Question 1

-Refer to the above table. The production of this good has been through the first 3 stages of production. What is the total value added in Stage 1 through 3?

Accepted Answer

A)  $0.75 
B)  $0.43 
C)  $0.07 
D)  Cannot be computed without more information. 
A)  $0.75 
B)  $0.43 
C)  $0.07 
D)  Cannot be computed without more information.

Question 2

The foreign exchange rate is

Accepted Answer

A)  an adjustment that takes into account differences in the true cost of living across countries. 
B)  the price of one currency in terms of another. 
C)  another name for purchasing power parity. 
D)  part of the circular flow diagram. 
A)  an adjustment that takes into account differences in the true cost of living across countries. 
B)  the price of one currency in terms of another. 
C)  another name for purchasing power parity. 
D)  part of the circular flow diagram.

Question 3

National income includes all of the following EXCEPT

Accepted Answer

A)  proprietors' income. 
B)  net interest. 
C)  corporate profits. 
D)  depreciation. 
A)  proprietors' income. 
B)  net interest. 
C)  corporate profits. 
D)  depreciation.

Question 4

A family sells the house they have lived in for two years to a friend. They received $300,000 and paid $200,000 three years ago. This transaction

Accepted Answer

A)  increases GDP by $150,000. 
B)  increases GDP by $50,000. 
C)  has no effect on GDP because the house was not built this year. 
D)  has no effect on GDP because the buyer is the family's friend. 
A)  increases GDP by $150,000. 
B)  increases GDP by $50,000. 
C)  has no effect on GDP because the house was not built this year. 
D)  has no effect on GDP because the buyer is the family's friend.

Question 5

Which of the following would NOT be a part of personal income?

Accepted Answer

A)  indirect business taxes 
B)  payments received from Social Security 
C)  retirement checks 
D)  corporate dividend payments to shareholders 
A)  indirect business taxes 
B)  payments received from Social Security 
C)  retirement checks 
D)  corporate dividend payments to shareholders

Question 6

Which one of the following statements about GDP is TRUE?

Accepted Answer

A)  GDP can be calculated using the income approach. 
B)  The value of household production is excluded from GDP. 
C)  GDP can be calculated using the expenditures approach. 
D)  all of the above. 
A)  GDP can be calculated using the income approach. 
B)  The value of household production is excluded from GDP. 
C)  GDP can be calculated using the expenditures approach. 
D)  all of the above.

Question 7

Using the expenditure approach to deriving gross domestic product, if U.S. imports rise and exports remain the same

Accepted Answer

A)  GDP rises. 
B)  GDP remains the same. 
C)  GDP falls. 
D)  GDP indicates a recession. 
A)  GDP rises. 
B)  GDP remains the same. 
C)  GDP falls. 
D)  GDP indicates a recession.

Question 8

Suppose you drive downtown, pay for parking at a private parking garage, and go to see an investment advisor. He charges you a $50 fee to advise you to purchase 100 shares of stock, which you do. Which of these transactions is NOT included in GDP?

Accepted Answer

A)  the purchase of gas for the trip 
B)  paying the parking fee 
C)  paying the $50 fee to the investment advisor 
D)  your purchase of the stock 
A)  the purchase of gas for the trip 
B)  paying the parking fee 
C)  paying the $50 fee to the investment advisor 
D)  your purchase of the stock

Question 9

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

Accepted Answer

A)  net exports. 
B)  government purchases of goods and services. 
C)  expenditures for business investments. 
D)  the implicit payments for unpaid household work. 
A)  net exports. 
B)  government purchases of goods and services. 
C)  expenditures for business investments. 
D)  the implicit payments for unpaid household work.

Question 10

Which of the following occurs in the factor market?

Accepted Answer

A)  firms exchange goods and services for resources. 
B)  households exchange resources for goods and services. 
C)  households exchange money for goods and services. 
D)  firms exchange money for resources. 
A)  firms exchange goods and services for resources. 
B)  households exchange resources for goods and services. 
C)  households exchange money for goods and services. 
D)  firms exchange money for resources.

Question 11

C + I + G + X equals

Accepted Answer

A)  GDP. 
B)  DPI. 
C)  NDP. 
D)  PI. 
A)  GDP. 
B)  DPI. 
C)  NDP. 
D)  PI.

Question 12

GDP measures

Accepted Answer

A)  the nation's economic welfare. 
B)  the nation's economic activity. 
C)  the changes in the unemployment rate in a given year. 
D)  the amount of underground activity in a nation. 
A)  the nation's economic welfare. 
B)  the nation's economic activity. 
C)  the changes in the unemployment rate in a given year. 
D)  the amount of underground activity in a nation.

