Macroeconomics
Increasing returns would be a situation where a firm increases its workforce and other inputs by: -12 percent and its output increases by 10 percent -5 percent and its output increase by 8 percent -8 percent and its output increases by 5 percent -8 percent and its output increases by 8 percent
5 percent and its output increase by 8 percent
If the GDP gap is positive, then:
Actual GDP is greater than potential GDP
The diagram above illustrates the pattern of: -Price level movements -Wage movements over time -Business cycles -Economic growth patterns
Business cycles
The recurrent ups and downs in the level of economic activity extending over several years are referred to as:
Business cycles
In calculating the unemployment rate, part-time workers are:
Counted as employed because they are receiving payment for work
Unemployment that occurs when there is deficient demand for the goods and services of an economy is called: -Cyclical unemployment -Frictional unemployment -Structural unemployment -Natural unemployment
Cyclical unemployment
Okun's law indicates that for:
Every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated
Money spent on the purchase of a new house is included in the GDP as a part of: -Household expenditures on durable goods -Personal consumption expenditures -Gross domestic private investment -Personal saving
Gross domestic private investment
The "statistical discrepancy" that the NIPA includes in the data is to account for the following, except: -Errors due to people misrepresenting their incomes on their tax returns -Household production, or "do-it-yourself" activities of households -Difficulty in accurately estimating depreciation -To equalize GDP totals produced by the expenditures approach and the income approach
Household production, or "do-it-yourself" activities of households
Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n): -Decrease in supply -Decrease in quantity supplied -Increase in supply -Increase in quantity supplied
Increase in supply
If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income:
Increases by 3%
A person's real income will increase by 3% if her nominal income:
Increases by 5% while the price index rises by 2%
Which of the following is the single most important source of U.S. economic growth? -Stability of the socio-cultural-political environment -Increases in labor productivity -Improvement in the legal and human environment -Increases in the quantity of labor
Increases in labor productivity
An increase in the overall level of prices in an economy is called: -Growth -Inflation -Expansion -Nominal GDP growth
Inflation
What is the main problem with mild inflation according to some economists?
It diverts productive time towards activities to hedge against inflation
Sources of increasing returns that help raise productivity growth include the following, except: -Spreading of development costs -More specialized inputs -Network effects -Low unemployment
Low unemployment
What are the primary effects of cost-push inflation? -It reduces real output and redistributes a decreased level of real income -It reduces real output, but redistributes an increased level of real income -It raises real output, and redistributes an increased level of real income -It raises real output, but redistributes a decreased level of real income
NOT: It raises real output, but redistributes a decreased level of real income
The total income earned through the use of resources, plus taxes on production and on imports, equals: -Disposable income -Gross domestic product -Personal income -National income
National income
With mild demand-pull inflation, the economy's output level would tend to be:
Pulled up by the increase in total spending
Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
Structural
Which of the following government agencies estimates and compiles the U.S. GDP accounts? -The American Economic Association -The Bureau of Economic Analysis -The Internal Revenue Service -The Federal Reserve System
The Bureau of Economic Analysis
Depreciation is all of the following, except: -The consumption of fixed capital -The difference between gross investment and net investment -The difference between GDP and NDP -The accumulation of capital stock
The accumulation of capital stock
Possible reasons why the level of employment remained lower than before the Great Recession began, even three years after the recession ended, includes the following, except:
The production of output continued to decline, so that firms had no real need to increase hiring
Which of the following guides sensible decisions regarding the management of business risk in a market system? -Consumer sovereignty -The "invisible hand" -The profit and loss system -Taxes and subsidies
The profit and loss system
When inflation occurs:
The purchasing power of money decreases
If the negative GDP gap were equal to 4% of the potential GDP, Okun's law suggests that the actual unemployment rate would exceed the natural rate of unemployment by:
Two percentage points
In order to derive the market supply curve from individual supply curves, we add up the: -Total number of sellers in the market at a given time -Costs that all individual sellers incur in producing the product -Various prices that individual sellers are charging for the product -Various quantities that individual sellers want to sell at specific price levels
Various quantities that individual sellers want to sell at specific price levels
The term consumer sovereignty means that: -What is produced is ultimately determined by what consumers buy -Government is responsible for protecting consumers' interests -Producers have strong control over what consumers buy -There are no limits on what consumers may buy in a market system
What is produced is ultimately determined by what consumers buy
Trends in educational attainment in the U.S. since 1960 indicate that the percentage of adults: -Completing college has been rising, and so has the percentage completing high school -Who do not go to high school has been falling, but the percentage who do not complete elementary school has been rising -Completing college has been constant, but the percentage completing high school has been rising -Completing high school has been rising, and so has the percentage who do not go to high school nor complete elementary school
