Question 1

Which of the following would be included in the calculation of the GDP for the year 2010?

Accepted Answer

A) Purchase of a 2004 model Volkswagen sedan in 2010 
B) Swapping of baseball cards among two college students 
C) Car repairs done by a person on his/her own 
D) Fresh lemonade sold at a local diner 
E) A lamp sold at a garage sale 
A) Purchase of a 2004 model Volkswagen sedan in 2010 
B) Swapping of baseball cards among two college students 
C) Car repairs done by a person on his/her own 
D) Fresh lemonade sold at a local diner 
E) A lamp sold at a garage sale D

Question 2

Suppose the price index is 100 in the base year and the price of a pound of oranges in that year is $1.96.Now, if the price index changes to 105 in the following year, how much would a pound of oranges cost?

Accepted Answer

A) $2.45 
B) $0.25 
C) $1.96 
D) $2.06 
E) $1.50 
A) $2.45 
B) $0.25 
C) $1.96 
D) $2.06 
E) $1.50 D

Question 3

Which of the following is true of real GDP?

Accepted Answer

A) It measures a nation's output in terms of current year prices. 
B) It measures a nation's output in constant year prices. 
C) It measures the degree of change in the general price level in an economy. 
D) It measures the change in the value of an economy's output. 
E) It measures the value of both intermediate and final goods and services produced in an economy. 
A) It measures a nation's output in terms of current year prices. 
B) It measures a nation's output in constant year prices. 
C) It measures the degree of change in the general price level in an economy. 
D) It measures the change in the value of an economy's output. 
E) It measures the value of both intermediate and final goods and services produced in an economy. B

Question 4

Productive activity in the underground economy:

Accepted Answer

A) results in an overstatement of actual income and production in the national accounting system. 
B) consists of unrecorded cash transactions. 
C) is estimated and included in the national income accounting system. 
D) poses no problem for the measurement of gross domestic product. 
E) does not affect GDP but is included in the value-added computations. 
A) results in an overstatement of actual income and production in the national accounting system. 
B) consists of unrecorded cash transactions. 
C) is estimated and included in the national income accounting system. 
D) poses no problem for the measurement of gross domestic product. 
E) does not affect GDP but is included in the value-added computations.

Question 5

The income that is available to individuals for consumption or investment is called disposable income.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following components of GDP accounts for the bulk of national expenditures in the United States?

Accepted Answer

A) Government purchases 
B) Imports 
C) Consumption 
D) Investment 
E) Exports 
A) Government purchases 
B) Imports 
C) Consumption 
D) Investment 
E) Exports

Question 7

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most likely to have taken place?

Accepted Answer

A) Output increased and the price level increased 
B) Output increased and the price level decreased 
C) Output decreased and the price level increased 
D) Output decreased and the price level decreased 
E) Output increased and the price level remained constant 
A) Output increased and the price level increased 
B) Output increased and the price level decreased 
C) Output decreased and the price level increased 
D) Output decreased and the price level decreased 
E) Output increased and the price level remained constant

Question 8

The term value added is used to describe:

Accepted Answer

A) the increase in the value of a product that occurs at each stage of production. 
B) the amount subtracted from the value of goods because of inflation. 
C) the total value of all intermediate goods used in the production of the final good. 
D) the amount paid in the final sale of a product or service. 
E) the amount subtracted from the value of resources because of depreciation. 
A) the increase in the value of a product that occurs at each stage of production. 
B) the amount subtracted from the value of goods because of inflation. 
C) the total value of all intermediate goods used in the production of the final good. 
D) the amount paid in the final sale of a product or service. 
E) the amount subtracted from the value of resources because of depreciation.

Question 9

The consumer price index:

Accepted Answer

A) tracks the value of output over time. 
B) is not tied to cost-of-living adjustments. 
C) doubles every five years in the economy. 
D) is a weighted average of consumer prices. 
E) is a broader price index measure than the implicit GDP deflator. 
A) tracks the value of output over time. 
B) is not tied to cost-of-living adjustments. 
C) doubles every five years in the economy. 
D) is a weighted average of consumer prices. 
E) is a broader price index measure than the implicit GDP deflator.

Question 10

The difference between GNP and NNP is equal to:

Accepted Answer

A) the statistical discrepancy in calculation. 
B) the capital consumption allowance. 
C) the difference between government spending and transfer payments. 
D) the value of net exports. 
E) the change in inventory. 
A) the statistical discrepancy in calculation. 
B) the capital consumption allowance. 
C) the difference between government spending and transfer payments. 
D) the value of net exports. 
E) the change in inventory.

