Question 1

National income is

Accepted Answer

A)  the total of factor payments to owners of resources. 
B)  the dollar value of all final goods and services produced in a country in a year. 
C)  the amount of monetary payments households actually receive before paying personal income taxes. 
D)  the amount of monetary payments households actually receive after paying personal income taxes. 
A)  the total of factor payments to owners of resources. 
B)  the dollar value of all final goods and services produced in a country in a year. 
C)  the amount of monetary payments households actually receive before paying personal income taxes. 
D)  the amount of monetary payments households actually receive after paying personal income taxes.

Question 2

If consumption expenditures are $100 million, net investment is $50 million, imports are $20 million, exports are $10 million, government spending on goods and services is $40 million, Social Security spending is $15 million, and sales of existing homes equals $40 million, then what is the measure of GDP?

Accepted Answer

A)  GDP = $225 million 
B)  GDP = $180 million 
C)  GDP = $295 million 
D)  GDP = $195 million 
A)  GDP = $225 million 
B)  GDP = $180 million 
C)  GDP = $295 million 
D)  GDP = $195 million

Question 3

The value of Gross Domestic Product (GDP), when estimated by the income approach, is the sum of

Accepted Answer

A)  consumption expenditures, investment spending, and profits. 
B)  consumption, wages, rents, interest, and profits. 
C)  income earned by all factors of production, indirect business taxes, corporate income taxes, and personal income taxes. 
D)  depreciation, business income adjustments less indirect business taxes, U.S. net income earned abroad and income earned domestically by factors of production. 
A)  consumption expenditures, investment spending, and profits. 
B)  consumption, wages, rents, interest, and profits. 
C)  income earned by all factors of production, indirect business taxes, corporate income taxes, and personal income taxes. 
D)  depreciation, business income adjustments less indirect business taxes, U.S. net income earned abroad and income earned domestically by factors of production.

Question 4

The difference between nominal and real values is that real values take into account

Accepted Answer

A)  depreciation. 
B)  changes in the composition of output. 
C)  changes in prices between years. 
D)  the presence of durable goods. 
A)  depreciation. 
B)  changes in the composition of output. 
C)  changes in prices between years. 
D)  the presence of durable goods.

Question 5

Which of the following is a component of net domestic product (NDP), but NOT of national income?

Accepted Answer

A)  Capital consumption allowance 
B)  Indirect business taxes 
C)  Corporate taxes 
D)  Personal taxes 
A)  Capital consumption allowance 
B)  Indirect business taxes 
C)  Corporate taxes 
D)  Personal taxes

Question 6

-Refer to the above figure. The top two arrows of the figure refer to the product markets. The bottom arrows refer to the factor markets. Which arrow represents total income?

Accepted Answer

A)  Arrow A 
B)  Arrow B 
C)  Arrow C 
D)  Arrow D 
A)  Arrow A 
B)  Arrow B 
C)  Arrow C 
D)  Arrow D

Question 7

The Social Security check received by your grandmother

Accepted Answer

A)  is included in the GDP because it will be spent on goods and services. 
B)  is excluded from GDP calculations because including it would result in double counting. 
C)  is included in the GDP because she is entitled to it as a citizen. 
D)  is included in the GDP because it is part of her income. 
A)  is included in the GDP because it will be spent on goods and services. 
B)  is excluded from GDP calculations because including it would result in double counting. 
C)  is included in the GDP because she is entitled to it as a citizen. 
D)  is included in the GDP because it is part of her income.

Question 8

Net investment refers to

Accepted Answer

A)  the change in the capital stock after subtracting out depreciation. 
B)  the change in inventories over a 1-year period. 
C)  the change in investment spending and the change in government expenditures on infrastructure. 
D)  exports minus imports. 
A)  the change in the capital stock after subtracting out depreciation. 
B)  the change in inventories over a 1-year period. 
C)  the change in investment spending and the change in government expenditures on infrastructure. 
D)  exports minus imports.

Question 9

Profits

Accepted Answer

A)  are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits. 
B)  are a cost of doing business because they are payments to others. 
C)  are not a cost of doing business because they are owed to resource owners. 
D)  are not a cost of doing business because they are often zero or negative. 
A)  are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits. 
B)  are a cost of doing business because they are payments to others. 
C)  are not a cost of doing business because they are owed to resource owners. 
D)  are not a cost of doing business because they are often zero or negative.

Question 10

All of the following are included in the calculation of gross domestic income (GDI) EXCEPT

Accepted Answer

A)  consumer expenditures. 
B)  wages. 
C)  profits. 
D)  indirect business taxes. 
A)  consumer expenditures. 
B)  wages. 
C)  profits. 
D)  indirect business taxes.

Question 11

Resources can be purchased

Accepted Answer

A)  in the product markets. 
B)  in the factor markets. 
C)  exclusively through the government. 
D)  at a grocery store. 
A)  in the product markets. 
B)  in the factor markets. 
C)  exclusively through the government. 
D)  at a grocery store.

