Question 1

When economists discuss the nominal value of an economic variable, the variable is

Accepted Answer

A)  expressed in current dollars. 
B)  expressed as an index figure. 
C)  adjusted for a changing price level. 
D)  expressed as a percentage. 
A)  expressed in current dollars. 
B)  expressed as an index figure. 
C)  adjusted for a changing price level. 
D)  expressed as a percentage.

Question 2

Explain the concept of the circular flow.

Accepted Answer

The circular flow refers to the interrel

Question 3

Profits

Accepted Answer

A)  are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits. 
B)  are a cost of doing business because they are payments to others. 
C)  are not a cost of doing business because they are owed to resource owners. 
D)  are not a cost of doing business because they are often zero or negative. 
A)  are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits. 
B)  are a cost of doing business because they are payments to others. 
C)  are not a cost of doing business because they are owed to resource owners. 
D)  are not a cost of doing business because they are often zero or negative.

Question 4

Suppose that the following occurred in two countries during the past decade. Country A, real Gross Domestic Product (GDP) rose 40 percent and population rose 46 percent; Country B, real Gross Domestic Product (GDP) increased 80 percent and population increased 75 percent. Based on this information, which is TRUE?

Accepted Answer

A)  Both countries have experienced growth in per capita real Gross Domestic Product (GDP). 
B)  Neither country has experienced growth in per capita real Gross Domestic Product (GDP). 
C)  Chances for an improved standard of living are greater in Country A. 
D)  Only Country B has experienced growth in its per capita real Gross Domestic Product (GDP). 
A)  Both countries have experienced growth in per capita real Gross Domestic Product (GDP). 
B)  Neither country has experienced growth in per capita real Gross Domestic Product (GDP). 
C)  Chances for an improved standard of living are greater in Country A. 
D)  Only Country B has experienced growth in its per capita real Gross Domestic Product (GDP).

Question 5

If Gross Domestic Product (GDP) and other national income accounts are expressed in nominal values, then they are

Accepted Answer

A)  measured in real values. 
B)  measured in market prices at which goods actually sold. 
C)  measured in constant prices instead of actual market prices. 
D)  readily comparable to Gross Domestic Product (GDP) figures for other years. 
A)  measured in real values. 
B)  measured in market prices at which goods actually sold. 
C)  measured in constant prices instead of actual market prices. 
D)  readily comparable to Gross Domestic Product (GDP) figures for other years.

Question 6

The Social Security check received by your grandmother

Accepted Answer

A)  is included in the GDP because it will be spent on goods and services. 
B)  is excluded from GDP calculations because it is a transfer payment. 
C)  is included in the GDP because she is entitled to it as a citizen. 
D)  is included in the GDP because it is part of her income. 
A)  is included in the GDP because it will be spent on goods and services. 
B)  is excluded from GDP calculations because it is a transfer payment. 
C)  is included in the GDP because she is entitled to it as a citizen. 
D)  is included in the GDP because it is part of her income.

Question 7

The value added method of calculating GDP means

Accepted Answer

A)  adding up the market values of all intermediate goods. 
B)  calculating the percentage changes in the GDP between two years. 
C)  adding up the incomes of all businesses in a given year. 
D)  adding up the difference between the sale price and the value of intermediate goods of each product at every stage of production. 
A)  adding up the market values of all intermediate goods. 
B)  calculating the percentage changes in the GDP between two years. 
C)  adding up the incomes of all businesses in a given year. 
D)  adding up the difference between the sale price and the value of intermediate goods of each product at every stage of production.

Question 8

How many U.S. dollars does a U.S. importer need to pay for an invoice of 1 million yen when the price of 1 yen is $0.006?

Accepted Answer

A)  $1,666 million 
B)  $1.66 million 
C)  $166.7 
D)  $6,000 
A)  $1,666 million 
B)  $1.66 million 
C)  $166.7 
D)  $6,000

Question 9

Why might a homemaker be upset with the way Gross Domestic Product (GDP) is calculated?

Accepted Answer

A)  because the government always underestimates the dollar value of the household services produced at home and outside the market that are included in the Gross Domestic Product (GDP) statistic 
B)  because household services produced at home and outside the market are only included in Gross Domestic Product (GDP) if the homemaker is a man 
C)  because household services produced at home and outside the market that are sold to others are not included in Gross Domestic Product (GDP) 
D)  because none of the household services produced for at home and outside the market are included in Gross Domestic Product (GDP) even though they contribute greatly to the welfare of the family 
A)  because the government always underestimates the dollar value of the household services produced at home and outside the market that are included in the Gross Domestic Product (GDP) statistic 
B)  because household services produced at home and outside the market are only included in Gross Domestic Product (GDP) if the homemaker is a man 
C)  because household services produced at home and outside the market that are sold to others are not included in Gross Domestic Product (GDP) 
D)  because none of the household services produced for at home and outside the market are included in Gross Domestic Product (GDP) even though they contribute greatly to the welfare of the family

Question 10

To determine how well an economy is doing, it is better to use

Accepted Answer

A)  nominal Gross Domestic Product (GDP) figures. 
B)  real Gross Domestic Product (GDP) figures. 
C)  Gross Domestic Product (GDP) figures measured by the expenditure approach. 
D)  Gross Domestic Product (GDP) figures measured by the income approach. 
A)  nominal Gross Domestic Product (GDP) figures. 
B)  real Gross Domestic Product (GDP) figures. 
C)  Gross Domestic Product (GDP) figures measured by the expenditure approach. 
D)  Gross Domestic Product (GDP) figures measured by the income approach.

