Question 1

National income includes wages and salaries, interest and rent, but not corporate profits.

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

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

Accepted Answer

A) ​stagnation. 
B) ​stagflation. 
C) ​inflation. 
D) ​deflation. 
A) ​stagnation. 
B) ​stagflation. 
C) ​inflation. 
D) ​deflation.

Question 4

Which of the following is an example of an intermediate good?

Accepted Answer

A) ​a pair of jeans sold by a clothing retailer 
B) ​cloth sold to a suit manufacturer 
C) ​a share of Wal-Mart stock 
D) ​a used Ford Mustang sold from one neighbor to another 
A) ​a pair of jeans sold by a clothing retailer 
B) ​cloth sold to a suit manufacturer 
C) ​a share of Wal-Mart stock 
D) ​a used Ford Mustang sold from one neighbor to another

Question 5

The expenditure approach to measuring GDP involves adding up the purchases of final goods and services by market participants.

Accepted Answer

A) True 
 B)False

Question 6

We can calculate the GDP by adding the values added by each firm that produced the goods and services.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is included in GDP calculations?

Accepted Answer

A) ​the college tuition paid to enroll in a course 
B) ​a check for $50 received on your birthday 
C) ​cash income received by a self-employed landscaper that is not reported to the IRS 
D) ​sales revenue received from a yard sale 
A) ​the college tuition paid to enroll in a course 
B) ​a check for $50 received on your birthday 
C) ​cash income received by a self-employed landscaper that is not reported to the IRS 
D) ​sales revenue received from a yard sale

Question 8

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 9

The expenditure category of GDP that fluctuates the most over time is investment.

Accepted Answer

A) True 
 B)False

Question 10

Government purchases, under the expenditure approach to GDP accounting, includes all of the following except:

Accepted Answer

A) ​welfare payments. 
B) ​salaries of senators. 
C) ​fighter jets purchased by the government. 
D) ​the military payroll. 
A) ​welfare payments. 
B) ​salaries of senators. 
C) ​fighter jets purchased by the government. 
D) ​the military payroll.

Question 11

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.

Question 12

The investment component of GDP includes:

Accepted Answer

A) ​funds in individual retirement accounts. 
B) ​construction of a new steel mill. 
C) ​the sale of shares of Coca-Cola stock. 
D) ​the purchase of a refrigerator by a household. 
A) ​funds in individual retirement accounts. 
B) ​construction of a new steel mill. 
C) ​the sale of shares of Coca-Cola stock. 
D) ​the purchase of a refrigerator by a household.

Question 13

Real GDP accurately reflects both the quantity and quality of goods and services.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true about underground economies?

Accepted Answer

A) ​Underground economies represent a greater percentage of GDP in developing countries than in developed countries. 
B) ​Higher taxation and labor regulation are reasons why we see more underground activities. 
C) ​The underground economy includes legal activities that are concealed for the purpose of tax evasion. 
D) ​all of the above 
A) ​Underground economies represent a greater percentage of GDP in developing countries than in developed countries. 
B) ​Higher taxation and labor regulation are reasons why we see more underground activities. 
C) ​The underground economy includes legal activities that are concealed for the purpose of tax evasion. 
D) ​all of the above

Question 15

Would it be possible for an increase in taxation to decrease the gross domestic product measured in the U.S.? Why or why not?

Accepted Answer

Yes, it would be possible for an increas

Question 16

To better measure economic well being, GDP needs to:

Accepted Answer

A) ​find better ways to estimate the value of leisure. 
B) ​estimate and factor in the value of the underground economy. 
C) ​factor in externalities. 
D) ​do any or all of the above. 
A) ​find better ways to estimate the value of leisure. 
B) ​estimate and factor in the value of the underground economy. 
C) ​factor in externalities. 
D) ​do any or all of the above.

Question 17

Suppose that nominal GDP did not change in 2011, and real GDP decreased, relative to the year 2010. It can be concluded that:

Accepted Answer

A) ​total production of goods and services in the economy did not change in 2011. 
B) ​the economy experienced deflation during 2011. 
C) ​the price level did not change during 2011. 
D) ​total production of goods and services in the economy declined during 2011. 
A) ​total production of goods and services in the economy did not change in 2011. 
B) ​the economy experienced deflation during 2011. 
C) ​the price level did not change during 2011. 
D) ​total production of goods and services in the economy declined during 2011.

Question 18

When real GDP declines in a particular year, nominal GDP:

Accepted Answer

A) ​will decline at a faster rate than real GDP if there is inflation. 
B) ​will decline at a slower rate than real GDP if there is inflation. 
C) ​may increase or decrease if there is inflation. 
D) ​will increase if there is deflation. 
A) ​will decline at a faster rate than real GDP if there is inflation. 
B) ​will decline at a slower rate than real GDP if there is inflation. 
C) ​may increase or decrease if there is inflation. 
D) ​will increase if there is deflation.

Question 19

Fixed investment includes spending on all of the following goods except:

Accepted Answer

A) ​machinery. 
B) ​inventory. 
C) ​tools. 
D) ​factory buildings. 
A) ​machinery. 
B) ​inventory. 
C) ​tools. 
D) ​factory buildings.

Question 20

Estimates of the size of the underground economy in the U.S. range from:

Accepted Answer

A) ​4 to 20 percent. 
B) ​2 to 5 percent. 
C) ​7 to 10 percent. 
D) ​45 to 60 percent. 
A) ​4 to 20 percent. 
B) ​2 to 5 percent. 
C) ​7 to 10 percent. 
D) ​45 to 60 percent.

Exam 11: The Firm: Production and Costs

National income includes wages and salaries, interest and rent, but not corporate profits.

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

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

Which of the following is an example of an intermediate good?

The expenditure approach to measuring GDP involves adding up the purchases of final goods and services by market participants.

We can calculate the GDP by adding the values added by each firm that produced the goods and services.

Which of the following is included in GDP calculations?

All of the following are examples of producer goods except:

The expenditure category of GDP that fluctuates the most over time is investment.

Government purchases, under the expenditure approach to GDP accounting, includes all of the following except:

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

The investment component of GDP includes:

Real GDP accurately reflects both the quantity and quality of goods and services.

Which of the following is true about underground economies?

Would it be possible for an increase in taxation to decrease the gross domestic product measured in the U.S.? Why or why not?

To better measure economic well being, GDP needs to:

Suppose that nominal GDP did not change in 2011, and real GDP decreased, relative to the year 2010. It can be concluded that:

When real GDP declines in a particular year, nominal GDP:

Fixed investment includes spending on all of the following goods except:

Estimates of the size of the underground economy in the U.S. range from:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

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

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

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