Question 13

Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals

Accepted Answer

A)  $2.9 billion. 
B)  $3.6 billion. 
C)  $5.9 billion. 
D)  $6.7 billion. 
A)  $2.9 billion. 
B)  $3.6 billion. 
C)  $5.9 billion. 
D)  $6.7 billion.

Question 14

The circular flow of income involves the idea that

Accepted Answer

A)  in every economic exchange one party takes advantage of the other party. 
B)  the seller of a good receives less than the buyer spends. 
C)  the seller of a good receives more than the buyer spends. 
D)  the seller of a good receives exactly the same amount as the buyer spends. 
A)  in every economic exchange one party takes advantage of the other party. 
B)  the seller of a good receives less than the buyer spends. 
C)  the seller of a good receives more than the buyer spends. 
D)  the seller of a good receives exactly the same amount as the buyer spends.

Question 15

Which of the following represents how real GDP is calculated?

Accepted Answer

A)  nominal GDP multiplied by the GDP deflator 
B)  nominal GDP divided by the population 
C)  nominal GDP divided by the PPI, the producer price index 
D)  nominal GDP divided by the GDP deflator 
A)  nominal GDP multiplied by the GDP deflator 
B)  nominal GDP divided by the population 
C)  nominal GDP divided by the PPI, the producer price index 
D)  nominal GDP divided by the GDP deflator

Question 16

Depreciation is

Accepted Answer

A)  added to Gross Domestic Product (GDP) to reach Net Domestic Product (NDP). 
B)  the reduction in the value of capital goods due to physical wear and tear. 
C)  not included in Gross Domestic Product (GDP) from the income side. 
D)  always higher than the capital consumption allowance. 
A)  added to Gross Domestic Product (GDP) to reach Net Domestic Product (NDP). 
B)  the reduction in the value of capital goods due to physical wear and tear. 
C)  not included in Gross Domestic Product (GDP) from the income side. 
D)  always higher than the capital consumption allowance.

Question 17

The computation of GDP by adding up all components of national income including wages, interest, rent and profits is

Accepted Answer

A)  the expenditure approach. 
B)  the income approach. 
C)  transfer payments. 
D)  the value of all securities. 
A)  the expenditure approach. 
B)  the income approach. 
C)  transfer payments. 
D)  the value of all securities.

Question 18

A decrease in U.S. income earned abroad will make all of the following smaller EXCEPT

Accepted Answer

A)  national income. 
B)  net domestic product. 
C)  personal income. 
D)  disposable personal income. 
A)  national income. 
B)  net domestic product. 
C)  personal income. 
D)  disposable personal income.

Question 19

Comparing two countries' nominal GDP over time is likely to be misleading if one wants to determine whether standards of living are better in one country because

Accepted Answer

A)  the figures must be adjusted for different types of currency. 
B)  the figures must be adjusted for price changes and population differences. 
C)  the figures must be adjusted to account for production differences. 
D)  NDP instead of GDP should be used. 
A)  the figures must be adjusted for different types of currency. 
B)  the figures must be adjusted for price changes and population differences. 
C)  the figures must be adjusted to account for production differences. 
D)  NDP instead of GDP should be used.

Question 20

According to the circular flow, the value of total output produced and total income

Accepted Answer

A)  should differ by the value of intermediate goods. 
B)  should increase by the unanticipated rate of inflation. 
C)  will always be different by the amount of firm profits 
D)  will be equal. 
A)  should differ by the value of intermediate goods. 
B)  should increase by the unanticipated rate of inflation. 
C)  will always be different by the amount of firm profits 
D)  will be equal.

Exam 8: Measuring the Economys Performance

-Refer to the above table. The production of this good has been through the first 3 stages of production. What is the total value added in Stage 1 through 3?

The foreign exchange rate is

National income includes all of the following EXCEPT

A family sells the house they have lived in for two years to a friend. They received $300,000 and paid $200,000 three years ago. This transaction

Which of the following would NOT be a part of personal income?

Which one of the following statements about GDP is TRUE?

Using the expenditure approach to deriving gross domestic product, if U.S. imports rise and exports remain the same

Suppose you drive downtown, pay for parking at a private parking garage, and go to see an investment advisor. He charges you a $50 fee to advise you to purchase 100 shares of stock, which you do. Which of these transactions is NOT included in GDP?

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

Which of the following occurs in the factor market?

C + I + G + X equals

GDP measures

Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals

The circular flow of income involves the idea that

Which of the following represents how real GDP is calculated?

Depreciation is

The computation of GDP by adding up all components of national income including wages, interest, rent and profits is

A decrease in U.S. income earned abroad will make all of the following smaller EXCEPT

Comparing two countries' nominal GDP over time is likely to be misleading if one wants to determine whether standards of living are better in one country because

According to the circular flow, the value of total output produced and total income

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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