Question 11

A farmer buys seed for 20 cents that is used to grow wheat. The farmer sells the wheat to the miller for 35 cents, and the miller makes flour, which is then sold to the baker for 55 cents. The baker makes bread and sells it to the grocer for 80 cents, and the grocer sells the bread to a family for $1. What is the value added of the baker and what is the sum of the value added at each stage of production?

Accepted Answer

A)  80 cents; $1 
B)  80 cents; $2.90 
C)  25 cents; $2.90 
D)  25 cents; $1 
A)  80 cents; $1 
B)  80 cents; $2.90 
C)  25 cents; $2.90 
D)  25 cents; $1

Question 12

What is value added and how is it related to Gross Domestic Product (GDP)?

Accepted Answer

Value added is the dollar value of an in

Question 13

GDP measures

Accepted Answer

A)  the annual total value of all services produced by factors of production located within a national border. 
B)  the annual value of final goods and services produced by factors of production located within a national border. 
C)  the annual value of goods and services produced by factors of production owned by companies headquartered in a given country. 
D)  the value of all goods and services sold in a given country. 
A)  the annual total value of all services produced by factors of production located within a national border. 
B)  the annual value of final goods and services produced by factors of production located within a national border. 
C)  the annual value of goods and services produced by factors of production owned by companies headquartered in a given country. 
D)  the value of all goods and services sold in a given country.

Question 14

-Using the data in the above table, what is the real GDP for year 2008 (in billions of constant dollars)?

Accepted Answer

A)  9,250 
B)  8,500 
C)  7,708 
D)  8,950 
A)  9,250 
B)  8,500 
C)  7,708 
D)  8,950

Question 15

Fixed investment is

Accepted Answer

A)  the change in stocks of finished goods. 
B)  the change in the stocks of goods in process. 
C)  capital purchase by businesses of newly produced durables. 
D)  purchases by consumers of newly produced consumer durables. 
A)  the change in stocks of finished goods. 
B)  the change in the stocks of goods in process. 
C)  capital purchase by businesses of newly produced durables. 
D)  purchases by consumers of newly produced consumer durables.

Question 16

Which one of the following is NOT included in GDP?

Accepted Answer

A)  The federal government pays a defense contractor to develop a new weapons system. 
B)  You volunteer to organize a neighborhood watch group on your block. 
C)  You pay your monthly apartment rent. 
D)  A mail-order firm constructs a new warehouse in Kansas as a central distribution facility. 
A)  The federal government pays a defense contractor to develop a new weapons system. 
B)  You volunteer to organize a neighborhood watch group on your block. 
C)  You pay your monthly apartment rent. 
D)  A mail-order firm constructs a new warehouse in Kansas as a central distribution facility.

Question 17

Which of the following items is NOT included in GDP?

Accepted Answer

A)  purchase of a hamburger at a fast-food restaurant 
B)  sales at a grocery store 
C)  sale of Microsoft security stock 
D)  downloads of iTunes music charged to a credit card 
A)  purchase of a hamburger at a fast-food restaurant 
B)  sales at a grocery store 
C)  sale of Microsoft security stock 
D)  downloads of iTunes music charged to a credit card

Question 18

-Refer to the above table. The production of this good goes through 4 different stages of production. What does the total value added equal?

Accepted Answer

A)  $0.07 
B)  $0.32 
C)  $0.75 
D)  Cannot be computed without more information. 
A)  $0.07 
B)  $0.32 
C)  $0.75 
D)  Cannot be computed without more information.

Question 19

Intermediate goods are NOT included in Gross Domestic Product (GDP) calculations because

Accepted Answer

A)  they are used in the production of final goods and would then be counted twice. 
B)  they are produced overseas. 
C)  they are made from foreign raw materials. 
D)  they have very low value added. 
A)  they are used in the production of final goods and would then be counted twice. 
B)  they are produced overseas. 
C)  they are made from foreign raw materials. 
D)  they have very low value added.

Question 20

The income approach to measuring GDP

Accepted Answer

A)  adds the dollar value of final goods and services. 
B)  adds the income received by all factors of production. 
C)  excludes durable consumer goods since they last more than a year. 
D)  excludes profits since profits are a cost of production. 
A)  adds the dollar value of final goods and services. 
B)  adds the income received by all factors of production. 
C)  excludes durable consumer goods since they last more than a year. 
D)  excludes profits since profits are a cost of production.

Exam 8: Measuring the Economys Performance

When economists discuss the nominal value of an economic variable, the variable is

Explain the concept of the circular flow.

Profits

If Gross Domestic Product (GDP) and other national income accounts are expressed in nominal values, then they are

The Social Security check received by your grandmother

The value added method of calculating GDP means

How many U.S. dollars does a U.S. importer need to pay for an invoice of 1 million yen when the price of 1 yen is $0.006?

Why might a homemaker be upset with the way Gross Domestic Product (GDP) is calculated?

To determine how well an economy is doing, it is better to use

What is value added and how is it related to Gross Domestic Product (GDP)?

GDP measures

-Using the data in the above table, what is the real GDP for year 2008 (in billions of constant dollars)?

Fixed investment is

Which one of the following is NOT included in GDP?

Which of the following items is NOT included in GDP?

-Refer to the above table. The production of this good goes through 4 different stages of production. What does the total value added equal?

Intermediate goods are NOT included in Gross Domestic Product (GDP) calculations because

The income approach to measuring GDP

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

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