Question 1

Household consumption:

Accepted Answer

A)  only accounts for about 20 per cent of total GDP. 
B)  is the largest single component of GDP. 
C)  accounts for around 80 per cent to 85 per cent of total GDP each year. 
D)  is the smallest component of GDP. 
A)  only accounts for about 20 per cent of total GDP. 
B)  is the largest single component of GDP. 
C)  accounts for around 80 per cent to 85 per cent of total GDP each year. 
D)  is the smallest component of GDP.

Question 2

The difference between GDP at factor cost and GDP at market prices is:

Accepted Answer

A)  wages. 
B)  profit. 
C)  interest. 
D)  indirect taxes less subsidies. 
A)  wages. 
B)  profit. 
C)  interest. 
D)  indirect taxes less subsidies.

Question 3

Which one of the following statements is true?

Accepted Answer

A)  Prices and quantities in individual markets are determined by the government. 
B)  In the factor markets, labour is owned by businesses and supplied to households. 
C)  In the factor markets, businesses supply labour in return for money repayments. 
D)  Households supply labour to businesses in return for wages and salaries. 
A)  Prices and quantities in individual markets are determined by the government. 
B)  In the factor markets, labour is owned by businesses and supplied to households. 
C)  In the factor markets, businesses supply labour in return for money repayments. 
D)  Households supply labour to businesses in return for wages and salaries.

Question 4

Narrbegin Exhibit 11.3 GDP data (billions of dollars)
 $\begin{array}{|l|r|}
\hline \text { Capital depreciation } & 950 \
\hline \text { Change in business inventory } & 50 \
\hline \text { Compensation of employees } & 5000 \
\hline \text { Corporate profit } & 600 \
\hline \text { Durable goods } & 600 \
\hline \text { Exports } & 100 \
\hline \text { Factor payments from the rest of the world } & 360 \
\hline \text { Factor payments to the rest of the world } & 300 \
\hline \text { Farm income } & 300 \
\hline \text { Gross private domestic investment } & 1000 \
\hline \text { Government spending } & 800 \
\hline \text { Imports } & 150 \
\hline \text { Net interest } & 500 \
\hline \text { Non-durable goods } & 2000 \
\hline \text { Non-farm income } & 700 \
\hline \text { Proprietors' income } & 1000 \
\hline \text { Rental income } & 100 \
\hline \text { Services } & 4000\
\hline 
\end{array}$
 
-Use the information in Exhibit 11.3 to compute GDP. Which of the following is correct?

Accepted Answer

A)  $8500 billion. 
B)  $8400 billion. 
C)  $7400 billion. 
D)  $8350 billion. 
A)  $8500 billion. 
B)  $8400 billion. 
C)  $7400 billion. 
D)  $8350 billion.

Question 5

Intermediate goods are goods and services used:

Accepted Answer

A)  by the ultimate user. 
B)  by state and local governments. 
C)  as inputs. 
D)  both as inputs and final goods. 
A)  by the ultimate user. 
B)  by state and local governments. 
C)  as inputs. 
D)  both as inputs and final goods.

Question 6

GDP is the sum of exports, consumer expenditure, government expenditure and taxes.

Accepted Answer

A) True 
 B)False

Question 7

GDP is equal to:

Accepted Answer

A)  GNP minus net income payable to foreigners. 
B)  NNP plus depreciation, minus net income payable to foreigners. 
C)  C + I + G - NX. 
D)  C + I + G + NX. 
A)  GNP minus net income payable to foreigners. 
B)  NNP plus depreciation, minus net income payable to foreigners. 
C)  C + I + G - NX. 
D)  C + I + G + NX.

Question 8

GDP fails to measure changes in

Accepted Answer

A)  the prices of products caused by inflation. 
B)  the market value of goods and services, since it uses market prices for valuation. 
C)  the distribution of goods and services. 
D)  leisure time, since it is valued at the minimum wage and not the true opportunity cost of lost wages. 
A)  the prices of products caused by inflation. 
B)  the market value of goods and services, since it uses market prices for valuation. 
C)  the distribution of goods and services. 
D)  leisure time, since it is valued at the minimum wage and not the true opportunity cost of lost wages.

