Question 1

Which of the following statements is FALSE?

Accepted Answer

A)  One definition of total income is that it is the annual cost of producing the entire output of final goods and services. 
B)  Transactions in which households buy final goods and services occur in the factor market. 
C)  The value of total output is identical to total income. 
D)  Saving is the difference between consumer income and expenditures. 
A)  One definition of total income is that it is the annual cost of producing the entire output of final goods and services. 
B)  Transactions in which households buy final goods and services occur in the factor market. 
C)  The value of total output is identical to total income. 
D)  Saving is the difference between consumer income and expenditures.

Question 2

In the simple circular flow model, total income in the United States must equal

Accepted Answer

A)  wages + rents + interest + profits. 
B)  the total monetary value of all final goods and services. 
C)  the yearly amount earned by our nation's resources. 
D)  All of the above are correct. 
A)  wages + rents + interest + profits. 
B)  the total monetary value of all final goods and services. 
C)  the yearly amount earned by our nation's resources. 
D)  All of the above are correct.

Question 3

Consider the following: Farmer Jones bought seed and fertilizer for $100.
He grew wheat that he sold to the Acme Bread Company for $200.
Acme Bread produced and sold bread to the ABC Grocery Store for $250.
Consumers bought the bread from the grocery for $350.
How much was added to the GDP?

Accepted Answer

A)  $700 
B)  $800 
C)  $350 
D)  $600 
A)  $700 
B)  $800 
C)  $350 
D)  $600

Question 4

When we use the term fixed investment, we include in investment

Accepted Answer

A)  the purchase of stocks and bonds. 
B)  the purchase of consumer goods. 
C)  the purchase of private bonds, but not government bonds. 
D)  the purchase of equipment and other capital goods. 
A)  the purchase of stocks and bonds. 
B)  the purchase of consumer goods. 
C)  the purchase of private bonds, but not government bonds. 
D)  the purchase of equipment and other capital goods.

Question 5

Comparing GDP across countries is unrealistic unless we make adjustment in exchange rates to take into account differences in the cost of living via

Accepted Answer

A)  real GDP. 
B)  purchasing power parity. 
C)  price index. 
D)  international GDP. 
A)  real GDP. 
B)  purchasing power parity. 
C)  price index. 
D)  international GDP.

Question 6

Nominal income per person in the United States in 1960 was about $2,800 per year, while in 1990 nominal income per person was about $21,000. This indicates that

Accepted Answer

A)  nominal income was about 7.5 times greater in 1990, but we can't tell if this increase is due to inflation, economic growth, or a combination of the two. 
B)  people enjoyed a standard of living about 7.5 times higher in 1990 than in 1960. 
C)  a dollar in 1960 was worth less than a dollar in 1990. 
D)  the average person would consider him/herself about 7.5 times happier in 1990 than in 1960. 
A)  nominal income was about 7.5 times greater in 1990, but we can't tell if this increase is due to inflation, economic growth, or a combination of the two. 
B)  people enjoyed a standard of living about 7.5 times higher in 1990 than in 1960. 
C)  a dollar in 1960 was worth less than a dollar in 1990. 
D)  the average person would consider him/herself about 7.5 times happier in 1990 than in 1960.

Question 7

When economists refer to investment expenditures they mean the

Accepted Answer

A)  purchase of a consumer nondurable goods. 
B)  purchase of stocks or bonds. 
C)  use of today's resources to expand tomorrow's production or consumption. 
D)  production of intermediate goods. 
A)  purchase of a consumer nondurable goods. 
B)  purchase of stocks or bonds. 
C)  use of today's resources to expand tomorrow's production or consumption. 
D)  production of intermediate goods.

Question 8

The term "value added" refers to the dollar value of

Accepted Answer

A)  an industry's sales plus profits. 
B)  the intermediate goods and services purchased by an industry. 
C)  an industry's sales less the dollar value of the intermediate goods purchased by the industry. 
D)  the intermediate goods purchased by an industry plus the profits of the industry. 
A)  an industry's sales plus profits. 
B)  the intermediate goods and services purchased by an industry. 
C)  an industry's sales less the dollar value of the intermediate goods purchased by the industry. 
D)  the intermediate goods purchased by an industry plus the profits of the industry.

Question 9

Which sector of our economy accounts for the largest percentage to total spending?

Accepted Answer

A)  households 
B)  businesses 
C)  government 
D)  exports 
A)  households 
B)  businesses 
C)  government 
D)  exports

Question 10

If a firm produces more output than it sells, there will be I. An increase in the firm's inventories
II) An increase in the gross private investment of the nation

Accepted Answer

A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II 
A)  I only 
B)  II only 
C)  Both I and II 
D)  Neither I nor II

Question 11

Real GDP is

Accepted Answer

A)  the nominal value of all real goods produced in the nation in a year. 
B)  GDP corrected for changes in the average of overall prices. 
C)  a misnomer since all GDP figures have to be in dollar values. 
D)  the value of output in current dollars. 
A)  the nominal value of all real goods produced in the nation in a year. 
B)  GDP corrected for changes in the average of overall prices. 
C)  a misnomer since all GDP figures have to be in dollar values. 
D)  the value of output in current dollars.

Question 12

An increase in fixed investment spending that increases GDP occurs when

Accepted Answer

A)  a family purchases a new car. 
B)  a business buys a new computer. 
C)  inventories of new cars are drawn down on the lots of car dealers. 
D)  the government builds a new office building. 
A)  a family purchases a new car. 
B)  a business buys a new computer. 
C)  inventories of new cars are drawn down on the lots of car dealers. 
D)  the government builds a new office building.

