Question 1

A price index creates a measure of how many dollars it would take to maintain a constant purchasing power over time.

Accepted Answer

A) True 
 B)False

Question 2

Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.

Accepted Answer

GDP = C +

Question 3

Total income received by households is called:

Accepted Answer

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

Question 4

Which of the following is not considered investment in the national income accounts?

Accepted Answer

A)  The purchase of a drill press by XYZ company. 
B)  Construction of a new housing project. 
C)  The accumulation of inventories on a grocer's shelves. 
D)  The purchase of 1000 shares of IBM stock. 
A)  The purchase of a drill press by XYZ company. 
B)  Construction of a new housing project. 
C)  The accumulation of inventories on a grocer's shelves. 
D)  The purchase of 1000 shares of IBM stock.

Question 5

The goods and services that are used in the production of other goods and services are called:

Accepted Answer

A)  gross domestic goods. 
B)  intermediate goods. 
C)  final goods. 
D)  ultimate goods. 
A)  gross domestic goods. 
B)  intermediate goods. 
C)  final goods. 
D)  ultimate goods.

Question 6

Transfer payments are included in which category under the expenditure approach to GDP accounting?

Accepted Answer

A)  consumption 
B)  government purchases 
C)  net exports 
D)  Transfer payments are not directly included in GDP calculations. 
A)  consumption 
B)  government purchases 
C)  net exports 
D)  Transfer payments are not directly included in GDP calculations.

Question 7

What is the measure of the income earned by owners of resources used in making final goods and services?

Accepted Answer

A)  personal income 
B)  national income 
C)  retained earnings 
D)  gross domestic income 
A)  personal income 
B)  national income 
C)  retained earnings 
D)  gross domestic income

Question 8

Changes in inventories are included in which category under the expenditure approach to GDP accounting?

Accepted Answer

A)  consumption 
B)  government purchases 
C)  investment 
D)  net exports 
A)  consumption 
B)  government purchases 
C)  investment 
D)  net exports

Question 9

If nominal GDP rises from $5 billion to $6 billion,when the GDP deflator goes from 100 to 130,real GDP

Accepted Answer

A)  rises. 
B)  falls. 
C)  stays the same. 
D)  could either be rising or falling. 
A)  rises. 
B)  falls. 
C)  stays the same. 
D)  could either be rising or falling.

Question 10

Exhibit 19-1   Refer to Exhibit 19-1.Government purchases (G)for the year in question is:

Accepted Answer

A)  $1,350 billion. 
B)  $3,400 billion. 
C)  $2,100 billion. 
D)  $2,550 billion. 
A)  $1,350 billion. 
B)  $3,400 billion. 
C)  $2,100 billion. 
D)  $2,550 billion.

Question 11

If country A had a smaller underground economy than country B,and country A's citizens worked more hours per week than the citizens of country B,other things equal,then

Accepted Answer

A) GDP comparisons between the countries would overstate the economic welfare of country A compared to B. 
B) GDP comparisons between the countries would understate the economic welfare of country A compared to B. 
C) it is impossible to know which direction GDP comparisons between the countries would be biased as measures of the economic welfare of the two countries. 
D) it would not introduce any bias in using GDP to compare economic welfare between the countries. 
A) GDP comparisons between the countries would overstate the economic welfare of country A compared to B. 
B) GDP comparisons between the countries would understate the economic welfare of country A compared to B. 
C) it is impossible to know which direction GDP comparisons between the countries would be biased as measures of the economic welfare of the two countries. 
D) it would not introduce any bias in using GDP to compare economic welfare between the countries.

Question 12

Which of the following is not part of GDP?

Accepted Answer

A)  the value of a new home built and purchased during the year 
B)  the value of shares of Microsoft stock bought and sold during the year 
C)  the value of long distance telephone services rendered during the year 
D)  the value of new furniture produced during the year 
A)  the value of a new home built and purchased during the year 
B)  the value of shares of Microsoft stock bought and sold during the year 
C)  the value of long distance telephone services rendered during the year 
D)  the value of new furniture produced during the year

Question 13

Using the expenditure approach to GDP accounting,which of the following are included in the investment category?