Question 9

The output measure that adjusts for depreciation in plant and equipment is:

Accepted Answer

A)  net national product. 
B)  gross domestic product. 
C)  not possible to estimate. 
D)  net domestic product. 
A)  net national product. 
B)  gross domestic product. 
C)  not possible to estimate. 
D)  net domestic product.

Question 10

Narrbegin Exhibit 11.2 GDP data (billions of dollars)
 $\begin{array}{|l|r|}
\hline \text { Personal consumption expenditures } & 5207.6 \
\hline \text { Interest } & 425.1 \
\hline \text { Corporate profit } & 735.9 \
\hline \text { Government spending } & 1406.7 \
\hline \text { Depreciation } & 830.1 \
\hline \text { Rent } & 146.3 \
\hline \text { Gross private domestic investment } & 1116.5 \
\hline \text { Compensation of employees } & 4426.9 \
\hline \text { Exports } & 870.9 \
\hline \text { Imports } & 965.7 \
\hline \text { Indirect business taxes } & 553.1 \
\hline \text { Proprietors' income } & 520.3 \
\hline \text { Direct taxes } & 886.9 \
\hline \text { Income earned but not received } & 617.3 \
\hline \text { Income received but not earned } & 376.6\

\hline
\end{array}$
 
-In Exhibit 11.2, NDP is:

Accepted Answer

A)  $6254.5 billion. 
B)  $6495.2 billion. 
C)  $6805.9 billion. 
D)  $7082.9 billion. 
A)  $6254.5 billion. 
B)  $6495.2 billion. 
C)  $6805.9 billion. 
D)  $7082.9 billion.

Question 11

If domestic saving is less than investment in an open economy, the result is most likely to be:

Accepted Answer

A)  a current account surplus. 
B)  a capital account deficit. 
C)  a current account deficit. 
D)  a balanced current account. 
A)  a current account surplus. 
B)  a capital account deficit. 
C)  a current account deficit. 
D)  a balanced current account.

Question 12

Which of the following would not be included in the government consumption expenditures and gross investment (G) category of GDP?

Accepted Answer

A)  The payments made to social security recipients. 
B)  Expenditures made to repair a highway. 
C)  Spending for professors at universities. 
D)  The purchase of new china for parliamentary functions. 
A)  The payments made to social security recipients. 
B)  Expenditures made to repair a highway. 
C)  Spending for professors at universities. 
D)  The purchase of new china for parliamentary functions.

Question 13

Which one of the following is an example of a circular flow model and shows the interdependence of households and firms?

Accepted Answer

A)  Households demand their resources from firms in the factor markets and, in turn, supply in the product market, the goods and services produced by the firms. 
B)  Firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C)  Households supply their resources to firms in the factor markets and, in turn, demand in the product market, the goods and services produced by the firms. 
D)  Firms in the factor markets pay households, in the form of wages, interest, rent and profit, for resources demanded. 
A)  Households demand their resources from firms in the factor markets and, in turn, supply in the product market, the goods and services produced by the firms. 
B)  Firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets. 
C)  Households supply their resources to firms in the factor markets and, in turn, demand in the product market, the goods and services produced by the firms. 
D)  Firms in the factor markets pay households, in the form of wages, interest, rent and profit, for resources demanded.

Question 14

Which of the following transactions is not included in GDP?

Accepted Answer

A)  A drug addict buys cough medicine. 
B)  A drug addict spends two months in a drug rehabilitation centre. 
C)  A doctor treats a patient for drug addiction. 
D)  Someone sells drugs in a black market. 
A)  A drug addict buys cough medicine. 
B)  A drug addict spends two months in a drug rehabilitation centre. 
C)  A doctor treats a patient for drug addiction. 
D)  Someone sells drugs in a black market.

