Question 1

If depreciation exceeds gross investment, net investment is negative.

Accepted Answer

A) True 
 B)False

Question 2

Rental income includes

Accepted Answer

A)  the payment for the use of all rented inputs. 
B)  the payment for the use of land. 
C)  no income from rental housing because most houses are occupied by their owners. 
D)  Both answers A and B are correct.

Question 3

Real GDP in 2008 is $10 trillion. Between 2008 and 2009, using 2008 prices, GDP grew 3 percent and using 2009 prices real GDP grew 7 percent. Using the chain- weighted output index method, real GDP in 2009 is trillion.

Accepted Answer

A)  $10.5 
B)  $10.1 
C)  $11 
D)  $12.72

Question 4

The four parts of the business cycle occur in the following order:

Accepted Answer

A)  expansion, trough, peak, recession. 
B)  recession, trough, peak, expansion. 
C)  recession, trough, expansion, peak. 
D)  expansion, trough, recession, peak.

Question 5

Explain how gross investment, depreciation, net investment, and the capital stock are related.

Accepted Answer

The answer of Explain how gross investment, depreciation, net investment,...

Question 6

The underground economy exists for all of the following reasons EXCEPT the

Accepted Answer

A)  avoidance of taxes. 
B)  production of illegal goods. 
C)  avoidance of government regulation. 
D)  desire to maintain accurate records of economic transactions.

Question 7

A country that has a large real GDP per person might not necessarily have a high level of economic welfare because it may have

Accepted Answer

A)  environmental problems. 
B)  very little political freedom. 
C)  little leisure time. 
D)  All of the above answers are correct.

Question 8

All of the following are indirect taxes EXCEPT

Accepted Answer

A)  liquor excise taxes. 
B)  income taxes. 
C)  cigarette sales taxes. 
D)  taxes on utility bills.

Question 9

Which of the following are equal to one another?
I. aggregate production
II. aggregate expenditure
III. aggregate income

Accepted Answer

A)  I equals II, but not III. 
B)  II equals III, but not I. 
C)  I equals II equals III. 
D)  I equals III, but not II.

Question 10

Explain the business cycle by describing the phases and turning points.

Accepted Answer

The answer of Explain the business cycle by describing the...

Question 11

In 2009, the country of Nerf's imports equaled its exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were _.

Accepted Answer

A)  zero 
B)  $900 million 
C)  $500 million 
D)  $100 million

Question 12

Which of the following is NOT included in the income approach to measuring GDP?

Accepted Answer

A)  net exports 
B)  corporate profits 
C)  compensation of employees 
D)  net interest

Question 13

Real GDP fluctuates from year to year but is always below potential GDP.

Accepted Answer

A) True 
 B)False

Question 14

When calculating GDP, underground economic activity is

Accepted Answer

A)  the part of the economy purposely hidden. 
B)  the production of goods and services in the home. 
C)  an aspect of the quality of life, such as health and life expectancy. 
D)  that portion of the time when we are enjoying leisure activities and not producing marketable goods.

Question 15

Net investment

Accepted Answer

A)  is the only measure of investment used to calculate GDP. 
B)  equals gross investment plus depreciation. 
C)  equals gross investment minus depreciation. 
D)  is equivalent to the existing capital stock in the economy.

Question 16

List and discuss various types of goods and services omitted from measured GDP.

Accepted Answer

The answer of List and discuss various types of goods...

Question 17

What is a business cycle?

Accepted Answer

The answer of What is a business cycle?...

Question 18

is gross investment minus .

Accepted Answer

A)  Net investment; depreciation 
B)  Depreciation; replacement investment 
C)  The capital stock; depreciation 
D)  The capital stock; net investment

Question 19

In the circular flow of economic activity

Accepted Answer

A)  aggregate expenditure is measured as it moves through the financial markets. 
B)  aggregate expenditure measures the dollar value of purchases of final goods and services. 
C)  aggregate expenditure measures the dollar value of purchases of factors. 
D)  aggregate income measures the dollar value of labor resources only.

Question 20

A recession is commonly defined as a period with

Accepted Answer

A)  negative growth rate in real GDP that lasts at least two quarters. 
B)  positive growth rate in real GDP that lasts at least two quarters. 
C)  positive growth rate in real GDP that lasts at least one quarter. 
D)  negative growth rate in real GDP that lasts at least one quarter.

Exam 4: Measuring Gdp and Economic Growth