Question 1

In a simple circular-flow diagram, total income and total expenditure are

Accepted Answer

A)  never equal because total income always exceeds total expenditure. 
B)  seldom equal because of the ongoing changes in an economy's unemployment rate. 
C)  equal only when the government purchases no goods or services. 
D)  always equal because every transaction has a buyer and a seller. 
A)  never equal because total income always exceeds total expenditure. 
B)  seldom equal because of the ongoing changes in an economy's unemployment rate. 
C)  equal only when the government purchases no goods or services. 
D)  always equal because every transaction has a buyer and a seller.

Question 2

Nominal GDP uses constant base­year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.

Accepted Answer

A) True 
 B)False

Question 3

To encourage formation of small businesses, the government could provide subsidies; these subsidies

Accepted Answer

A)  would be included in GDP because they are part of government purchases. 
B)  would be included in GDP because they are part of investment expenditures. 
C)  would not be included in GDP because they are transfer payments. 
D)  would not be included in GDP because the government raises taxes to pay for them. 
A)  would be included in GDP because they are part of government purchases. 
B)  would be included in GDP because they are part of investment expenditures. 
C)  would not be included in GDP because they are transfer payments. 
D)  would not be included in GDP because the government raises taxes to pay for them.

Question 4

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

Accepted Answer

A) True 
 B)False

Question 5

The basic tools of supply and demand are

Accepted Answer

A)  useful only in the analysis of economic behavior in individual markets. 
B)  useful in analyzing the overall economy, but not in analyzing individual markets. 
C)  central to microeconomic analysis, but seldom used in macroeconomic analysis. 
D)  central to macroeconomic analysis as well as to microeconomic analysis. 
A)  useful only in the analysis of economic behavior in individual markets. 
B)  useful in analyzing the overall economy, but not in analyzing individual markets. 
C)  central to microeconomic analysis, but seldom used in macroeconomic analysis. 
D)  central to macroeconomic analysis as well as to microeconomic analysis.

Question 6

New home construction is included in the consumption component of GDP.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is included in GDP?

Accepted Answer

A)  the market value of rental housing services, but not the market value of owner-occupied housing services. 
B)  the market value of owner-occupied housing services, but not the market value of rental housing services 
C)  both the market value of rental housing services and the market value of owner-occupied housing services 
D)  neither the market value of owner-occupied housing services nor the market value of rental housing services. 
A)  the market value of rental housing services, but not the market value of owner-occupied housing services. 
B)  the market value of owner-occupied housing services, but not the market value of rental housing services 
C)  both the market value of rental housing services and the market value of owner-occupied housing services 
D)  neither the market value of owner-occupied housing services nor the market value of rental housing services.

Question 8

Table 23-3
The table below contains data for the country of Crete for the year 2010.  
-Refer to Table 23-3. What was Crete's investment in 2010?

Accepted Answer

A)  $675 
B)  $1090 
C)  $1491 
D)  $1793 
A)  $675 
B)  $1090 
C)  $1491 
D)  $1793

Question 9

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly.

Accepted Answer

A) True 
 B)False

Question 10

In 2010 a country had nominal GDP of 6 trillion euro and real GDP of 5 trillion euro. In 2011 it had nominal GDP of 6.5 trillion euro and real GDP of 5.2 trillion euro. What was its inflation rate in 2011? Show your work.

Accepted Answer

The GDP deflator for 2010 was

Question 11

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.

Accepted Answer

A) True 
 B)False

Question 12

In 2009, the level of U.S. real GDP was close to four times its 1965 level.

Accepted Answer

A) True 
 B)False

Question 13

Economists use the term inflation to describe a situation in which the economy's overall production level is rising.

Accepted Answer

A) True 
 B)False

Question 14

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services?

Accepted Answer

A)  capital 
B)  consumption 
C)  investment 
D)  costs 
A)  capital 
B)  consumption 
C)  investment 
D)  costs

Question 15

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

Accepted Answer

A)  spending on education 
B)  the purchase of stocks and bonds 
C)  the purchase of a new house 
D)  the purchase of durable goods such as stoves and washing machines 
A)  spending on education 
B)  the purchase of stocks and bonds 
C)  the purchase of a new house 
D)  the purchase of durable goods such as stoves and washing machines

Question 16

The residents of country A earn $500 million of income from abroad. Residents of other countries earn $200 million in country A. These earnings are accounted for in country A's

Accepted Answer

A)  GNP which is larger than GDP in country A. 
B)  GNP which is smaller than GDP in country A. 
C)  GDP which is larger than GNP in country A. 
D)  GDP which is smaller than GNP in country A. 
A)  GNP which is larger than GDP in country A. 
B)  GNP which is smaller than GDP in country A. 
C)  GDP which is larger than GNP in country A. 
D)  GDP which is smaller than GNP in country A.

Question 17

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.

Accepted Answer

GDP excludes some products because they

Question 18

A recession is always associated with

Accepted Answer

A)  the end of a war. 
B)  slowly growing real GDP. 
C)  rising inflation. 
D)  declining real GDP. 
A)  the end of a war. 
B)  slowly growing real GDP. 
C)  rising inflation. 
D)  declining real GDP.

Question 19

If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.

Accepted Answer

A) True 
 B)False

Question 20

In the circular flow diagram what are the three types of payments from firms to factors of production? Is the sum of these payments greater than, less than, or equal to GDP?

Accepted Answer

Wages, rents, and pr

Exam 23: Measuring a Nations Income

In a simple circular-flow diagram, total income and total expenditure are

Nominal GDP uses constant base­year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.

To encourage formation of small businesses, the government could provide subsidies; these subsidies

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

The basic tools of supply and demand are

New home construction is included in the consumption component of GDP.

Which of the following is included in GDP?

Table 23-3 The table below contains data for the country of Crete for the year 2010. -Refer to Table 23-3. What was Crete's investment in 2010?

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly.

In 2010 a country had nominal GDP of 6 trillion euro and real GDP of 5 trillion euro. In 2011 it had nominal GDP of 6.5 trillion euro and real GDP of 5.2 trillion euro. What was its inflation rate in 2011? Show your work.

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.

In 2009, the level of U.S. real GDP was close to four times its 1965 level.

Economists use the term inflation to describe a situation in which the economy's overall production level is rising.

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services?

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

The residents of country A earn $500 million of income from abroad. Residents of other countries earn $200 million in country A. These earnings are accounted for in country A's

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. In spite of this definition, some production is left out of GDP. Explain why some final goods and services are not included.

A recession is always associated with

If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.

In the circular flow diagram what are the three types of payments from firms to factors of production? Is the sum of these payments greater than, less than, or equal to GDP?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Nominal GDP uses constant baseyear prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.