  changes in the general level of prices. 
C)  material well-being. 
D)  social welfare.

Question 11

Gross domestic product (GDP)is defined as:

Accepted Answer

A)  the market value of all final goods and services produced within the borders of a nation. 
B)  incomes received by all a nation's households. 
C)  the quantity of each good and service produced by U.S. residents. 
D)  none of the above. 
A)  the market value of all final goods and services produced within the borders of a nation. 
B)  incomes received by all a nation's households. 
C)  the quantity of each good and service produced by U.S. residents. 
D)  none of the above.

Question 12

If Lacy buys a smoothie at the corner store,which of the following best relates this transaction to the circular flow model?

Accepted Answer

A)  Goods flow from firms and money flows from households through the product markets. 
B)  Resources (land, labor, or capital) flows from households, and money flows from business in the product markets. 
C)  Income flows from the factor markets, and goods flow into the factor markets. 
D)  Resources flow into households, and back into the goods and services markets. 
A)  Goods flow from firms and money flows from households through the product markets. 
B)  Resources (land, labor, or capital) flows from households, and money flows from business in the product markets. 
C)  Income flows from the factor markets, and goods flow into the factor markets. 
D)  Resources flow into households, and back into the goods and services markets.

Question 13

Exhibit 11-3 Expenditure approach
  
-As shown in Exhibit 11-3,total expenditures by households for domestically produced goods is:

Accepted Answer

A)  $1,000 billion. 
B)  $100 billion. 
C)  $600 billion. 
D)  $20 billion. 
A)  $1,000 billion. 
B)  $100 billion. 
C)  $600 billion. 
D)  $20 billion.

Question 14

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  GDP measures used goods and services. 
B)  GDP includes changes in inventories. 
C)  GDP includes the value of net exports. 
D)  GDP does not make an allowance for leisure time. 
A)  GDP measures used goods and services. 
B)  GDP includes changes in inventories. 
C)  GDP includes the value of net exports. 
D)  GDP does not make an allowance for leisure time.

Question 15

National income:

Accepted Answer

A)  represents total wages and salaries in an economy. 
B)  equals GDP minus indirect business taxes. 
C)  equals GDP minus depreciation. 
D)  equals C + I + G + (X - M). 
E)  is the value of existing capital stock used up in making goods. 
A)  represents total wages and salaries in an economy. 
B)  equals GDP minus indirect business taxes. 
C)  equals GDP minus depreciation. 
D)  equals C + I + G + (X - M). 
E)  is the value of existing capital stock used up in making goods.

Question 16

Which of the following would count as an investment expenditure in the GDP expenditures approach?

Accepted Answer

A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges. 
A)  General Motors hires 10 electrical engineers. 
B)  Boeing purchases a new metal stretching machine used to produce airplane wings. 
C)  Ms. Quantum buys 100 shares of Microsoft stock. 
D)  A large corporation spends $10,000 per month on long-distance phone charges.

Question 17

Gross domestic product (GDP)includes:

Accepted Answer

A)  intermediate as well as final goods. 
B)  foreign goods as well as domestically produced goods. 
C)  used goods sold in the current time period. 
D)  only final goods and services. 
A)  intermediate as well as final goods. 
B)  foreign goods as well as domestically produced goods. 
C)  used goods sold in the current time period. 
D)  only final goods and services.

Question 18

Which one of the following would count as investment in the GDP accounts?

Accepted Answer

A)  Purchase of a new airplane by an airline. 
B)  Purchase of a U.S. government bond. 
C)  Purchase of 100 shares of Wal-Mart stock. 
D)  Purchase of an existing house. 
A)  Purchase of a new airplane by an airline. 
B)  Purchase of a U.S. government bond. 
C)  Purchase of 100 shares of Wal-Mart stock. 
D)  Purchase of an existing house.

Question 19

Personal income minus personal taxes equals disposable personal income.

Accepted Answer

A) True 
 B)False

Question 20

In contrast with nominal GDP,real GDP refers to nominal GDP:

Accepted Answer

A)  minus exports. 
B)  minus personal income taxes. 
C)  corrected for price changes. 
D)  corrected for depreciation. 
A)  minus exports. 
B)  minus personal income taxes. 
C)  corrected for price changes. 
D)  corrected for depreciation.

Exam 11: Gross Domestic Product

Which one of the following statements is true?

The GDP of a country can be derived by summing the:

Which one of the following transactions would be included in GDP?

GDP does count:

Gross private domestic investment or simply business investment spending (I):

The largest component of GDP as measured by the expenditure approach is:

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

GDP is a measure of:

Gross domestic product (GDP)is defined as:

If Lacy buys a smoothie at the corner store,which of the following best relates this transaction to the circular flow model?

Exhibit 11-3 Expenditure approach -As shown in Exhibit 11-3,total expenditures by households for domestically produced goods is:

Which of the following is a shortcoming of GDP?

National income:

Which of the following would count as an investment expenditure in the GDP expenditures approach?

Gross domestic product (GDP)includes:

Which one of the following would count as investment in the GDP accounts?

Personal income minus personal taxes equals disposable personal income.

In contrast with nominal GDP,real GDP refers to nominal GDP:

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