Question 1

-Refer to the above figure. The top two arrows of the figure refer to the product markets. The bottom arrows refer to the factor markets. Which arrow represents the final consumer goods and services?

Accepted Answer

A)  Arrow A 
B)  Arrow B 
C)  Arrow C 
D)  Arrow D

Question 2

If you take national income and add transfer payments, then subtract income earned but not received, the result will be

Accepted Answer

A)  net national product. 
B)  disposable personal income. 
C)  personal income. 
D)  wages.

Question 3

Gross Domestic Product is best defined as

Accepted Answer

A)  the total market value of all final goods and services produced during a year by factors of production located within a nation's borders. 
B)  the total market value of all intermediate goods and services produced during a year by factors of production located within a nation's borders. 
C)  the value added to all goods produced in an economy during a year. 
D)  the total market value of all final goods and services that exist in an economy at a given point in time.

Question 4

Personal income is equal to

Accepted Answer

A)  NDP minus national income. 
B)  disposable personal income plus personal income taxes. 
C)  disposable personal income plus personal and corporate income taxes. 
D)  national income minus (corporate income taxes and Social Security).

Question 5

Calculating Gross Domestic Product (GDP) by the expenditure approach requires summing the value of

Accepted Answer

A)  all income paid to individuals. 
B)  all transactions in the economy. 
C)  all final goods and services produced in the economy. 
D)  all expenditures by individuals.

Question 6

Which of the following statements is FALSE?

Accepted Answer

A)  One definition of total income is that it is the annual cost of producing the entire output of final goods and services. 
B)  Transactions in which households buy final goods and services occur in the factor market. 
C)  The value of total output is identical to total income. 
D)  Saving is the difference between consumer income and expenditures.

Question 7

The expenditure approach to measuring GDP

Accepted Answer

A)  adds the dollar value of final goods and services. 
B)  adds the income received by all factors of production. 
C)  excludes durable consumer goods since they last more than a year. 
D)  excludes profits since profits are a cost of production.

Question 8

Suppose gross domestic product (GDP) is $5 billion, government transfer payments are $1.5 billion, indirect business taxes and transfers are $0.25 billion, and depreciation is $0.5 billion. Then national income equals

Accepted Answer

A)  $5 billion. 
B)  $4.25 billion. 
C)  $3.25 billion. 
D)  $2.75 billion.

Question 9

If households pay $1,000 in interest payments and receive $1,200 in interest, wages equal $9,000, rental receipts on land are $200, total business profits before taxes are $2,200, depreciation is $1,750, and indirect business taxes are $1,000, then gross domestic income is

Accepted Answer

A)  $15,350. 
B)  $14,350. 
C)  $13,150. 
D)  $11,400.

Question 10

Economists consider profit to be

Accepted Answer

A)  a cost of producing goods and services. 
B)  the same as a salary. 
C)  a reward for incurring losses. 
D)  something that should be eliminated by antitrust laws.

Question 11

-According to the above table, Gross Domestic Product is

Accepted Answer

A)  $14,140. 
B)  $13,965. 
C)  $13,315. 
D)  $12,115.

Question 12

Indirect business taxes include

Accepted Answer

A)  property taxes and corporate income taxes. 
B)  sales taxes and income taxes. 
C)  business property taxes and sales taxes. 
D)  income taxes and Social Security taxes.

Question 13

Profits represent

Accepted Answer

A)  the income earned from a bond. 
B)  the payments firms make to their employees. 
C)  a reward to entrepreneurs. 
D)  the difference between total tax revenue and total government spending.

Question 14

What is the difference between personal income and disposable personal income?

Accepted Answer

A)  the amount of personal income taxes 
B)  indirect personal taxes and transfers 
C)  net U.S. income earned abroad 
D)  depreciation

Question 15

Constant dollars are

Accepted Answer

A)  the same as current dollars. 
B)  dollars corrected for general price level changes. 
C)  what nominal GDP is measured in. 
D)  when an individual does not receive a cost of living increase.

Question 16

Services include all of the following EXCEPT

Accepted Answer

A)  payment for a doctor's visit. 
B)  the face value of a government bond. 
C)  school tuition. 
D)  payments for auto repair.

Question 17

If a nation's nominal GDP is $3,257 million and its price level is 110, then its real GDP is

Accepted Answer

A)  $1960.9 million. 
B)  $24.67 million. 
C)  $2960.9 million. 
D)  $2467.42 million.

Question 18

The value of total output and total income in the simple circular flow model

Accepted Answer

A)  are measures of the economy's level of savings. 
B)  include only intermediate goods. 
C)  are equal to each other. 
D)  are related in the sense that national income is less than national product.

Question 19

An increase in fixed investment spending that increases GDP occurs when

Accepted Answer

A)  a family purchases a new truck. 
B)  a business buys a new office desk. 
C)  inventories of new cars are drawn down on the lots of car dealers. 
D)  the government builds a new office building.

Question 20

Is looking at changes in gross domestic product over time a good way to determine whether the people in a country are experiencing an increase in their standards of living? Why or why not?

Accepted Answer

The answer of Is looking at changes in gross domestic...

Exam 8: Measuring the Economys Performance