Question 1

Consider the following three items of spending by the government: (1)the federal government pays a $500 unemployment benefit to an unemployed person;(2)the federal government makes a $2,000 salary payment to a Navy lieutenant;(3)the city of Bozeman,Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman.Which of these payments contributes directly to government purchases in the national income accounts?

Accepted Answer

A)  only item (1) 
B)  only item (2) 
C)  only items (1)and (2) 
D)  only items (2)and (3)

Question 2

When studying changes in the economy over time,economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services.In other words,economists want to study

Accepted Answer

A)  nominal GDP. 
B)  real GDP. 
C)  the GDP deflator. 
D)  GNP.

Question 3

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company,which uses the aluminum to make aluminum foil.Shiny Foil Company sells $4 million worth of aluminum foil to households.The transactions just described contribute how much to GDP?

Accepted Answer

A)  $1 million 
B)  $3 million 
C)  $4 million 
D)  $5 million

Question 4

Social Security payments are

Accepted Answer

A)  included in GDP because they represent payments for work performed in the past. 
B)  included in GDP because they represent potential consumption. 
C)  excluded from GDP because they are not private pensions. 
D)  excluded from GDP because they do not reflect the economy's production.

Question 5

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services,but GDP cannot measure both at the same time.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following subcomponents of GDP can be either positive or negative?

Accepted Answer

A)  inventory investment 
B)  exports 
C)  government purchases 
D)  All of the above are correct.

Question 7

Table 23-1
The table below contains data for the country of Wrexington for the year 2006.
 
-Refer to Table 23-1.National income for Wrexington in 2006 is

Accepted Answer

A)  $88. 
B)  $92. 
C)  $100. 
D)  $104.

Question 8

Table 23-2
The table below contains data for the country of Wrexington for the year 2008.
 
-Refer to Table 23-2.What was Wrexington's consumption in 2008?

Accepted Answer

A)  $2018 
B)  $3010 
C)  $3311 
D)  $4015

Question 9

In a simple circular-flow diagram,

Accepted Answer

A)  households spend all of their income. 
B)  all goods and services are bought by households. 
C)  expenditures flow through the markets for goods and services,while income flows through the markets for the factors of production. 
D)  All of the above are correct.

Question 10

Microeconomics and macroeconomics are closely linked.

Accepted Answer

A) True 
 B)False

Question 11

Retained earnings is income that

Accepted Answer

A)  households retain after paying taxes. 
B)  businesses retain after paying taxes. 
C)  corporations have earned but have not used to invest in plant,equipment,and inventories. 
D)  corporations have earned but have not paid out to their owners.

Question 12

The output of goods and services produced in the United States has grown on average 3.2 percent per year.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

If an economy's GDP rises,then it must be the case that the economy's

Accepted Answer

A)  income rises and saving falls. 
B)  income and saving both rise. 
C)  income rises and expenditure falls. 
D)  income and expenditure both rise.

Question 15

Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP,but the value of intermediate goods produced and not sold is included directly as part of GDP.

Accepted Answer

The answer of Explain why it is the case that...

Question 16

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.

Question 17

Table 23-4
The table below contains data for the country of Dachsland,which produces only pretzels and books.The base year is 2005.
 
-Refer to Table 23-4.In 2008,Dachsland's

Accepted Answer

A)  nominal GDP was $585,real GDP was $900,and the GDP deflator was 65. 
B)  nominal GDP was $585,real GDP was $1065,and the GDP deflator was 54.9. 
C)  nominal GDP was $1600,real GDP was $900,and the GDP deflator was 177.8. 
D)  nominal GDP was $1600,real GDP was $1065,and the GDP deflator was 150.2.

Question 18

In a certain small country,the unit of currency is the huck.That country's government recently announced that "GDP amounted to 400 million hucks in the quarter that just ended." Assuming this country has adopted American GDP accounting conventions,this statement means that GDP,

Accepted Answer

A)  without seasonal adjustment,amounted to 100 million hucks in the quarter that just ended. 
B)  with seasonal adjustment,amounted to 100 million hucks in the quarter that just ended. 
C)  without seasonal adjustment,amounted to 400 million hucks in the quarter that just ended. 
D)  with seasonal adjustment,amounted to 400 million hucks in the quarter that just ended.

Question 19

Which of the following is included in the consumption component of U.S.GDP?

Accepted Answer

A)  purchases of staplers,paper clips,and pens by U.S.business firms 
B)  purchases of natural gas by U.S.households 
C)  purchases of newly constructed homes by U.S.households 
D)  All of the above are correct.

Question 20

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

Exam 23: Measuring a Nations Income

When studying changes in the economy over time,economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services.In other words,economists want to study

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company,which uses the aluminum to make aluminum foil.Shiny Foil Company sells $4 million worth of aluminum foil to households.The transactions just described contribute how much to GDP?

Social Security payments are

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services,but GDP cannot measure both at the same time.

Which of the following subcomponents of GDP can be either positive or negative?

Table 23-1 The table below contains data for the country of Wrexington for the year 2006. -Refer to Table 23-1.National income for Wrexington in 2006 is

Table 23-2 The table below contains data for the country of Wrexington for the year 2008. -Refer to Table 23-2.What was Wrexington's consumption in 2008?

In a simple circular-flow diagram,

Microeconomics and macroeconomics are closely linked.

Retained earnings is income that

The output of goods and services produced in the United States has grown on average 3.2 percent per year.

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?

If an economy's GDP rises,then it must be the case that the economy's

Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP,but the value of intermediate goods produced and not sold is included directly as part of GDP.

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

Table 23-4 The table below contains data for the country of Dachsland,which produces only pretzels and books.The base year is 2005. -Refer to Table 23-4.In 2008,Dachsland's

In a certain small country,the unit of currency is the huck.That country's government recently announced that "GDP amounted to 400 million hucks in the quarter that just ended." Assuming this country has adopted American GDP accounting conventions,this statement means that GDP,

Which of the following is included in the consumption component of U.S.GDP?

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