Question 1

Which of the following is not a phase or turning point of the business cycle?

Accepted Answer

A)  recession 
B)  expansion 
C)  shutdown 
D)  trough

Question 2

In years with inflation, nominal GDP increases ________ real GDP.

Accepted Answer

A)  faster than 
B)  slower than 
C)  at the same rate as 
D)  sometimes faster, sometimes slower, and sometimes at the same rate as

Question 3

The series of ups and downs the economy tends to move in is called

Accepted Answer

A)  the business cycle. 
B)  a recession. 
C)  a depression. 
D)  economic growth.

Question 4

-Which of the following is NOT a part of the income approach to determining GDP?

Accepted Answer

A)  rental income 
B)  gross private domestic investment 
C)  net interest 
D)  indirect business taxes

Question 5

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

Question 6

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

Accepted Answer

The answer of Use the idea of the circular flow...

Question 7

The calculation of the final goods and services sold in an economy would NOT include

Accepted Answer

A)  the purchase of a lawnmower by a household. 
B)  General Motors' purchases of tires for new automobiles. 
C)  Ford Motor Company's purchase of a new industrial robot to be used to produce cars. 
D)  the purchase of a service by a household.

Question 8

Why does real GDP have limitations in determining economic welfare?

Accepted Answer

The answer of Why does real GDP have limitations in...

Question 9

The expenditure approach measures GDP by adding

Accepted Answer

A)  compensation of employees, rental income, corporate profits, net interest, and proprietors' income. 
B)  compensation of employees, rental income, corporate profits, net interest, proprietors' income, subsidies paid by the government, indirect taxes paid, and depreciation. 
C)  compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and depreciation and subtracting subsidies paid by the government. 
D)  consumption expenditure, gross private domestic investment, net exports of goods and services, and government expenditure on goods and services.

Question 10

The following data show Uruguay's GDP using purchasing power parity in billions of dollars.

Using the data, we can conclude that

Accepted Answer

A)  Uruguay's economy entered a recession in 2005. 
B)  Uruguay's standard of living increased steadily between 2000 and 2008. 
C)  potential GDP more than doubled between 2000 and 2008. 
D)  Uruguay's economy reached a trough in 2002.

Question 11

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

Accepted Answer

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

Question 12

-A trend shows

Accepted Answer

A)  the degree of correlation between two variables. 
B)  the general tendency for a variable to rise or fall. 
C)  the scale used to measure to variables. 
D)  the increases in one variable.

Question 13

Goods that are produced this year, stored in inventories, and then sold to consumers next year

Accepted Answer

A)  count in this year's GDP. 
B)  count in next year's GDP. 
C)  count in both this year's and next year's GDP. 
D)  are not counted as a part of GDP.

Question 14

A ton of coal purchased by your local utility to burn to make electricity would be best described as

Accepted Answer

A)  an intermediate good. 
B)  a financial asset. 
C)  a used good. 
D)  a final product.

Question 15

GDP equals

Accepted Answer

A)  C + S + G + (X + M). 
B)  C + I + G + (X + M). 
C)  C + I + G + (X - M). 
D)  C + S + G + (X - M).

Question 16

Intermediate goods are excluded from GDP because

Accepted Answer

A)  their inclusion would involve double counting. 
B)  they represent goods that have never been purchased so they cannot be counted. 
C)  their inclusion would understate GDP. 
D)  the premise of the question is incorrect because intermediate goods are directly included in calculating GDP.

Question 17

Business cycles are

Accepted Answer

A)  irregular, with some having two recessions and no expansion. 
B)  predictable, with a recession following a trough. 
C)  unpredictable, but always have two phases and two turning points. 
D)  unpredictable, and don't always have two phases and two turning points.

Question 18

According to the BEA, in the second quarter of 2012 personal consumption expenditures grew by 1.7 percent, gross private domestic investment grew by 3.0 percent, government expenditure on goods and services decreased by -0.9 percent, imports grew by 2.9%, and exports grew by 6.0%. Given these data, it is most likely that

Accepted Answer

A)  GDP growth was positive in the 2nd quarter. 
B)  GDP growth was negative in the 2nd quarter. 
C)  the economy hit a business cycle peak. 
D)  the economy hit a business cycle trough.

Question 19

"If country A has a higher level of real GDP per person than country B, then people in Country A must enjoy a higher standard of economic welfare than people in Country B." Is this statement true or false and explain your answer.

Accepted Answer

The answer of "If country A has a higher level...

Question 20

To calculate GDP using the expenditure approach, in part it is necessary to

Accepted Answer

A)  add imports and exports. 
B)  add imports and subtract exports. 
C)  add exports and subtract imports. 
D)  subtract both exports and imports.

Exam 4: Measuring GDP and Economic Growth