Accepted Answer

A)  the purchase of government bonds 
B)  the purchase of corporate bonds 
C)  the purchase of corporate stocks 
D)  none of the above 
A)  the purchase of government bonds 
B)  the purchase of corporate bonds 
C)  the purchase of corporate stocks 
D)  none of the above

Question 14

Which of the following is subtracted from net national product to arrive at national income?

Accepted Answer

A)  net income of foreigners 
B)  depreciation 
C)  indirect business taxes 
D)  transfer payments 
A)  net income of foreigners 
B)  depreciation 
C)  indirect business taxes 
D)  transfer payments

Question 15

All of the following are examples of producer goods except:

Accepted Answer

A)  machinery. 
B)  tools. 
C)  appliances. 
D)  factory buildings. 
A)  machinery. 
B)  tools. 
C)  appliances. 
D)  factory buildings.

Question 16

Which of the following is not considered part of the services category under the expenditure approach to GDP accounting?

Accepted Answer

A)  sporting events 
B)  haircuts 
C)  commercial airline transportation 
D)  privately owned jets 
A)  sporting events 
B)  haircuts 
C)  commercial airline transportation 
D)  privately owned jets

Question 17

If the GDP deflator increases from one year to the next,it can be concluded that the economy has experienced:

Accepted Answer

A)  growth. 
B)  stagnation. 
C)  stagflation. 
D)  inflation. 
A)  growth. 
B)  stagnation. 
C)  stagflation. 
D)  inflation.

Question 18

Which of the following is false?

Accepted Answer

A)  We do not have information on nonmarket transactions output that is reliable enough to include it in the GDP. 
B)  The most important nonmarket transaction omitted from GDP are services provided directly in the home. 
C)  The value that individuals place on leisure is omitted in calculating GDP. 
D)  All goods and services exchanged in the current period are included in this year's GDP. 
A)  We do not have information on nonmarket transactions output that is reliable enough to include it in the GDP. 
B)  The most important nonmarket transaction omitted from GDP are services provided directly in the home. 
C)  The value that individuals place on leisure is omitted in calculating GDP. 
D)  All goods and services exchanged in the current period are included in this year's GDP.

Question 19

The largest component of consumption expenditures is:

Accepted Answer

A)  durables. 
B)  nondurables. 
C)  services. 
D)  residential structures. 
A)  durables. 
B)  nondurables. 
C)  services. 
D)  residential structures.

Question 20

Doctor Green grows cucumbers for home consumption.That activity is:

Accepted Answer

A)  excluded from GDP to avoid double counting. 
B)  excluded from GDP because an intermediate good is involved. 
C)  excluded from GDP because no market transaction occurs. 
D)  included in GDP because it reflects production. 
A)  excluded from GDP to avoid double counting. 
B)  excluded from GDP because an intermediate good is involved. 
C)  excluded from GDP because no market transaction occurs. 
D)  included in GDP because it reflects production.

Exam 19: Measuring Economic Performance

A price index creates a measure of how many dollars it would take to maintain a constant purchasing power over time.

Provide the formula for the expenditure approach to GDP accounting and include an example of each category of spending.

Total income received by households is called:

Which of the following is not considered investment in the national income accounts?

The goods and services that are used in the production of other goods and services are called:

Transfer payments are included in which category under the expenditure approach to GDP accounting?

What is the measure of the income earned by owners of resources used in making final goods and services?

Changes in inventories are included in which category under the expenditure approach to GDP accounting?

If nominal GDP rises from $5 billion to $6 billion,when the GDP deflator goes from 100 to 130,real GDP

Exhibit 19-1 Refer to Exhibit 19-1.Government purchases (G)for the year in question is:

If country A had a smaller underground economy than country B,and country A's citizens worked more hours per week than the citizens of country B,other things equal,then

Which of the following is not part of GDP?

Using the expenditure approach to GDP accounting,which of the following are included in the investment category?

Which of the following is subtracted from net national product to arrive at national income?

All of the following are examples of producer goods except:

Which of the following is not considered part of the services category under the expenditure approach to GDP accounting?

If the GDP deflator increases from one year to the next,it can be concluded that the economy has experienced:

Which of the following is false?

The largest component of consumption expenditures is:

Doctor Green grows cucumbers for home consumption.That activity is:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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