Econ Exam 3 - GDP and the Marketplace

***Suppose an economy produces only three products, A, B, and C. Quantity purchased and changes in the prices of these items over a period are shown below: Using year 1 as a base, the value of the country's nominal GDP in year 1: A) cannot be determined with the information given. B) is $850. C) is $3,270. D) is $800.

D

A distinguishing characteristic of public transfer payments is that: A) they are used to subsidize the major transportation carriers to reduce transportation costs. B) they are counted as part of government purchases in the calculation of the gross domestic product. C) there is a tax on the amount of the subsidy above a certain income level. D) the recipients make no contribution to current production in return for them.

D

An antigrowth view states that there may be a significant trade-off between productivity and: A) education. B) employment. C) economies of scale. D) the quality of life.

D

An example of a public transfer payment is a(n): A) airline pass giving price discounts to senior citizens. B) monthly allowance from home for a college student. C) gift of land from a wealthy relative. D) veteran's benefit payment.

D

An example of an intermediate good or service would be: A) bricks bought by a homeowner for constructing a patio. B) sacks of groceries bought by a dentist for his family. C) a car bought by a stockbroker for commuting to work. D) a desk bought by an accountant for her office.

D

GDP is the market value of: A) all expenditures on natural resources, labor, and capital goods in an economy in a given year. B) all expenditures on consumption, investment, and net exports in an economy in a given year. C) all intermediate goods and services produced in an economy in a given year. D) all final goods and services produced in an economy in a given year.

D

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from: A) public transfer payments to households. B) the consumption of fixed capital. C) the underground economy. D) intermediate goods.

C

Gordon James is a person who sells narcotics "on the street." This type of illegal activity: A) would be considered double counting in calculating GDP. B) is estimated and included in GDP figures. C) is excluded from GDP figures. D) causes GDP to be overstated.

C

Net exports is a positive number when: A) gross private domestic investment is greater than depreciation. B) depreciation is greater than gross private domestic investment. C) a nation's exports of goods and services exceed its imports. D) a nation's imports of goods and services exceed its exports.

C

Refer to the above diagram. If there is a movement away from the full employment of resources in an economy with production possibilities curve AB, this can be shown by: A)a shift of the curve from AB to CD. B)a movement from point 3 to point 1. C)a movement from point 2 to point 4. D)point 5 in the diagram.

C

The basic determinants of labor inputs (total hours of work) include: A) economies of scale and technological advance. B) education and training, and allocative efficiency. C) the size of the labor force and average hours of work. D) the quantity and quality of capital and human resources.

C

The following are national income account data for a hypothetical economy in billions of dollars: government purchases ($1130), personal consumption expenditures ($4800), imports ($370), exports ($240), and gross private domestic investment ($1150). Personal consumption expenditures are approximately what percentage of this economy? A) 60 percent B) 65 percent C) 69 percent D) 75 percent

C

The single most important source of productivity for economic growth for the United States has been: A)improved resource allocation. B)education and training. C)technological advance. D)economies of scale.

C

Which does not contribute directly to the production of the domestic output of an economy? A) A police officer. B) An insurance agent. C) A full-time student. D) A soldier.

C

Which is included in GDP? A) Used autos purchased by consumers B) Social Security payments C) Telephone service for a home D) Bread for a restaurant

C

***Refer to the above diagram. Negative economic growth can be shown by a: A)shift of EF to AB. B)movement along AB from point 2 to point 3. C)shift of AB to CD. D)shift of CD to AB.

D

***Assume a nation's current production possibilities are represented by the curve AB in the above diagram. Positive economic growth would best be indicated by a: A) shift in the curve from AB to CD. B) shift in the curve from AB to EF. C) movement from point 1 to point 2. D) movement from point 3 to point 4.

A

GDP measured using current prices is called: A) nominal GDP. B) real GDP. C) constant GDP. D) deflated GDP.

A

Gross private domestic investment is the value of capital goods and buildings that are produced that year: A) plus residential construction and changes in business inventories. B) plus the consumption of fixed capital and indirect business taxes. C) minus changes in business inventories. D) plus the consumption of fixed capital.

A

The knowledge and skills that make workers productive are referred to by economists as: A) human capital. B) increasing returns. C) resource allocation. D) simultaneous consumption.

A

To avoid multiple counting in national income accounts, only: A) final goods and services should be counted. B) intermediate goods and services should be counted. C) both final and intermediate goods and services should be counted. D) primary, intermediate, and final goods and services should be counted.

A

Which is included in the expenditures approach to GDP? A) Spending on meals by consumers at restaurants B) Spending on used clothing by consumers at garage sales C) The monetary value of stocks and bonds owned by investors D) The monetary value of used trucks purchased by construction companies

A

***Assume an economy is producing only one product. Year 2 is the base year. Output and price data for a five-year period are given. Refer to the above data. If year 2 is the base year, then real GDP for year 5 is: A) $41. B) $50. C) $56. D) $100.

