Question 1

The purchase of a new machine to replace the one that is worn out is:

Accepted Answer

A) not included in GDP. 
B) included in gross investment. 
C) considered a personal consumption expenditure. 
D) not included in GNP. 
E) an increase in inventories. 
A) not included in GDP. 
B) included in gross investment. 
C) considered a personal consumption expenditure. 
D) not included in GNP. 
E) an increase in inventories.

Question 2

The table given below reports the price of soda over four consecutive years. Table 5.7
  Refer to Table 5.7.Compute the price index for the third year.

Accepted Answer

A) 150 
B) 183 
C) 100 
D) 118 
E) 130 
A) 150 
B) 183 
C) 100 
D) 118 
E) 130

Question 3

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

Accepted Answer

A) True 
 B)False

Question 4

Identify the correct statement.

Accepted Answer

A) National income accounting measures only the flow of output between the different sectors of the economy. 
B) National income accounting summarizes the level of production in an economy over a decade. 
C) National income accounting explains diagrammatically the flows of goods and services and of money expenditures (income). 
D) National income accounting summarizes and categorizes the productive activity in an economy over a year. 
E) National income accounting measures the total money supply in the economy. 
A) National income accounting measures only the flow of output between the different sectors of the economy. 
B) National income accounting summarizes the level of production in an economy over a decade. 
C) National income accounting explains diagrammatically the flows of goods and services and of money expenditures (income). 
D) National income accounting summarizes and categorizes the productive activity in an economy over a year. 
E) National income accounting measures the total money supply in the economy.

Question 5

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 value added by the dealer 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 6

Which of the following is included in GDP computation according to the income method?

Accepted Answer

A) Consumption 
B) Profits 
C) Investment 
D) Government spending 
E) Imports 
A) Consumption 
B) Profits 
C) Investment 
D) Government spending 
E) Imports

Question 7

Since there are smaller fluctuations in the equilibrium prices of final goods than in the prices of intermediate goods, the producer price index is more volatile than the consumer price index.

Accepted Answer

A) True 
 B)False

Question 8

Wheat produced in the U.S.but sold in Japan would not be included while calculating the U.S.GDP.

Accepted Answer

A) True 
 B)False

Question 9

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation)for the years 1995 and 2003. Table 5.6
  Refer to Table 5.6.What is the constant-dollar real GDP growth from 1995 to 2003 using 1995 as the base year?

Accepted Answer

A) 50 percent 
B) zero percent 
C) -75 percent 
D) 100 percent 
E) 14 percent 
A) 50 percent 
B) zero percent 
C) -75 percent 
D) 100 percent 
E) 14 percent

Question 10

Which of the following would not be included in the calculation of GDP?

Accepted Answer

A) Vegetables grown and consumed by a nonfarm family 
B) The purchase of a new Porsche 
C) The sale of meat at the local grocery store 
D) The government purchase of an F-14 fighter plane 
E) The payment made to an accountant for the preparation of tax forms 
A) Vegetables grown and consumed by a nonfarm family 
B) The purchase of a new Porsche 
C) The sale of meat at the local grocery store 
D) The government purchase of an F-14 fighter plane 
E) The payment made to an accountant for the preparation of tax forms

Question 11

The circular flow diagram validates the fact that the different sectors in the economy are independent.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following will be categorized as an intermediate good in national income accounting?

Accepted Answer

A) The value of oregano used as a seasoning for pizzas 
B) The crops consumed by a farmer's family members 
C) The present value of a car produced a couple of years before 
D) A clunker sold during the current year 
E) The value of an antique piece of jewelry handed down over generations in a family 
A) The value of oregano used as a seasoning for pizzas 
B) The crops consumed by a farmer's family members 
C) The present value of a car produced a couple of years before 
D) A clunker sold during the current year 
E) The value of an antique piece of jewelry handed down over generations in a family

Question 13

Consider a hypothetical economy, whose GDP was $10, 000, consumption equaled $9, 800, investment equaled $125, goods exported equaled $255, and goods imported equaled $500, in 2010.Calculate the government spending in this economy during the year.