Question 11

GDP according to the income method is the sum of:

Accepted Answer

A) wages, rent, interest, and profits. 
B) consumption, gross investment, depreciation, and net exports. 
C) depreciation, net factor income from abroad, and indirect business taxes. 
D) gross investment, wages, profits, rent, and indirect business taxes. 
E) consumption, profits, interest, rent, and net exports. 
A) wages, rent, interest, and profits. 
B) consumption, gross investment, depreciation, and net exports. 
C) depreciation, net factor income from abroad, and indirect business taxes. 
D) gross investment, wages, profits, rent, and indirect business taxes. 
E) consumption, profits, interest, rent, and net exports.

Question 12

Which of the following accounts for the largest percentage of output in the United States?

Accepted Answer

A) The government 
B) Business firms 
C) Households 
D) Banks 
E) The rest of the world 
A) The government 
B) Business firms 
C) Households 
D) Banks 
E) The rest of the world

Question 13

The sale of live cattle to a slaughterhouse constitutes a final transaction that is counted as part of the gross domestic product.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would not be included as part of personal income?

Accepted Answer

A) Welfare benefits 
B) Food stamps distributed by the government 
C) Social security benefits 
D) Indirect business taxes 
E) Corporate dividend payments to stockholders 
A) Welfare benefits 
B) Food stamps distributed by the government 
C) Social security benefits 
D) Indirect business taxes 
E) Corporate dividend payments to stockholders

Question 15

A reduction in the value of capital goods over time due to their use in production is called:

Accepted Answer

A) amortization. 
B) erosion. 
C) consumption. 
D) investment. 
E) depreciation. 
A) amortization. 
B) erosion. 
C) consumption. 
D) investment. 
E) depreciation.

Question 16

Which of the following is true of nominal GDP?

Accepted Answer

A) It acts as an indicator of the general price level in the economy. 
B) It measures the real level of output in the economy. 
C) It measures national output based on the current year's prices. 
D) It tends to rise by a smaller amount than real GDP when the general price level increases. 
E) It measures changes in the output of intermediate goods and services. 
A) It acts as an indicator of the general price level in the economy. 
B) It measures the real level of output in the economy. 
C) It measures national output based on the current year's prices. 
D) It tends to rise by a smaller amount than real GDP when the general price level increases. 
E) It measures changes in the output of intermediate goods and services.

Question 17

The figure given below shows the various stages of production of a Corvette, a sports car produced by General Motors Company (GMC): Table 5.2
  According to Table 5.2, the contribution to GDP from the production of this car is

Accepted Answer

A) $2, 350. 
B) $16, 300. 
C) $19, 700. 
D) $36, 000. 
E) $59, 550. 
A) $2, 350. 
B) $16, 300. 
C) $19, 700. 
D) $36, 000. 
E) $59, 550.

Question 18

The total expenditure on goods and services in a country must be the same as the total income earned from selling goods and services because:

Accepted Answer

A) the government annual budget has to balance. 
B) net exports in an economy is usually zero. 
C) one sector's expenditures are another sector's income. 
D) total investment in an economy always equals total saving. 
E) the sum of consumption spending and saving is zero. 
A) the government annual budget has to balance. 
B) net exports in an economy is usually zero. 
C) one sector's expenditures are another sector's income. 
D) total investment in an economy always equals total saving. 
E) the sum of consumption spending and saving is zero.

Question 19

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

Accepted Answer

A) True 
 B)False

Question 20

The table given below reports the value of different economic variables of a country during a year. Table 5.4
  Refer to Table 5.4.What will be the value of gross investment?

Accepted Answer

A) $400 
B) $1, 200 
C) $1, 000 
D) $1, 800 
E) Indeterminate 
A) $400 
B) $1, 200 
C) $1, 000 
D) $1, 800 
E) Indeterminate

Exam 6: National Income Accounting

Which of the following would be included in the calculation of the GDP for the year 2010?

Suppose the price index is 100 in the base year and the price of a pound of oranges in that year is $1.96.Now, if the price index changes to 105 in the following year, how much would a pound of oranges cost?

Which of the following is true of real GDP?

Productive activity in the underground economy:

The income that is available to individuals for consumption or investment is called disposable income.

Which of the following components of GDP accounts for the bulk of national expenditures in the United States?

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most likely to have taken place?

The term value added is used to describe:

The consumer price index:

The difference between GNP and NNP is equal to:

GDP according to the income method is the sum of:

Which of the following accounts for the largest percentage of output in the United States?

The sale of live cattle to a slaughterhouse constitutes a final transaction that is counted as part of the gross domestic product.

Which of the following would not be included as part of personal income?

A reduction in the value of capital goods over time due to their use in production is called:

Which of the following is true of nominal GDP?

The figure given below shows the various stages of production of a Corvette, a sports car produced by General Motors Company (GMC): Table 5.2 According to Table 5.2, the contribution to GDP from the production of this car is

The total expenditure on goods and services in a country must be the same as the total income earned from selling goods and services because:

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

The table given below reports the value of different economic variables of a country during a year. Table 5.4 Refer to Table 5.4.What will be the value of gross investment?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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