CH.06

The purchases of U.S. products by the citizens of Mexico are: A) counted as U.S. exports. B) counted as U.S. imports. C) considered Mexico's exports. D) considered as an income transfer from the U.S. to Mexico.

A) counted as U.S. exports.

(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "C" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services.

A) factors of production.

(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "A" represents the flow of: A) personal consumption expenditures. B) consumer goods and services. C) factors of production. D) factor incomes.

A) personal consumption expenditures.

The value of goods and services purchased by households during a particular period is called: A) personal consumption. B) private investment. C) gross domestic purchases. D) net imports.

A) personal consumption.

Government purchases are defined as: A) the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. B) the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. C) the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. D) the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies.

A) the sum of purchases of goods and services from firms by government agencies

Goods that are produced in a particular period but not sold in the current period: A) are included in consumption estimates. B) are called inventories and are included in gross private investment. C) are excluded from the current year's GDP and included in GDP in the year they are sold. D) are classified as intermediate goods.

B) are called inventories and are included in gross private investment.

(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "D" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services.

B) factor incomes.

GDP can be calculated by totaling either the: A) market values of all final goods and services or the total volume of all intermediate goods at all stages of production. B) market values of all final goods and services or the value added at all stages of production. C) total sales values of all intermediate goods at all stages of production or the value added at all stages of production. D) market values of all final goods and services or the values added by labor at all stages of production.

B) market values of all final goods and services or the value added at all stages of production.

Transfer payments are: A) payments made to certain individuals and are part of GDP. B) not included in GDP because they do not represent income derived from current production. C) included in GDP only if they pertain to unemployment benefits. D) payments for services produced in the current time period.

B) not included in GDP because they do not represent income derived from current production.

Double counting in GDP accounting: A) refers to the fact that accountants check their figures twice. B) refers to the inclusion of both intermediate goods and final goods in GDP. C) is the method of using both income and expenditures in measuring GDP. D) is the method of calculating the GDP by including the net incomes received by residents of a nation living abroad.

B) refers to the inclusion of both intermediate goods and final goods in GDP.

Private investment plays a crucial role in the macroeconomy because it is: A) the largest expenditure component of GDP. B) the smallest expenditure component of GDP. C) an expenditure that adds to the economy's productive capacity. D) undertaken by the government and must be funded by tax revenue.

C) an expenditure that adds to the economy's productive capacity.

The value of an economy's total output of goods and services is called _____. A) consumption B) investment C) gross domestic product D) exports

C) gross domestic product

(Exhibit: Components of GDP for an Economy 2) Net exports are negative. This would mean that: A) imports are larger than exports and there is a trade surplus. B) exports are larger than imports and there is a trade surplus. C) imports are larger than exports and there is a trade deficit. D) exports are larger than imports and there is a trade deficit.

C) imports are larger than exports and there is a trade deficit.

Disposable personal income is calculated as personal income: A) adjusted for inflation. B) minus depreciation. C) minus taxes. D) plus transfer payments.

C) minus taxes.

Which of the following is the best measure of a nation's standard of living? A) nominal GDP B) market GDP C) real GDP per capita D) nominal GDP per capita

C) real GDP per capita

The cost of producing goods and services includes: A) only the cost of the factors of production used to produce output. B) the cost of factors of production and depreciation but excludes sales tax. C) the cost of factors of production, depreciation, and other production-related taxes. D) the cost of the inputs used to produce the product, all production-related taxes, and profit.

C) the cost of factors of production, depreciation, and other production-related taxes.

Gross domestic income (GDI) is defined as: A) the income of all the workers in an economy who have provided human capital in the production process during a particular period. B) the income of all workers in the private sector of an economy during a particular period. C) the total income generated in an economy by the production of final goods and services during a particular period. D) the total non-wage benefits of all the workers in private sector.

C) the total income generated in an economy by the production of final goods and services during a particular period.

Which of the following items would NOT be a part of private investment in the computation of GDP? A) A new factory building B) New factory equipment C) A rise in inventory levels at a firm D) An old shopping center acquired by a firm

D) An old shopping center acquired by a firm

(Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "B" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services.

D) consumer goods and services.

For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called: A) personal investment expenditure. B) a capital consumption allowance. C) a transfer payment. D) gross private domestic investment.

D) gross private domestic investment.