Ch.8 Quiz

Which is the largest component of GDP? Consumption Investment Government spending

Consumption

Economic growth is important to an economy because it typically translates to: a higher standard of living for the country's population. increases in the level of transfer payments. more educational attainment for the country's population.

a higher standard of living for the country's population.

When a significant fraction of the domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows GDP will be much larger than GNP GNP will be much larger than GDP GDP will be almost identical to GNP

GDP will be much larger than GNP

In the circular flow model, who supplies factors of production in exchange for income? Firms Households Governments

Households

The buying and selling of goods and services that is hidden from the government in order to avoid taxes and/or regulation is known as the: illicit zone underground economy. Peruvian context.

underground economy

Which of these do we subtract from GDP to obtain national income? Depreciation Consumption Investment

Depreciation

If Americans still worked sixty hour weeks, as they did in 1890, __________. the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher both the GDP and the well-being of the typical person would be higher both the GDP and the well-being of the typical person would be lower than current levels

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher

A period of real economic growth, where production and employment are both moving higher is known as: expansion. recession. contraction.

expansion

Disposable personal income is equal to personal income minus: social security payments personal tax payments government transfer payments

personal tax payments

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant? Real GDP Nominal GDP Net national product

Real GDP

Which of the following is included in the economist's definition of investment? The purchase of new machines, factories, or houses The purchase of a share of stock The purchase of a rare coin or a deposit in a savings account

The purchase of new machines, factories, or houses

The best measure of the income households actually have available to spend is: disposable personal income national income gross domestic product

disposable personal income

Real GDP is: the value of goods and services evaluated at base year prices the value of goods and services evaluated at current year prices a measure of output that was replaced by nominal GDP some years ago

the value of goods and services evaluated at base year prices

To calculate personal income from national income, which of the following must be done by the BEA? Add government transfer payments Add corporate retained earnings Add profits

Add government transfer payments

The GDP per capita is computed by dividing a country's: real GDP by its labor force nominal GDP by its labor force real GDP by its population

real GDP by its population

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics? Education A new house A haircut

A new House

How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP? By adding the quantities of every goods and service produced in the economy. By adding the value in dollar terms of all the final goods and services produced domestically By ascribing a historic value to all of the quantities produced in the economy.

By adding the value in dollar terms of all the final goods and services produced domestically

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow. government and firms investment banks households

households

Gross domestic product is best defined as the: market value of all final goods and services produced in a country during a period of time total quantity of goods and services produced in a country during a period of time total value of all goods that can be found in a country

market value of all final goods and services produced in a country during a period of time

Which of the following are not counted as final goods and used in the GDP calculation? Intermediate goods Consumption goods Exports

Intermediate goods

Which of these is not a shortcoming of GDP as a measure of welfare? It does not include the value of leisure. It only counts final goods and services and not intermediate goods. It is not adjusted for crime and other problems.

It only counts final goods and services and not intermediate goods.

The total national income actually received by a country's residents is: larger than the value of GDP exactly equal to the value of GDP smaller than the value of GDP

smaller than the value of GDP

An alternating period of economic contraction and economic expansion measured over time with real GDP is known as the: business cycle. Great Depression. circular flow model.

business cycle

As the value of a country's real GDP increases, the country is likely to: devote more resources to pollution reduction devote fewer resources to pollution reduction include the value of pollution in calculating the GDP

devote more resources to pollution reduction