Question 12

A capital good is

Accepted Answer

A)  a good that lasts more than three years. 
B)  a good that is used to make other goods and services. 
C)  an intermediate product and therefore not part of GDP. 
D)  a good that should increase in value over time. 
A)  a good that lasts more than three years. 
B)  a good that is used to make other goods and services. 
C)  an intermediate product and therefore not part of GDP. 
D)  a good that should increase in value over time.

Question 13

Fixed investment includes

Accepted Answer

A)  business spending on plant and equipment. 
B)  business spending on printing paper. 
C)  business salaries. 
D)  labor union contracts. 
A)  business spending on plant and equipment. 
B)  business spending on printing paper. 
C)  business salaries. 
D)  labor union contracts.

Question 14

An example of a nondurable good is

Accepted Answer

A)  items purchased at a grocery store. 
B)  a refrigerator. 
C)  the purchase of labor for a business. 
D)  the services of a cleaning person. 
A)  items purchased at a grocery store. 
B)  a refrigerator. 
C)  the purchase of labor for a business. 
D)  the services of a cleaning person.

Question 15

Goods used up entirely in the production of final goods are

Accepted Answer

A)  intermediate goods. 
B)  production goods. 
C)  process goods. 
D)  inventory goods. 
A)  intermediate goods. 
B)  production goods. 
C)  process goods. 
D)  inventory goods.

Question 16

When the total quantity of unsold new Chevrolets increases from 50,000 to 75,000,

Accepted Answer

A)  the economy experiences a period of disinvestment. 
B)  the economy's level of competition increases. 
C)  there is an increase in the rate of aggregate output. 
D)  the producer engages in an inventory investment. 
A)  the economy experiences a period of disinvestment. 
B)  the economy's level of competition increases. 
C)  there is an increase in the rate of aggregate output. 
D)  the producer engages in an inventory investment.

Question 17

Which of the following represents how real GDP is calculated?

Accepted Answer

A)  nominal GDP multiplied by the GDP deflator 
B)  nominal GDP divided by the population 
C)  nominal GDP divided by the PPI, the producer price index 
D)  nominal GDP divided by the GDP deflator 
A)  nominal GDP multiplied by the GDP deflator 
B)  nominal GDP divided by the population 
C)  nominal GDP divided by the PPI, the producer price index 
D)  nominal GDP divided by the GDP deflator

Question 18

Social Security payments are

Accepted Answer

A)  included in Gross Domestic Product (GDP). 
B)  not included in Gross Domestic Product (GDP), but are included in Gross Domestic Income accounts. 
C)  not included in Gross Domestic Product (GDP). 
D)  not included in Gross Domestic Product (GDP), but are included in Net Domestic Product. 
A)  included in Gross Domestic Product (GDP). 
B)  not included in Gross Domestic Product (GDP), but are included in Gross Domestic Income accounts. 
C)  not included in Gross Domestic Product (GDP). 
D)  not included in Gross Domestic Product (GDP), but are included in Net Domestic Product.

Question 19

-Refer to the above table. The production of this good has been through the first 3 stages of production. What is the total value added in Stage 1 through 3?

Accepted Answer

A)  $0.75 
B)  $0.43 
C)  $0.07 
D)  Cannot be computed without more information. 
A)  $0.75 
B)  $0.43 
C)  $0.07 
D)  Cannot be computed without more information.

Question 20

GDP does NOT include intermediate goods because

Accepted Answer

A)  intermediate goods are not valuable. 
B)  intermediate goods are not useful to consumers. 
C)  that would count the value of intermediate goods twice. 
D)  that would understate the true size of GDP. 
A)  intermediate goods are not valuable. 
B)  intermediate goods are not useful to consumers. 
C)  that would count the value of intermediate goods twice. 
D)  that would understate the true size of GDP.

Exam 8: Measuring the Economys Performance

National income is

The value of Gross Domestic Product (GDP), when estimated by the income approach, is the sum of

The difference between nominal and real values is that real values take into account

Which of the following is a component of net domestic product (NDP), but NOT of national income?

-Refer to the above figure. The top two arrows of the figure refer to the product markets. The bottom arrows refer to the factor markets. Which arrow represents total income?

The Social Security check received by your grandmother

Net investment refers to

Profits

All of the following are included in the calculation of gross domestic income (GDI) EXCEPT

Resources can be purchased

A capital good is

Fixed investment includes

An example of a nondurable good is

Goods used up entirely in the production of final goods are

When the total quantity of unsold new Chevrolets increases from 50,000 to 75,000,

Which of the following represents how real GDP is calculated?

Social Security payments are

-Refer to the above table. The production of this good has been through the first 3 stages of production. What is the total value added in Stage 1 through 3?

GDP does NOT include intermediate goods because

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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