Question 15

Which of the following is a shortcoming of GDP?

Accepted Answer

A)  It measures non-market transactions. 
B)  It includes an estimate of illegal transactions. 
C)  It includes an estimate of the value of household services. 
D)  It does not include the value of the black market. 
A)  It measures non-market transactions. 
B)  It includes an estimate of illegal transactions. 
C)  It includes an estimate of the value of household services. 
D)  It does not include the value of the black market.

Question 16

The current account balance is equal to:

Accepted Answer

A)  national saving plus national investment. 
B)  national investment minus national saving. 
C)  national saving minus national investment. 
D)  national leisure time minus national investment. 
A)  national saving plus national investment. 
B)  national investment minus national saving. 
C)  national saving minus national investment. 
D)  national leisure time minus national investment.

Question 17

To finance a current account deficit, a country must:

Accepted Answer

A)  borrow money from overseas. 
B)  buy overseas assets. 
C)  lend money overseas. 
D)  do nothing. 
A)  borrow money from overseas. 
B)  buy overseas assets. 
C)  lend money overseas. 
D)  do nothing.

Question 18

GDP does not count:

Accepted Answer

A)  the estimated value of household production, which is not sold in the market. 
B)  state and local government purchases. 
C)  spending for new homes. 
D)  changes in inventories. 
A)  the estimated value of household production, which is not sold in the market. 
B)  state and local government purchases. 
C)  spending for new homes. 
D)  changes in inventories.

Question 19

Australian gross domestic product is the market value of all final goods and services:

Accepted Answer

A)  produced in Australia by Australian citizens during a year. 
B)  produced in Australia during a year. 
C)  produced outside of Australia during a year. 
D)  produced outside Australia by Australian citizens during a year. 
A)  produced in Australia by Australian citizens during a year. 
B)  produced in Australia during a year. 
C)  produced outside of Australia during a year. 
D)  produced outside Australia by Australian citizens during a year.

Question 20

In very simple economies, a community's saving is its:

Accepted Answer

A)  capital. 
B)  treasure. 
C)  burden. 
D)  investment. 
A)  capital. 
B)  treasure. 
C)  burden. 
D)  investment.

Household consumption:

The difference between GDP at factor cost and GDP at market prices is:

Which one of the following statements is true?

Intermediate goods are goods and services used:

GDP is the sum of exports, consumer expenditure, government expenditure and taxes.

GDP is equal to:

GDP fails to measure changes in

The output measure that adjusts for depreciation in plant and equipment is:

If domestic saving is less than investment in an open economy, the result is most likely to be:

Which of the following would not be included in the government consumption expenditures and gross investment (G) category of GDP?

Which one of the following is an example of a circular flow model and shows the interdependence of households and firms?

Which of the following transactions is not included in GDP?

Which of the following is a shortcoming of GDP?

The current account balance is equal to:

To finance a current account deficit, a country must:

GDP does not count:

Australian gross domestic product is the market value of all final goods and services:

In very simple economies, a community's saving is its:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

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Exam 12: Measuring the Size of the Economy

Household consumption:

The difference between GDP at factor cost and GDP at market prices is:

Which one of the following statements is true?

Intermediate goods are goods and services used:

GDP is the sum of exports, consumer expenditure, government expenditure and taxes.

GDP is equal to:

GDP fails to measure changes in

The output measure that adjusts for depreciation in plant and equipment is:

If domestic saving is less than investment in an open economy, the result is most likely to be:

Which of the following would not be included in the government consumption expenditures and gross investment (G) category of GDP?

Which one of the following is an example of a circular flow model and shows the interdependence of households and firms?

Which of the following transactions is not included in GDP?

Which of the following is a shortcoming of GDP?

The current account balance is equal to:

To finance a current account deficit, a country must:

GDP does not count:

Australian gross domestic product is the market value of all final goods and services:

In very simple economies, a community's saving is its:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters