Question 1

If a firm's inventory decreases,the GDP counts the net decrease as a reduction in investment.

Accepted Answer

A) True 
 B)False

Question 2

If real GDP for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal GDP for that year is

Accepted Answer

A) $3.7 trillion 
B) $4 trillion 
C) $6.8 trillion 
D) $27 trillion 
E) $68 trillion 
A) $3.7 trillion 
B) $4 trillion 
C) $6.8 trillion 
D) $27 trillion 
E) $68 trillion

Question 3

The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.

Accepted Answer

A) overstates,unpopular 
B) overstates,obsolete 
C) overstates,widely used 
D) understates,widely used 
E) understates,obsolete 
A) overstates,unpopular 
B) overstates,obsolete 
C) overstates,widely used 
D) understates,widely used 
E) understates,obsolete

Question 4

Which of the following is not considered a component of investment when calculating GDP?

Accepted Answer

A) new residential construction 
B) construction of new factories 
C) net increases in inventory 
D) purchases of corporate stock 
E) production of new equipment 
A) new residential construction 
B) construction of new factories 
C) net increases in inventory 
D) purchases of corporate stock 
E) production of new equipment

Question 5

If the CPI overstated inflation by 1 percent per year,then the average real wage,instead of dropping by 2 percent in the last two decades,actually increased by about

Accepted Answer

A) 1 percent 
B) 2 percent 
C) 10 percent 
D) 20 percent 
E) 3 percent 
A) 1 percent 
B) 2 percent 
C) 10 percent 
D) 20 percent 
E) 3 percent

Question 6

You could determine the value of the GDP price index if you knew

Accepted Answer

A) current GDP at current- and base-year prices 
B) base-year GDP at current- and base-year prices 
C) current GDP at current prices and base-year GDP at base-year prices 
D) current GDP at base-year prices only 
E) current GDP at current prices only 
A) current GDP at current- and base-year prices 
B) base-year GDP at current- and base-year prices 
C) current GDP at current prices and base-year GDP at base-year prices 
D) current GDP at base-year prices only 
E) current GDP at current prices only

Question 7

Which of the following is reflected in GDP?

Accepted Answer

A) the value of leisure time 
B) the value of illegal goods and services 
C) emotional and psychological well-being 
D) costs of cleaning up after pollution 
E) the value of house maintenance performed by homeowners 
A) the value of leisure time 
B) the value of illegal goods and services 
C) emotional and psychological well-being 
D) costs of cleaning up after pollution 
E) the value of house maintenance performed by homeowners

Question 8

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment.According to the circular flow model,the government's budget

Accepted Answer

A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a surplus 
A) must be in deficit 
B) must be in surplus 
C) must be balanced 
D) could be in a surplus or a deficit 
E) could be in balance or a surplus

Question 9

Suppose that the economy is in equilibrium with the government budget in surplus and with exports less than imports.According to the circular flow model,

Accepted Answer

A) saving must exceed investment 
B) saving must be less than investment 
C) saving must equal investment 
D) saving could be greater than or equal to investment 
E) it is impossible to determine anything about saving and investment using the given information 
A) saving must exceed investment 
B) saving must be less than investment 
C) saving must equal investment 
D) saving could be greater than or equal to investment 
E) it is impossible to determine anything about saving and investment using the given information

Question 10

The government budget must be balanced in order to have an equilibrium in the circular flow model.

Accepted Answer

A) True 
 B)False

Question 11

If toy stores overestimate the demand for a toy in 2004 and,as a result,have an unexpectedly large number of them on hand at the end of the year,the value of the increased inventory of those toys will be counted as

Accepted Answer

A) investment in 2004 
B) investment in 2005 
C) consumption in 2004 
D) consumption in 2005 
E) part of GDP only when the toys are sold 
A) investment in 2004 
B) investment in 2005 
C) consumption in 2004 
D) consumption in 2005 
E) part of GDP only when the toys are sold

Question 12

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $3 trillion,then the GDP price index is 133.

Accepted Answer

A) True 
 B)False

Question 13

GDP is a good measure of social welfare since it includes the value of leisure time.

