Question 1

Which of the following statements is true about profits?

Accepted Answer

A)  Profits are excluded from the circular flow of the income diagram. 
B)  The only portion of profits that are included in the circular flow diagram are the portion paid out in the form of dividends. 
C)  Profits are considered one of the resources necessary for production. 
D)  Profits are considered a cost of doing business. 
A)  Profits are excluded from the circular flow of the income diagram. 
B)  The only portion of profits that are included in the circular flow diagram are the portion paid out in the form of dividends. 
C)  Profits are considered one of the resources necessary for production. 
D)  Profits are considered a cost of doing business.

Question 2

The purchase of a share of stock is excluded in the calculation of Gross Domestic Product (GDP) because it

Accepted Answer

A)  is an intermediate good. 
B)  produces value added. 
C)  only represents the transfer of ownership rights. 
D)  is a final service and not a good. 
A)  is an intermediate good. 
B)  produces value added. 
C)  only represents the transfer of ownership rights. 
D)  is a final service and not a good.

Question 3

A purchasing power parity index would help you

Accepted Answer

A)  predict changes in U.S. real GDP. 
B)  identify those goods and services that are becoming relatively more important in chain-weighted GDP. 
C)  make international comparisons of living standards. 
D)  estimate the growth rate of U.S. personal income. 
A)  predict changes in U.S. real GDP. 
B)  identify those goods and services that are becoming relatively more important in chain-weighted GDP. 
C)  make international comparisons of living standards. 
D)  estimate the growth rate of U.S. personal income.

Question 4

Comparing two countries' nominal GDP over time is likely to be misleading if one wants to determine whether standards of living are better in one country because

Accepted Answer

A)  the figures must be adjusted for different types of currency. 
B)  the figures must be adjusted for price changes and population differences. 
C)  the figures must be adjusted to account for production differences. 
D)  NDP instead of GDP should be used. 
A)  the figures must be adjusted for different types of currency. 
B)  the figures must be adjusted for price changes and population differences. 
C)  the figures must be adjusted to account for production differences. 
D)  NDP instead of GDP should be used.

Question 5

The foreign exchange rate is

Accepted Answer

A)  an adjustment that takes into account differences in the true cost of living across countries. 
B)  the price of one currency in terms of another. 
C)  another name for purchasing power parity. 
D)  part of the circular flow diagram. 
A)  an adjustment that takes into account differences in the true cost of living across countries. 
B)  the price of one currency in terms of another. 
C)  another name for purchasing power parity. 
D)  part of the circular flow diagram.

Question 6

Which of the following will have the smallest dollar value?

Accepted Answer

A)  Personal income. 
B)  Disposable personal income. 
C)  National income. 
D)  Net domestic product. 
A)  Personal income. 
B)  Disposable personal income. 
C)  National income. 
D)  Net domestic product.

Question 7

When one converts nominal GDP to real GDP, one takes into account which of the following?

Accepted Answer

A)  changes in the population 
B)  changes in the quality of goods 
C)  changes in the distribution of income 
D)  none of the above 
A)  changes in the population 
B)  changes in the quality of goods 
C)  changes in the distribution of income 
D)  none of the above

Question 8

Households receive a total income of $5 million. Of this, $3.5 million are wages received for labor services, $1 million are rental payments, and $250,000 are interest payments received. What are the costs of production and profits equal to respectively?

Accepted Answer

A)  $5 million; $500,000 
B)  $5 million; $250,000 
C)  $4.75 million; $250,000 
D)  $4.75 million; 0 
A)  $5 million; $500,000 
B)  $5 million; $250,000 
C)  $4.75 million; $250,000 
D)  $4.75 million; 0

Question 9

-According to the above table, national income is

Accepted Answer

A)  $12,637 billion. 
B)  $11,968 billion. 
C)  $11,943 billion. 
D)  $11,866 billion. 
A)  $12,637 billion. 
B)  $11,968 billion. 
C)  $11,943 billion. 
D)  $11,866 billion.

