Question 1

How does U.S.gross domestic product (GDP)differ from U.S.gross national product (GNP)?

Accepted Answer

A)  GNP = GDP - losses from depreciation 
B)  GNP = GDP + income earned by U.S.citizens abroad - income that foreign citizens earned in the U.S. 
C)  GNP = GDP + income earned by corporations 
D)  GNP = GDP - depreciation - retained earnings 
A)  GNP = GDP - losses from depreciation 
B)  GNP = GDP + income earned by U.S.citizens abroad - income that foreign citizens earned in the U.S. 
C)  GNP = GDP + income earned by corporations 
D)  GNP = GDP - depreciation - retained earnings

Question 2

After the terrorist attacks on September 11,2001,governments within the United States raised expenditures to increase security at airports.These purchases of goods and services are

Accepted Answer

A)  not included in GDP since they do not represent production. 
B)  not included in GDP since the government collects taxes to pay for them. 
C)  included in GDP since government expenditures on goods and services are included in GDP. 
D)  included in GDP only to the extent that the federal government,rather than state or local governments,paid for them. 
A)  not included in GDP since they do not represent production. 
B)  not included in GDP since the government collects taxes to pay for them. 
C)  included in GDP since government expenditures on goods and services are included in GDP. 
D)  included in GDP only to the extent that the federal government,rather than state or local governments,paid for them.

Question 3

In the economy of Wrexington in 2008,consumption was $2000,exports were $800,GDP was $4800,government purchases were $840,and investment was $1400.What were Wrexington's imports in 2008?

Accepted Answer

A)  -$560 
B)  -$240 
C)  $240 
D)  $560 
A)  -$560 
B)  -$240 
C)  $240 
D)  $560

Question 4

Changes in the GDP deflator reflect

Accepted Answer

A)  only changes in prices. 
B)  only changes in the amounts being produced. 
C)  both changes in prices and changes in the amounts being produced. 
D)  neither changes in prices nor changes in the amounts being produced. 
A)  only changes in prices. 
B)  only changes in the amounts being produced. 
C)  both changes in prices and changes in the amounts being produced. 
D)  neither changes in prices nor changes in the amounts being produced.

Question 5

Which of the following components or subcomponents of GDP can be either positive or negative?

Accepted Answer

A)  consumers' spending on durable goods 
B)  firms' spending on capital equipment 
C)  net exports 
D)  All of the above are correct. 
A)  consumers' spending on durable goods 
B)  firms' spending on capital equipment 
C)  net exports 
D)  All of the above are correct.

Question 6

Recessions are associated with lower incomes,rising unemployment,and falling profits.

Accepted Answer

A) True 
 B)False

Question 7

Suppose an economy produces only cranberries and maple syrup.In 2006,50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit.In 2005,the base year,the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit.For 2006,

Accepted Answer

A)  nominal GDP is $1800,real GDP is $2000,and the GDP deflator is 90. 
B)  nominal GDP is $1800,real GDP is $2000,and the GDP deflator is 111.1. 
C)  nominal GDP is $2000,real GDP is $1800,and the GDP deflator is 90. 
D)  nominal GDP is $2000,real GDP is $1800,and the GDP deflator is 111.1. 
A)  nominal GDP is $1800,real GDP is $2000,and the GDP deflator is 90. 
B)  nominal GDP is $1800,real GDP is $2000,and the GDP deflator is 111.1. 
C)  nominal GDP is $2000,real GDP is $1800,and the GDP deflator is 90. 
D)  nominal GDP is $2000,real GDP is $1800,and the GDP deflator is 111.1.

Question 8

Until recently,George lived in a home that was newly constructed in 2005.In 2005,he paid $200,000 for the brand new house.He sold the house in 2006 for $225,000.Which of the following statements is correct regarding the sale of the house?

Accepted Answer

A)  The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2006 sale increased 2006 GDP by $225,000;furthermore,the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2006 sale affected neither 2005 GDP nor 2006 GDP. 
A)  The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B)  The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C)  The 2006 sale increased 2006 GDP by $225,000;furthermore,the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D)  The 2006 sale affected neither 2005 GDP nor 2006 GDP.

Question 9

GDP is not a perfect measure of well-being;for example,

Accepted Answer

A)  GDP excludes the value of volunteer work. 
B)  GDP does not address the distribution of income. 
C)  GDP does not address environmental quality. 
D)  All of the above are correct. 
A)  GDP excludes the value of volunteer work. 
B)  GDP does not address the distribution of income. 
C)  GDP does not address environmental quality. 
D)  All of the above are correct.

Question 10

Which of the following is not an example of a durable good?

Accepted Answer

A)  a refrigerator 
B)  an automobile 
C)  a business suit 
D)  a furnace 
A)  a refrigerator 
B)  an automobile 
C)  a business suit 
D)  a furnace

Question 11

Disposable personal income is the income that

Accepted Answer

A)  households have left after paying taxes and non-tax payments to the government. 
B)  businesses have left after paying taxes and non-tax payments to the government. 
C)  households and noncorporate businesses have left after paying taxes and non-tax payments to the government. 
D)  households and businesses have left after paying taxes and non-tax payments to the government. 
A)  households have left after paying taxes and non-tax payments to the government. 
B)  businesses have left after paying taxes and non-tax payments to the government. 
C)  households and noncorporate businesses have left after paying taxes and non-tax payments to the government. 
D)  households and businesses have left after paying taxes and non-tax payments to the government.

Question 12

In the equation Y = C + I + G + NX,

Accepted Answer

A)  Y represents the economy's total expenditure. 
B)  C represents household expenditures on services and durable goods. 
C)  all of the variables are always positive numbers. 
D)  All of the above are correct. 
A)  Y represents the economy's total expenditure. 
B)  C represents household expenditures on services and durable goods. 
C)  all of the variables are always positive numbers. 
D)  All of the above are correct.