Accepted Answer

A) True 
 B)False

Question 14

U.S.exports are

Accepted Answer

A) not included in U.S.GDP because they are consumed abroad 
B) included in U.S.GDP because they are produced domestically 
C) included in U.S.GDP because they represent an increase in inventories 
D) included in U.S.GDP as government purchases because the government decides what goods may be exported 
E) not included in U.S.GDP because they are not subject to a tariff 
A) not included in U.S.GDP because they are consumed abroad 
B) included in U.S.GDP because they are produced domestically 
C) included in U.S.GDP because they represent an increase in inventories 
D) included in U.S.GDP as government purchases because the government decides what goods may be exported 
E) not included in U.S.GDP because they are not subject to a tariff

Question 15

In the resource market,

Accepted Answer

A) businesses borrow money to buy the capital resources they need 
B) businesses sell services to the households 
C) firms provide the resources to the households 
D) households sell the resources to firms in return for factor payments 
E) resources flow from the business sector to the household sector 
A) businesses borrow money to buy the capital resources they need 
B) businesses sell services to the households 
C) firms provide the resources to the households 
D) households sell the resources to firms in return for factor payments 
E) resources flow from the business sector to the household sector

Question 16

The circular flow model

Accepted Answer

A) measures identical flows through the different markets 
B) shows how firms maximize profits and minimize costs 
C) shows how competitive markets interact with noncompetitive markets 
D) measures the value of income earned by the public sector 
E) measures the value added by the business sector as it uses funds 
A) measures identical flows through the different markets 
B) shows how firms maximize profits and minimize costs 
C) shows how competitive markets interact with noncompetitive markets 
D) measures the value of income earned by the public sector 
E) measures the value added by the business sector as it uses funds

Question 17

If the CPI rises in one year from 220 to 230,the inflation rate is 10 percent.

Accepted Answer

A) True 
 B)False

Question 18

Nominal GDP is a better measure of the growth in production than real GDP is.

Accepted Answer

A) True 
 B)False

Question 19

In double-entry GDP accounting,

Accepted Answer

A) the value of output produced must equal the value of resource payments generated in producing that output 
B) government is not counted because most of government spending is for transfer payments 
C) payments to resources must equal the value of goods sold to households 
D) inventories are counted twice,once as investment and once as output 
E) intermediate goods are counted twice,once as a type of output themselves and once as part of final output 
A) the value of output produced must equal the value of resource payments generated in producing that output 
B) government is not counted because most of government spending is for transfer payments 
C) payments to resources must equal the value of goods sold to households 
D) inventories are counted twice,once as investment and once as output 
E) intermediate goods are counted twice,once as a type of output themselves and once as part of final output

Question 20

The GDP price index

Accepted Answer

A) involves all final goods and services produced in the economy 
B) is derived from looking at quantities of goods sold rather than at prices 
C) is derived using the prices of only imported and exported goods and services 
D) is derived using the implicit prices of goods and services produced by the government 
E) involves all goods and services sold in the economy 
A) involves all final goods and services produced in the economy 
B) is derived from looking at quantities of goods sold rather than at prices 
C) is derived using the prices of only imported and exported goods and services 
D) is derived using the implicit prices of goods and services produced by the government 
E) involves all goods and services sold in the economy

Exam 6: Tracking the Useconomy

If a firm's inventory decreases,the GDP counts the net decrease as a reduction in investment.

If real GDP for a particular year is $5 trillion and the GDP price index for that year is 136,the nominal GDP for that year is

The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.

Which of the following is not considered a component of investment when calculating GDP?

If the CPI overstated inflation by 1 percent per year,then the average real wage,instead of dropping by 2 percent in the last two decades,actually increased by about

You could determine the value of the GDP price index if you knew

Which of the following is reflected in GDP?

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment.According to the circular flow model,the government's budget

Suppose that the economy is in equilibrium with the government budget in surplus and with exports less than imports.According to the circular flow model,

The government budget must be balanced in order to have an equilibrium in the circular flow model.

If toy stores overestimate the demand for a toy in 2004 and,as a result,have an unexpectedly large number of them on hand at the end of the year,the value of the increased inventory of those toys will be counted as

If nominal GDP for a particular year is $4 trillion and real GDP for that year is $3 trillion,then the GDP price index is 133.

GDP is a good measure of social welfare since it includes the value of leisure time.

U.S.exports are

In the resource market,

The circular flow model

If the CPI rises in one year from 220 to 230,the inflation rate is 10 percent.

Nominal GDP is a better measure of the growth in production than real GDP is.

In double-entry GDP accounting,

The GDP price index

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

The CPI inflation because it includes an item in the market basket only after the product becomes .