Accepted Answer

A) $120 
B) $380 
C) $245 
D) $200 
E) $320 
A) $120 
B) $380 
C) $245 
D) $200 
E) $320

Question 14

Which of the following is not included in national income?

Accepted Answer

A) Corporate profits 
B) Interest earnings 
C) Capital consumption allowance 
D) Rental income 
E) Stockbroker commissions 
A) Corporate profits 
B) Interest earnings 
C) Capital consumption allowance 
D) Rental income 
E) Stockbroker commissions

Question 15

What is the approximate percent of GDP produced by private firms in the United States?

Accepted Answer

A) 4 percent 
B) 11 percent 
C) 25 percent 
D) 57 percent 
E) 75 percent 
A) 4 percent 
B) 11 percent 
C) 25 percent 
D) 57 percent 
E) 75 percent

Question 16

The services of a husband or wife as a homemaker and cash gains from a lottery are included in the calculation of gross domestic product.

Accepted Answer

A) True 
 B)False

Question 17

Consider a small country producing only two commodities (coffee beans and corn).Following are the price and output of these two commodities in the year 2008:   Assuming the price level in the economy remains same while the output of both these products increase by 10 percent in 2009, calculate the value of real GDP in this country for the year 2009?

Accepted Answer

A) $9, 600 
B) $10, 560 
C) $1, 056 
D) $6, 900 
E) $10, 960 
A) $9, 600 
B) $10, 560 
C) $1, 056 
D) $6, 900 
E) $10, 960

Question 18

Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.

Accepted Answer

A) True 
 B)False

Question 19

If nominal GDP of a country increased and real GDP remained unchanged 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 remained contant 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 remained contant and the price level increased. 
D) Output decreased and the price level decreased. 
E) Output increased and the price level remained constant.

Question 20

The table given below reports the sales value at each stage ofproduction of the soft drink Pepsi. Table 5.3
  Refer to Table 5.3.The value added by the wholesaler is equal to:

Accepted Answer

A) $0.05. 
B) $0.40. 
C) $0.20. 
D) $1.15. 
E) $0.06. 
A) $0.05. 
B) $0.40. 
C) $0.20. 
D) $1.15. 
E) $0.06.

Exam 6: National Income Accounting

The purchase of a new machine to replace the one that is worn out is:

The table given below reports the price of soda over four consecutive years. Table 5.7 Refer to Table 5.7.Compute the price index for the third year.

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

Identify the correct statement.

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 value added by the dealer is:

Which of the following is included in GDP computation according to the income method?

Since there are smaller fluctuations in the equilibrium prices of final goods than in the prices of intermediate goods, the producer price index is more volatile than the consumer price index.

Wheat produced in the U.S.but sold in Japan would not be included while calculating the U.S.GDP.

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation)for the years 1995 and 2003. Table 5.6 Refer to Table 5.6.What is the constant-dollar real GDP growth from 1995 to 2003 using 1995 as the base year?

Which of the following would not be included in the calculation of GDP?

The circular flow diagram validates the fact that the different sectors in the economy are independent.

Which of the following will be categorized as an intermediate good in national income accounting?

Consider a hypothetical economy, whose GDP was $10, 000, consumption equaled $9, 800, investment equaled $125, goods exported equaled $255, and goods imported equaled $500, in 2010.Calculate the government spending in this economy during the year.

Which of the following is not included in national income?

What is the approximate percent of GDP produced by private firms in the United States?

The services of a husband or wife as a homemaker and cash gains from a lottery are included in the calculation of gross domestic product.

Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.

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

The table given below reports the sales value at each stage ofproduction of the soft drink Pepsi. Table 5.3 Refer to Table 5.3.The value added by the wholesaler is equal to:

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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