Question 13

James owns two houses.He rents one house to the Johnson family for $10,000 per year.He lives in the other house.If he were to rent the house in which he lives,he could earn $12,000 per year in rent by doing so.How much do the housing services provided by the two houses contribute to GDP?

Accepted Answer

A)  $0 
B)  $10,000 
C)  $12,000 
D)  $22,000 
A)  $0 
B)  $10,000 
C)  $12,000 
D)  $22,000

Question 14

Statistics that are of particular interest to macroeconomists

Accepted Answer

A)  are largely ignored by the media. 
B)  are widely reported by the media. 
C)  include the equilibrium prices of individual goods and services. 
D)  tell us about a particular household,firm,or market. 
A)  are largely ignored by the media. 
B)  are widely reported by the media. 
C)  include the equilibrium prices of individual goods and services. 
D)  tell us about a particular household,firm,or market.

Question 15

The government of Wrexington,a country which has adopted American GDP accounting conventions,reported that GDP in quarter 3 was $12 billion at an annual rate.This means that the market value of all final goods and services produced within Wrexington in quarter 3 was

Accepted Answer

A)  $3 billion. 
B)  $4 billion. 
C)  $12 billion. 
D)  $48 billion. 
A)  $3 billion. 
B)  $4 billion. 
C)  $12 billion. 
D)  $48 billion.

Question 16

A recession has traditionally been defined as a period during which

Accepted Answer

A)  nominal GDP declines for two consecutive quarters. 
B)  nominal GDP declines for four consecutive quarters. 
C)  real GDP declines for two consecutive quarters. 
D)  real GDP declines for four consecutive quarters. 
A)  nominal GDP declines for two consecutive quarters. 
B)  nominal GDP declines for four consecutive quarters. 
C)  real GDP declines for two consecutive quarters. 
D)  real GDP declines for four consecutive quarters.

Question 17

In 2007,government purchases was the largest component of U.S.GDP.

Accepted Answer

A) True 
 B)False

Question 18

If the U.S.government reports that GDP in the third quarter was $12 trillion at an annual rate,then the amount of income and expenditure during quarter three was $3 trillion.

Accepted Answer

A) True 
 B)False

Question 19

In a simple circular-flow diagram,firms use the money they get from a sale to

Accepted Answer

A)  pay wages to workers. 
B)  pay rent to landlords. 
C)  pay profit to the firms' owners. 
D)  All of the above are correct. 
A)  pay wages to workers. 
B)  pay rent to landlords. 
C)  pay profit to the firms' owners. 
D)  All of the above are correct.

Question 20

Suppose an economy produces only cheese and fish.In 2008,20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each.In 2007,the base year,the price of cheese was $10 per unit and the price of fish was $75 per unit.For 2008,

Accepted Answer

A)  nominal GDP is $500,real GDP is $800,and the GDP deflator is 62.5. 
B)  nominal GDP is $500,real GDP is $800,and the GDP deflator is 160. 
C)  nominal GDP is $800,real GDP is $500,and the GDP deflator is 62.5. 
D)  nominal GDP is $800,real GDP is $500,and the GDP deflator is 160. 
A)  nominal GDP is $500,real GDP is $800,and the GDP deflator is 62.5. 
B)  nominal GDP is $500,real GDP is $800,and the GDP deflator is 160. 
C)  nominal GDP is $800,real GDP is $500,and the GDP deflator is 62.5. 
D)  nominal GDP is $800,real GDP is $500,and the GDP deflator is 160.

Exam 23: Measuring a Nations Income

How does U.S.gross domestic product (GDP)differ from U.S.gross national product (GNP)?

After the terrorist attacks on September 11,2001,governments within the United States raised expenditures to increase security at airports.These purchases of goods and services are

In the economy of Wrexington in 2008,consumption was $2000,exports were $800,GDP was $4800,government purchases were $840,and investment was $1400.What were Wrexington's imports in 2008?

Changes in the GDP deflator reflect

Which of the following components or subcomponents of GDP can be either positive or negative?

Recessions are associated with lower incomes,rising unemployment,and falling profits.

Suppose an economy produces only cranberries and maple syrup.In 2006,50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit.In 2005,the base year,the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit.For 2006,

Until recently,George lived in a home that was newly constructed in 2005.In 2005,he paid $200,000 for the brand new house.He sold the house in 2006 for $225,000.Which of the following statements is correct regarding the sale of the house?

GDP is not a perfect measure of well-being;for example,

Which of the following is not an example of a durable good?

Disposable personal income is the income that

In the equation Y = C + I + G + NX,

James owns two houses.He rents one house to the Johnson family for $10,000 per year.He lives in the other house.If he were to rent the house in which he lives,he could earn $12,000 per year in rent by doing so.How much do the housing services provided by the two houses contribute to GDP?

Statistics that are of particular interest to macroeconomists

The government of Wrexington,a country which has adopted American GDP accounting conventions,reported that GDP in quarter 3 was $12 billion at an annual rate.This means that the market value of all final goods and services produced within Wrexington in quarter 3 was

A recession has traditionally been defined as a period during which

In 2007,government purchases was the largest component of U.S.GDP.

If the U.S.government reports that GDP in the third quarter was $12 trillion at an annual rate,then the amount of income and expenditure during quarter three was $3 trillion.

In a simple circular-flow diagram,firms use the money they get from a sale to

Suppose an economy produces only cheese and fish.In 2008,20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each.In 2007,the base year,the price of cheese was $10 per unit and the price of fish was $75 per unit.For 2008,

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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