chapter 5 quiz

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP increases by $300 billion. does not change. decreases by $600 billion. increases by $600 billion.

b

If C = $4 million, I = $2 million, G = $1 million, X = $1 million, and M = $2 million, the value of GDP in this economy is $8 million. $10 million. $4 million. $6 million.

d

A disadvantage of using per capita GDP to measure the standard of living in a country is that it does not accurately reflect the differences in wealth between rich citizens and poor citizens in the same country. False True

t

Marci is 11 years old. She walks her neighbors' dogs for cash. Her income from this service is probably part of the informal economy. True False

t

Which of these correctly lists the sequence of stages in the business cycle? recession, trough, expansion, peak recession, trough, peak, expansion recession, peak, expansion, trough recession, expansion, peak, trough

A

For which situation would the yield curve MOST likely predict that a recession will occur? short-term interest rate = 2%; long-term interest rate = 4% short-term interest rate = 3%; long-term interest rate = 3% short-term interest rate = 4%; long-term interest rate = 3% short-term interest rate = 0%; long-term interest rate = 5%

c

Holding other expenditures constant, if imports fall by $20 billion and exports fall by $10 billion, then GDP rises by $30 billion. falls by $30 billion. rises by $10 billion. falls by $10 billion.

c

If LG (a South Korean company) produces televisions in Mexico, the value of these televisions will count toward South Korea's _____ and Mexico's _____. GDP; GNP GNP; GNP GNP; GDP GDP; GDP

c

If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____. decrease; increase decrease; be unchanged increase; be unchanged increase; also increase

c

The U.S. gross domestic product is equal to the total market value of all intermediate goods and services produced by citizens in the United States. intermediate goods and services produced by resources in the United States. final goods and services produced by resources in the United States. final goods and services produced by U.S. citizens in the United States.

c

The largest component of GDP is net exports. government spending. consumption expenditure. gross private domestic investment.

c

A change in the Leading Economic Index is supposed to reflect how the economy behaved recently. how the economy is behaving. how the economy will behave in the near future. an average of how the economy has behaved over the most recent business cycle.

c

The "business cycle" refers to short-run fluctuations in macroeconomic activity. changes in the economy over the course of the four seasons. changes in the economy between winter and summer. a long-run increase in GDP.

A

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _____ GDP, and its value should be counted in _____. 2013's; inventory changes 2014's; personal consumption expenditures 2014's; durable goods 2013's; durable goods

a

One of the criticisms of the way business cycles are officially dated by the NBER is that it uses historical data to date phases after they occur. it relies on too many indicators of economic activity to be accurate. the committee consists of hundreds of economists with different perspectives. it makes predictions based on estimated future growth dat

a

GNP includes output produced _____, but it does NOT include output produced _____. inside the United States by foreign citizens; outside the United States by U.S. citizens outside the United States by U.S. citizens; inside the United States by foreign citizens outside the United States by U.S. citizens; inside the United States by U.S. citizens The GNP only includes output (goods and services) produced by U.S. citizens within the United States.

b

The economy is LEAST likely to be heading into a recession when the National Activity Index equals -0.33. 0.81. 0.55. -0.98.

b

A double-dip recession is a recession that is twice as bad as the one that preceded it. True False

f

Current national income and production statistics include the environmental benefits or harm of economic activity. False True

f

Leisure time is included in the GDP accounts. False True

f

At the peak of the business cycle, the economy is typically operating below capacity. at its highest level ever. above capacity. at its capacity.

D

Business cycles are always the same duration. are always the same magnitude. are always the same duration and magnitude. vary in duration and magnitude.

D

We should MOST likely expect a recession if the Leading Economic Index _____ months in a row. falls for three rises for three falls for six rises for six

a

A guitar is produced in California using $100 in raw materials and sells for $300 in a guitar shop. Each guitar that is produced contributes _____ to U.S. GDP. $100 $300 $200 $400

b

If a country's GDP is $200 million and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is $25,000. $20,000. $100,000. $11,111.

b

Karl's Keychain Company produces keychains that sell in its stores for $1 each. On January 1, 2015, the company had inventory of 10,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year on December 31, 2015, the company's inventory of keychains was 6,000. How much did Karl's output contribute to GDP in 2015? $900,000 $896,000 $904,000 $906,000

b

Which expenditure component of GDP tends to be the MOST volatile over time? government purchases gross private domestic investment personal consumption expenditures net exports of goods and services

b

Which statement is TRUE within the circular flow of economic activity? Households are sellers of products and sellers of production factors. Business firms are sellers of products and buyers of production factors. Business firms are buyers and sellers of production factors. Households are sellers of products and buyers of production factors.

b

f in the past, you always painted your own house but now you hire a painting contractor to do the work, what effect does this have on GDP? GDP falls as a result of this change. GDP rises as a result of this change. GDP at first rises but then falls. GDP is unaffected by this change.

b

The national income and product accounts do all of these EXCEPT compare U.S. income and output to that of other nations. let economists judge our nation's economic performance. track changes in income distribution. track the economy's condition over the course of the business cycle.

c

Which component of GDP includes inventory changes? government spending Inventory changes are not included in GDP. investment consumption

c

What is an example of a final good? tartar sauce purchased by a fish restaurant corn purchased by a hog farmer rubber purchased by a bicycle company bacon purchased at a grocery store

d

Which of these is NOT an example of gross private domestic investment? the construction of a new hotel the construction of new residential housing a change in business inventories a household's purchase of shares of Google stock

d

he general purpose of the circular flow diagram is to show that total _____ equal(s) total _____ in an economy. investment; spending inputs; outputs savings; spending spending; income

d