Question 1

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,

Accepted Answer

A) U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000. 
B) U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500. 
C) U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. 
D) U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same. 
A) U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000. 
B) U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500. 
C) U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. 
D) U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

Question 2

If nominal GDP doubles and the GDP deflator doubles, then real GDP

Accepted Answer

A) remains constant. 
B) doubles. 
C) triples. 
D) quadruples. 
A) remains constant. 
B) doubles. 
C) triples. 
D) quadruples.

Question 3

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.

Accepted Answer

A) True 
 B)False

Question 4

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

Accepted Answer

A) values of goods and services based on surveys of consumers. 
B) market prices. 
C) quantities purchased by a typical urban household. 
D) profits from producing goods and services. 
A) values of goods and services based on surveys of consumers. 
B) market prices. 
C) quantities purchased by a typical urban household. 
D) profits from producing goods and services.

Question 5

If Brazil buys $100 million of tractors from the U.S., then U.S. net exports will decrease.

Accepted Answer

A) True 
 B)False

Question 6

In a simple circular-flow diagram, households buy goods and services with the income they get from

Accepted Answer

A) wages. 
B) rents. 
C) profits. 
D) All of the above are correct. 
A) wages. 
B) rents. 
C) profits. 
D) All of the above are correct.

Question 7

Real GDP per person tells us the income and expenditure of the average person in the economy.

Accepted Answer

A) True 
 B)False

Question 8

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

Accepted Answer

A) increased. 
B) decreased. 
C) stayed the same. 
D) may have increased, decreased, or stayed the same. 
A) increased. 
B) decreased. 
C) stayed the same. 
D) may have increased, decreased, or stayed the same.

Question 9

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is

Accepted Answer

A) 104.1 so prices are higher than in the base year. 
B) 104.1 so prices are lower than in the base year. 
C) 96.1 so prices are higher than in the base year. 
D) 96.1 so prices are lower than in the base year. 
A) 104.1 so prices are higher than in the base year. 
B) 104.1 so prices are lower than in the base year. 
C) 96.1 so prices are higher than in the base year. 
D) 96.1 so prices are lower than in the base year.

Question 10

A recession is always associated with

Accepted Answer

A) the end of a war. 
B) slowly growing real GDP. 
C) rising inflation. 
D) declining real GDP. 
A) the end of a war. 
B) slowly growing real GDP. 
C) rising inflation. 
D) declining real GDP.

Question 11

According to the circular-flow diagram GDP

Accepted Answer

A) can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. 
B) can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. 
C) can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services. 
D) cannot be computed as either the revenue firms receive or the payments they make to factors of production. 
A) can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production. 
B) can be computed as the revenue firms receive from the sales of goods and services but not as the payments they make to factors of production. 
C) can be computed as payments firms make to factors of production but not as revenues they receive from the sales of goods and services. 
D) cannot be computed as either the revenue firms receive or the payments they make to factors of production.

Question 12

How is net national product (NNP) calculated?

Accepted Answer

A) Saving is added to the total income of a nation's citizens. 
B) Saving is added to the total income earned within a nation. 
C) Depreciation losses are subtracted from the total income of a nation's citizens. 
D) Depreciation losses are subtracted from the total income earned within a nation. 
A) Saving is added to the total income of a nation's citizens. 
B) Saving is added to the total income earned within a nation. 
C) Depreciation losses are subtracted from the total income of a nation's citizens. 
D) Depreciation losses are subtracted from the total income earned within a nation.

Question 13

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

Accepted Answer

A) investment. 
B) government spending. 
C) consumption of services. 
D) consumption of durable goods. 
A) investment. 
B) government spending. 
C) consumption of services. 
D) consumption of durable goods.

Question 14

A country's real GDP rose from 500 to 550 while its nominal GDP rose from 600 to 770. What was this country's inflation rate?

Accepted Answer

A) 16.7% 
B) 20% 
C) -14.3% 
D) -20% 
A) 16.7% 
B) 20% 
C) -14.3% 
D) -20%

Question 15

Expenditures by households on education are included in the investment component of GDP.

Accepted Answer

A) True 
 B)False

Question 16

Gina, a U.S. citizen, works only in Bermuda. The value of Gina's production is included in

Accepted Answer

A) U.S. GDP and Bermudan GDP. 
B) U.S. GDP and Bermudan GNP. 
C) U.S. GNP and Bermudan GDP. 
D) U.S. GNP and Bermudan GNP. 
A) U.S. GDP and Bermudan GDP. 
B) U.S. GDP and Bermudan GNP. 
C) U.S. GNP and Bermudan GDP. 
D) U.S. GNP and Bermudan GNP.

Question 17

An identity is an equation that

Accepted Answer

A) describes an equilibrium. 
B) pertains to macroeconomics, not to microeconomics. 
C) must be true because of how the variables in the equation are defined. 
D) involves final goods, not intermediate goods. 
A) describes an equilibrium. 
B) pertains to macroeconomics, not to microeconomics. 
C) must be true because of how the variables in the equation are defined. 
D) involves final goods, not intermediate goods.

Question 18

In the economy of Ukzten in 2010, consumption was $1000, exports were $100, government purchases were $450, imports were $150, and investment was $350. What was Ukzten's GDP in 2010?

Accepted Answer

A) $1750 
B) $1850 
C) $1900 
D) $2050 
A) $1750 
B) $1850 
C) $1900 
D) $2050

Question 19

A consumer buys toys made in China. The value of the toys is included only in the net exports component of GDP.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

Accepted Answer

A) spending on education 
B) the purchase of stocks and bonds 
C) the purchase of a new house 
D) the purchase of durable goods such as stoves and washing machines 
A) spending on education 
B) the purchase of stocks and bonds 
C) the purchase of a new house 
D) the purchase of durable goods such as stoves and washing machines

Exam 10: Measuring a Nations Income

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,

If nominal GDP doubles and the GDP deflator doubles, then real GDP

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

If Brazil buys $100 million of tractors from the U.S., then U.S. net exports will decrease.

In a simple circular-flow diagram, households buy goods and services with the income they get from

Real GDP per person tells us the income and expenditure of the average person in the economy.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is

A recession is always associated with

According to the circular-flow diagram GDP

How is net national product (NNP) calculated?

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

A country's real GDP rose from 500 to 550 while its nominal GDP rose from 600 to 770. What was this country's inflation rate?

Expenditures by households on education are included in the investment component of GDP.

Gina, a U.S. citizen, works only in Bermuda. The value of Gina's production is included in

An identity is an equation that

In the economy of Ukzten in 2010, consumption was $1000, exports were $100, government purchases were $450, imports were $150, and investment was $350. What was Ukzten's GDP in 2010?

A consumer buys toys made in China. The value of the toys is included only in the net exports component of GDP.

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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