Question 13

Using the expenditure approach, GDP is calculated as

Accepted Answer

A)  wages + interest + rent + profits 
B)  consumption expenditures + wages 
C)  consumption expenditures + wages + interest 
D)  consumption expenditures + investment expenditures + government expenditures + net exports 
A)  wages + interest + rent + profits 
B)  consumption expenditures + wages 
C)  consumption expenditures + wages + interest 
D)  consumption expenditures + investment expenditures + government expenditures + net exports

Question 14

The nominal value of an economic variable is

Accepted Answer

A)  the consumer price index. 
B)  the producer price. 
C)  expressed in terms of actual market prices at which goods are sold. 
D)  computed by taking the nominal value and dividing by the appropriate price index. 
A)  the consumer price index. 
B)  the producer price. 
C)  expressed in terms of actual market prices at which goods are sold. 
D)  computed by taking the nominal value and dividing by the appropriate price index.

Question 15

Suppose gross domestic product is $5 billion, government transfer payments are $1 billion, indirect business taxes and transfers are $0.5 billion, and depreciation is $0.5 billion. Then national income equals

Accepted Answer

A)  $5 billion. 
B)  $4 billion. 
C)  $3 billion. 
D)  $2.7 billion. 
A)  $5 billion. 
B)  $4 billion. 
C)  $3 billion. 
D)  $2.7 billion.

Question 16

Which of the following statements is TRUE?

Accepted Answer

A)  The value of illegal activities is included in Gross Domestic Product (GDP). 
B)  The value of a homemaker's services is included in Gross Domestic Product (GDP). 
C)  The value of intermediate goods is included in Gross Domestic Product (GDP). 
D)  Gross Domestic Product (GDP) may be calculated using the income or the expenditure approach. 
A)  The value of illegal activities is included in Gross Domestic Product (GDP). 
B)  The value of a homemaker's services is included in Gross Domestic Product (GDP). 
C)  The value of intermediate goods is included in Gross Domestic Product (GDP). 
D)  Gross Domestic Product (GDP) may be calculated using the income or the expenditure approach.

Question 17

Which of the following is included in Gross Domestic Product (GDP)?

Accepted Answer

A)  Purchases of stocks and bonds by individuals 
B)  Purchases of stocks and bonds by firms 
C)  Sales of financial assets to foreign firms 
D)  Investment spending on capital goods 
A)  Purchases of stocks and bonds by individuals 
B)  Purchases of stocks and bonds by firms 
C)  Sales of financial assets to foreign firms 
D)  Investment spending on capital goods

Question 18

The components of the expenditure approach to measuring Gross Domestic Product (GDP) include all of the following EXCEPT

Accepted Answer

A)  government purchases of goods and services. 
B)  government Social Security payments. 
C)  durable consumer goods. 
D)  nondurable consumer goods. 
A)  government purchases of goods and services. 
B)  government Social Security payments. 
C)  durable consumer goods. 
D)  nondurable consumer goods.

Question 19

If nominal Gross Domestic Product (GDP) in 2013 was $3,000 billion, and the price level index was 330 (1985 = 100), then real Gross Domestic Product (GDP) in terms of the price level in 2013 was about

Accepted Answer

A)  $105 billion. 
B)  $4,220 billion. 
C)  $909 billion. 
D)  $537 billion. 
A)  $105 billion. 
B)  $4,220 billion. 
C)  $909 billion. 
D)  $537 billion.

Question 20

A car sold from a used car lot

Accepted Answer

A)  would be counted in Gross Domestic Product (GDP). 
B)  would fall under net exports, and would then be counted in Gross Domestic Product (GDP). 
C)  would not be counted in Gross Domestic Product (GDP). 
D)  would only be counted in Gross Domestic Product (GDP) if it was a foreign made car. 
A)  would be counted in Gross Domestic Product (GDP). 
B)  would fall under net exports, and would then be counted in Gross Domestic Product (GDP). 
C)  would not be counted in Gross Domestic Product (GDP). 
D)  would only be counted in Gross Domestic Product (GDP) if it was a foreign made car.

Exam 8: Measuring the Economys Performance

Which of the following statements is FALSE?

In the simple circular flow model, total income in the United States must equal

Consider the following: Farmer Jones bought seed and fertilizer for $100. He grew wheat that he sold to the Acme Bread Company for $200. Acme Bread produced and sold bread to the ABC Grocery Store for $250. Consumers bought the bread from the grocery for $350. How much was added to the GDP?

When we use the term fixed investment, we include in investment

Comparing GDP across countries is unrealistic unless we make adjustment in exchange rates to take into account differences in the cost of living via

Nominal income per person in the United States in 1960 was about $2,800 per year, while in 1990 nominal income per person was about $21,000. This indicates that

When economists refer to investment expenditures they mean the

The term "value added" refers to the dollar value of

Which sector of our economy accounts for the largest percentage to total spending?

If a firm produces more output than it sells, there will be I. An increase in the firm's inventories II) An increase in the gross private investment of the nation

Real GDP is

An increase in fixed investment spending that increases GDP occurs when

Using the expenditure approach, GDP is calculated as

The nominal value of an economic variable is

Suppose gross domestic product is $5 billion, government transfer payments are $1 billion, indirect business taxes and transfers are $0.5 billion, and depreciation is $0.5 billion. Then national income equals

Which of the following statements is TRUE?

Which of the following is included in Gross Domestic Product (GDP)?

The components of the expenditure approach to measuring Gross Domestic Product (GDP) include all of the following EXCEPT

If nominal Gross Domestic Product (GDP) in 2013 was $3,000 billion, and the price level index was 330 (1985 = 100), then real Gross Domestic Product (GDP) in terms of the price level in 2013 was about

A car sold from a used car lot

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

Filters