Question 10

The total factor payments to all resource owners is called

Accepted Answer

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

Question 11

The approach used in the U.S. to measure the economy's aggregate performance is

Accepted Answer

A)  national income accounting. 
B)  to add up the value of intermediate goods. 
C)  the total value of securities. 
D)  to add up the total value of financial transactions, transfer payments, and secondhand goods. 
E)  all of the above 
A)  national income accounting. 
B)  to add up the value of intermediate goods. 
C)  the total value of securities. 
D)  to add up the total value of financial transactions, transfer payments, and secondhand goods. 
E)  all of the above

Question 12

Net domestic product (NDP) is

Accepted Answer

A)  Gross Domestic Product (GDP) minus depreciation. 
B)  Gross Domestic Product (GDP) minus private investment. 
C)  Gross Domestic Product (GDP) minus the foreign sector. 
D)  Gross Domestic Product (GDP) minus government transfers. 
A)  Gross Domestic Product (GDP) minus depreciation. 
B)  Gross Domestic Product (GDP) minus private investment. 
C)  Gross Domestic Product (GDP) minus the foreign sector. 
D)  Gross Domestic Product (GDP) minus government transfers.

Question 13

Which of the following is from the calculation of investment for GDP purposes?

Accepted Answer

A)  the purchase of new capital goods 
B)  changes in business inventories 
C)  new home construction 
D)  all of the above 
A)  the purchase of new capital goods 
B)  changes in business inventories 
C)  new home construction 
D)  all of the above

Question 14

How is interest measured when used in deriving GDP?

Accepted Answer

Interest is expressed in net t

Question 15

National income accounting is

Accepted Answer

A)  used by businesses to calculate their profits during a given year. 
B)  a system utilized to measure macroeconomic activity. 
C)  a measure of consumer income. 
D)  used by accountants to calculate the tax obligations of multinational corporations. 
A)  used by businesses to calculate their profits during a given year. 
B)  a system utilized to measure macroeconomic activity. 
C)  a measure of consumer income. 
D)  used by accountants to calculate the tax obligations of multinational corporations.

Question 16

Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals

Accepted Answer

A)  $2.9 billion. 
B)  $3.6 billion. 
C)  $5.9 billion. 
D)  $6.7 billion. 
A)  $2.9 billion. 
B)  $3.6 billion. 
C)  $5.9 billion. 
D)  $6.7 billion.

Question 17

Which of the following items is included in GDP?

Accepted Answer

A)  The new car that James just bought 
B)  The value of a stay-at-home mom 
C)  Proceeds for a garage sale 
D)  Purchase of a government bond 
A)  The new car that James just bought 
B)  The value of a stay-at-home mom 
C)  Proceeds for a garage sale 
D)  Purchase of a government bond

Question 18

-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 factor services?

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 19

Which of the following is included in the calculation of Gross Domestic Product (GDP) using the income approach? I. Wages and salaries.
II) Net exports.

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 20

Which of the following accurately describes represents income earned by all factors of production?

Accepted Answer

A)  National Income 
B)  Personal Income 
C)  Disposable Personal Income 
D)  Wages and salaries 
A)  National Income 
B)  Personal Income 
C)  Disposable Personal Income 
D)  Wages and salaries

Exam 8: Measuring the Economys Performance

Which of the following statements is true about profits?

The purchase of a share of stock is excluded in the calculation of Gross Domestic Product (GDP) because it

A purchasing power parity index would help you

Comparing two countries' nominal GDP over time is likely to be misleading if one wants to determine whether standards of living are better in one country because

The foreign exchange rate is

Which of the following will have the smallest dollar value?

When one converts nominal GDP to real GDP, one takes into account which of the following?

Households receive a total income of $5 million. Of this, $3.5 million are wages received for labor services, $1 million are rental payments, and $250,000 are interest payments received. What are the costs of production and profits equal to respectively?

-According to the above table, national income is

The total factor payments to all resource owners is called

The approach used in the U.S. to measure the economy's aggregate performance is

Net domestic product (NDP) is

Which of the following is from the calculation of investment for GDP purposes?

How is interest measured when used in deriving GDP?

National income accounting is

Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals

Which of the following items is included in GDP?

-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 factor services?

Which of the following is included in the calculation of Gross Domestic Product (GDP) using the income approach? I. Wages and salaries. II) Net exports.

Which of the following accurately describes represents income earned by all factors of production?

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