Question 1

Personal consumption expenditures:

Accepted Answer

A)  represent close to two-thirds of GDP. 
B)  are equal to personal income minus individual taxes. 
C)  include durable good purchases but not nondurable good purchases. 
D)  do not include any intangible consumption items. 
E)  include all goods and services bought by the government. 
A)  represent close to two-thirds of GDP. 
B)  are equal to personal income minus individual taxes. 
C)  include durable good purchases but not nondurable good purchases. 
D)  do not include any intangible consumption items. 
E)  include all goods and services bought by the government.

Question 2

The market value of all final goods and services in an economy produced by resources owned by people of that economy:

Accepted Answer

A)  personal income. 
B)  national income. 
C)  capital income. 
D)  gross national product. 
E)  gross domestic product. 
A)  personal income. 
B)  national income. 
C)  capital income. 
D)  gross national product. 
E)  gross domestic product.

Question 3

Exhibit 11-6 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption exgenfitures } & \$ 850 \
\hline \text { Interest } & 90 \
\hline \text { Corporate profits } & 150 \
\hline \text { Government 5pending } & 400 \
\hline \text { Depreciation } & 100 \
\hline \text { Rental income } & 70 \
\hline \text { Grass private dometic investment } & 120 \
\hline \text { Compensation of emplayees } & 830 \
\hline \text { Exgarts } & 120 \
\hline \text { Imparts } & 70 \
\hline \text { Indirect business taxes } & 80 \
\hline \text { Proprietars' income } & 120 \
\hline \text { Personal income taxes } & 110 \
\hline \text { Social Security taxes } & 50 \
\hline \text { Transfer payments } & 160 \
\hline
\end{array}$$
-In Exhibit 11-6,and using the expenditures approach,gross domestic product (GDP)equals:

Accepted Answer

A)  $1,540 billion. 
B)  $2,460 billion. 
C)  $2,430 billion. 
D)  $1,450 billion. 
E)  $1,420 billion. 
A)  $1,540 billion. 
B)  $2,460 billion. 
C)  $2,430 billion. 
D)  $1,450 billion. 
E)  $1,420 billion.

Question 4

Exhibit 11-6 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Personal consumption exgenfitures } & \$ 850 \
\hline \text { Interest } & 90 \
\hline \text { Corporate profits } & 150 \
\hline \text { Government 5pending } & 400 \
\hline \text { Depreciation } & 100 \
\hline \text { Rental income } & 70 \
\hline \text { Grass private dometic investment } & 120 \
\hline \text { Compensation of emplayees } & 830 \
\hline \text { Exgarts } & 120 \
\hline \text { Imparts } & 70 \
\hline \text { Indirect business taxes } & 80 \
\hline \text { Proprietars' income } & 120 \
\hline \text { Personal income taxes } & 110 \
\hline \text { Social Security taxes } & 50 \
\hline \text { Transfer payments } & 160 \
\hline
\end{array}$$
-In Exhibit 11-6,personal income (PI)equals:

Accepted Answer

A)  $1,280 billion. 
B)  $2,290 billion. 
C)  $1,310 billion. 
D)  $2,320 billion. 
E)  $1,400 billion. 
A)  $1,280 billion. 
B)  $2,290 billion. 
C)  $1,310 billion. 
D)  $2,320 billion. 
E)  $1,400 billion.

Question 5

Fixed investment refers to investment in stocks,bonds,and improvements to land.

Accepted Answer

A) True 
 B)False

Question 6

All final goods and services that make up GDP can be expressed in the form:

Accepted Answer

A)  GDP = C + I - G + (X + M). 
B)  GDP = C + I + G + (X + M). 
C)  GDP = C + I + G + (X - M). 
D)  GDP = C + I + (X - M). 
E)  GDP = C + I + G. 
A)  GDP = C + I - G + (X + M). 
B)  GDP = C + I + G + (X + M). 
C)  GDP = C + I + G + (X - M). 
D)  GDP = C + I + (X - M). 
E)  GDP = C + I + G.

Question 7

Real GDP,as opposed to money (nominal)GDP,has been adjusted for changes in the general level of prices.

Accepted Answer

A) True 
 B)False

Question 8

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

Accepted Answer

A)  money laundering. 
B)  the underground economy. 
C)  disposable personal income. 
D)  indirect national income. 
E)  unreported capital 
A)  money laundering. 
B)  the underground economy. 
C)  disposable personal income. 
D)  indirect national income. 
E)  unreported capital

Question 9

Exhibit 11-8 GDP data (billions of dollars)
 $$\begin{array} { | l | r | } 
\hline \text { Indirect business taxes } & \$ 600 \
\hline \text { Depreciation } & 950 \
\hline \text { Change in business inventaries } & 50 \
\hline \text { Compensation of employees } & 5,400 \
\hline \text { Corparate profits } & 700 \
\hline \text { Durable goads } & 600 \
\hline \text { Expurts } & 100 \
\hline \text { Social Security taxes } & 360 \
\hline \text { Transfer payments } & 300 \
\hline \text { Fixed investment } & 950 \
\hline \text { Government 5pending } & 900 \
\hline \text { Imparts } & 150 \
\hline \text { Net interest } & 500 \
\hline \text { Nondurable goods } & 2,000 \
\hline \text { Persanal taxes } & 1,000 \
\hline \text { Rental income } & 200 \
\hline \text { Services } & 4,000 \
\hline
\end{array}$$
-In Exhibit 11-8,compute personal income (PI).Which of the following is correct?