B

An example of a final good in national income accounts would be new: A) lawn mowers purchased by Cut-rite Mowers. B) flowers purchased by homeowner Violet Rose. C) chemicals purchased by Green Grass Lawn Care. D) trees purchased by Wendy Birch's Garden Center.

B

Economists believe that the above-normal economic growth in the United States between 1995 and 2010 was caused primarily by: A)increases in the rate of personal saving. B)increased entrepreneurial activity, application of information technology, and global competition. C)rising federal budget surpluses that reduced real interest rates. D)expansionary monetary policy.

B

From an economist's perspective, which is not considered to be an investment? A) Construction of a new factory B) Purchase of shares of company stock C) The building of an apartment complex D) Additions to inventories at steel plants

B

Government purchases in national income accounts would include expenditures for payments of: A) Social Security checks to retirees. B) salaries for current U.S. military officers. C) public assistance for welfare recipients. D) public assistance for military veterans.

B

In 2017, Kara sold her used car to Augi's Used Cars, a local dealership, for $2,000. Augi's then serviced and cleaned the car and sold it to Alex for $3,000. How much would these transactions add to GDP in 2017? A) $0 B) $1,000. C) $2,000. D) $3,000.

B

One of the main arguments against further growth for industrialized nations focuses on the issue of: A) technological knowledge. B) environmental quality. C) feedback mechanisms. D) infrastructure development.

B

The value of corporate stocks and bonds traded in a given year is: A) included in the calculation of GDP because they make a contribution to the current production of goods and services. B) excluded from the calculation of GDP because they make no contribution to current production of goods and services. C) included in the calculation of net private domestic investment. D) included in the calculation of gross private domestic investment.

B

Which would be considered an investment according to economists? A) The buying of shares of Janus mutual funds. B) The purchase of a new machine by Ford. C) The purchase of stock in MacDonald's. D) The selling of IBM corporate bonds.

B

***Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. If the percentage increase in real GDP from year 3 to year 4 was maintained for an extended period of time, how many years would it take for real GDP to double? A) 20 years. B) 5 years. C) 3.5 years. D) 1.4 years.

C

***Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. If year 2 is the base year, the real GDP for year 3 is: A) $30. B) $40. C) $45. D) $60.

C

***Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. The percentage increase in real GDP from year 2 to year 4 is: A) 40 percent. B) 60 percent. C) 80 percent. D) 100 percent.

C

***The following data about a hypothetical economy are in billions of dollars. Refer to the above data. GDP in this economy is: A)$6080 billion. B)$6230 billion. C)$6380 billion. D)$6400 billion.

C

A major argument for economic growth is that it: A) creates an equal distribution of income. B) protects common property resources. C) leads to a higher standard of living. D) reduces the amount of taxation.

C

A supply factor in economic growth would be: A) a fall in the efficient use of resources. B) a rise in the rate of resource depletion. C) an increase in the quantity of labor. D) an increase in consumption spending.

C

GDP in an economy is $11,130 billion. Consumer expenditures are $7735 billion, government purchases are $1989 billion, and gross investment is $1410 billion. Net exports are: A) +$53 billion. B) -$47 billion. C) -$4 billion. D) -$161 billion.

C

Gross domestic product (GDP) is equal to personal consumption expenditures: A) plus gross private domestic investment, minus government purchases, and plus net exports. B) plus gross private domestic investment, plus government purchases, and minus net exports. C) minus gross private domestic investment, plus government purchases, and plus net exports. D) plus gross private domestic investment, plus government purchases, and plus net exports.

D

Money spent on the purchase of a new house is included in the GDP as a part of: A) the consumption of private fixed capital. B) personal consumption expenditures. C) personal saving. D) investment.

D

Net exports is a negative number when: A) a nation's imports of goods and services fall. B) a nation's imports of goods and services rise. C) a nation's exports of goods and services are greater than its imports. D) a nation's imports of goods and services are greater than its exports.

D

The gross domestic product provides an estimate of society's evaluation of the relative worth of goods and services because it: A) takes into account the value of security transactions. B) excludes public and private transfer payments. C) includes all income created by a nation's citizens, home or abroad. D) is a monetary measure.

D

What economic concept would be most closely associated with a situation where an aluminum plant uses extensive computerization on the production line to reduce per- unit costs of production? A) Infrastructure B) Human capital C) Network effects D) Economies of scale

D

Which is best considered a demand factor in economic growth? A) The quantity of human resources B) The quality of human resources C) The quantity of natural resources D) The level of spending by households, business, and government

D

Which of the following is a major measure of economic growth? A) The rise in the price level B) The fall in the rate of unemployment C) Changes in interest rates D) Changes in real GDP

D

Which of the following is a major measure of economic growth? A) The rise in the price level. B) The fall in the rate of unemployment. C) Changes in interest rates. D) Changes in real GDP per capita.

D

Which of the following is a private transfer payment? A) The sale of shares of stock in Walmart B) The sale of used clothing at a thrift store C) The Social Security benefits sent to a retired worker D) A check for $100 sent by a parent to a daughter at college

D