Accepted Answer

A)  $7,110 billion. 
B)  $7,410 billion. 
C)  $6,740 billion. 
D)  $7,760 billion. 
E)  $6,780 billion. 
A)  $7,110 billion. 
B)  $7,410 billion. 
C)  $6,740 billion. 
D)  $7,760 billion. 
E)  $6,780 billion.

Question 10

Social Security payments are included in personal income.

Accepted Answer

A) True 
 B)False

Question 11

When net exports are negative,

Accepted Answer

A)  exports are greater than investment. 
B)  depreciation is greater than net investment. 
C)  imports are greater than investment. 
D)  exports are greater than imports. 
E)  imports are greater than exports. 
A)  exports are greater than investment. 
B)  depreciation is greater than net investment. 
C)  imports are greater than investment. 
D)  exports are greater than imports. 
E)  imports are greater than exports.

Question 12

Nominal gross domestic product is based on:

Accepted Answer

A)  the existing prices at which final goods and services are actually sold. 
B)  prices of final goods and services adjusted for inflation. 
C)  prices at which intermediate goods are sold. 
D)  none of the above. 
A)  the existing prices at which final goods and services are actually sold. 
B)  prices of final goods and services adjusted for inflation. 
C)  prices at which intermediate goods are sold. 
D)  none of the above.

Question 13

Gross domestic product that is based on existing prices is called:

Accepted Answer

A)  nominal GDP. 
B)  current GDP. 
C)  money GDP. 
D)  all of the above. 
A)  nominal GDP. 
B)  current GDP. 
C)  money GDP. 
D)  all of the above.

Question 14

Gross private domestic investment includes business:

Accepted Answer

A)  purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B)  purchases of capital goods, all new construction, and inventory investment. 
C)  purchases of capital goods, all new commercial construction, and inventory investment. 
D)  purchases of capital goods, all new residential construction, and inventory investment. 
E)  purchases of all types of durable goods, all new construction, and inventory investment. 
A)  purchases of capital goods, all new construction, and purchases of consumer durable goods. 
B)  purchases of capital goods, all new construction, and inventory investment. 
C)  purchases of capital goods, all new commercial construction, and inventory investment. 
D)  purchases of capital goods, all new residential construction, and inventory investment. 
E)  purchases of all types of durable goods, all new construction, and inventory investment.

Question 15

Which of the following items is included in the calculation of GDP?

Accepted Answer

A)  Purchase of 100 shares of General Motors stock. 
B)  Purchase of a used car. 
C)  The value of a homemaker's services. 
D)  Sale of Gulf War military surplus. 
E)  None of the above would be included. 
A)  Purchase of 100 shares of General Motors stock. 
B)  Purchase of a used car. 
C)  The value of a homemaker's services. 
D)  Sale of Gulf War military surplus. 
E)  None of the above would be included.

Question 16

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Accepted Answer

A) True 
 B)False

Question 17

Gross domestic product is officially measured by adding together the:

Accepted Answer

A)  quantity of each good and service produced by U.S. residents. 
B)  market value of all final goods and services produced within the borders of a nation. 
C)  quantity of goods and services produced by companies owned by U.S. citizens. 
D)  none of the above. 
A)  quantity of each good and service produced by U.S. residents. 
B)  market value of all final goods and services produced within the borders of a nation. 
C)  quantity of goods and services produced by companies owned by U.S. citizens. 
D)  none of the above.

Question 18

The lower portion of the circular flow model contains factor markets in which households provide:

Accepted Answer

A)  output of all final goods and services produced. 
B)  savings, spending, and investment. 
C)  labor, money, and machines. 
D)  none of the above. 
A)  output of all final goods and services produced. 
B)  savings, spending, and investment. 
C)  labor, money, and machines. 
D)  none of the above.

Question 19

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following correctly gives us national income (NI)?

Accepted Answer

A)  Gross domestic product minus depreciation. 
B)  Personal income minus personal taxes. 
C)  Net national product minus indirect business taxes. 
D)  Consumption plus investment plus government plus net exports. 
A)  Gross domestic product minus depreciation. 
B)  Personal income minus personal taxes. 
C)  Net national product minus indirect business taxes. 
D)  Consumption plus investment plus government plus net exports.

Exam 11: Gross Domestic Product

Personal consumption expenditures:

The market value of all final goods and services in an economy produced by resources owned by people of that economy:

Fixed investment refers to investment in stocks,bonds,and improvements to land.

All final goods and services that make up GDP can be expressed in the form:

Real GDP,as opposed to money (nominal)GDP,has been adjusted for changes in the general level of prices.

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

Social Security payments are included in personal income.

When net exports are negative,

Nominal gross domestic product is based on:

Gross domestic product that is based on existing prices is called:

Gross private domestic investment includes business:

Which of the following items is included in the calculation of GDP?

The circular flow model illustrates that aggregate spending in the product markets equals 70 percent of aggregate income earned in the factor markets.

Gross domestic product is officially measured by adding together the:

The lower portion of the circular flow model contains factor markets in which households provide:

Intermediate goods are included and final goods are not included in calculating gross domestic product.

Which of the following correctly gives us national income (NI)?

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