Completing college has been rising, and so has the percentage completing high school
A person observes that consumer prices often fall when a nation experiences economic growth. The person then concludes that falling consumer prices leads to economic growth. This would be an example of: -The fallacy of composition -Confusing correlation and causation -Biases -The use of loaded terminology
Confusing correlation and causation
The following data about a hypothetical economy are in billions of dollars. Refer to the above data. How much are net exports of this economy? -+$20 billion -+$150 billion --$20 billion --$65 billion
-$20 billion
The graph above represents a competitive market for a product where the government has set a price ceiling of 0A. What quantity will buyers be able to buy after the imposition of the price ceiling? -0J -KL -0L -JL
0J
To keep the population in an economy stable, the total fertility rate (average number of births per woman in her lifetime) must be about: -2.1 -5.1 -4.2 -1.5
2.1
In 2011, what percent of adults in the U.S. were college graduates or higher? -30% -50% -70% -10%
30%
If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately: -$3,846 billion -$4,108 billion -$4,379 billion -$3,925 billion
4,108 billion
Which of the following is most likely to be an indication of higher unemployment? -An increase in nominal GDP -A decrease in nominal GDP -A decrease in real GDP -An increase in real GDP
A decrease in real GDP
Which would best explain a decrease in both the price and the quantity of a product over a period of time? -A decrease in the price of a substitute good -A decrease in people's incomes, and the product is an inferior good -A long strike by workers who make the product -A technological improvement in production methods
A decrease in the price of a substitute good
The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using: -A utility measure -A measure of volume -A monetary measure -A measure of physical weight
A monetary measure
If prices of goods and services are free to quickly adjust, then: -A negative demand shock would lead to increased unemployment in the short run -A negative demand shock would have no short-run effect on unemployment -A positive demand shock would lead to increased unemployment in the short run -There would be no short-run demand shocks
A negative demand shock would have no short-run effect on unemployment
Which of the following is the best example of investment as defined by economists? -A business manager purchases stock on the New York Stock Exchange -A restaurant owner buys a freezer to store ingredients for the restaurant meals -A college professor buys a truck to drive around in -A worker deposits money into a long-term retirement account
A restaurant owner buys a freezer to store ingredients for the restaurant meals
Which of the following is not an adjustment made when comparing standards of living across countries? -Converting each country's GDP into U.S. dollars -Adjusting for different price levels across countries -Dividing each country's GDP by the size of its population -Adjusting for different unemployment rates across countries
Adjusting for different unemployment rates across countries
GDP is the market value of: -All final goods and services produced in an economy in a given year -Resources (land, labor, capital, and entrepreneurship) in an economy in a given year -All output produced and accumulated over the years -Consumption and investment spending in an economy in a given year
All final goods and services produced in an economy in a given year
The slope of a graph that shows a direct relationship is: -Always positive -Either positive or negative -Possibly zero -Either zero or infinite
Always positive
Adding the market value of all final and intermediate goods and services in an economy in a given year would result in: -The calculation of NDP for that year -An amount less than GDP for that year -The calculation of GDP for that year -An amount greater than GDP for that year
An amount greater than GDP for that year
Economic growth in the U.S. since 1950 has been characterized by: -An average growth rate in real GDP per capita of about 6% per year -A quadrupling of real GDP from 1950 to 2012 -An average growth rate in real GDP that is faster than the growth rate of the population -An average growth rate in real GDP that is slower than the growth rate of the population
An average growth rate in real GDP that is faster than the growth rate of the population
Which of the following is consistent with the law of demand? -An increase in the price of hamburgers causes buyers to buy fewer hamburgers -A decrease in the price of tacos causes sellers to want to sell less -A decrease in the price of egg rolls causes a decrease in the quantity of egg rolls demanded -An increase in the people's craving for pizza causes buyers to buy more pizza
An increase in the price of hamburgers causes buyers to buy fewer hamburgers
Refer to the above diagram. Which of the following is the most likely cause for a shift in the production possibilities curve from AB to CD? -The use of the economy's resources in a more efficient way -An increase in the quantity and quality of labor resources -An increase in government purchase of the economy's output -An increase in the spending of business and consumers
An increase in the quantity and quality of labor resources
Which of the following statements is not correct? -An increase in the quantity of a nation's resources will cause economic growth, but an increase in the quality of resources will not -An increase in a nation's labor supply will cause its potential output to increase -New technologies or new ways of producing output can cause a nation's production possibilities curve to shift outwards -Economic growth can be illustrated by an expansion of a nation's production possibilities curve
An increase in the quantity of a nation's resources will cause economic growth, but an increase in the quality of resources will not
Which of the following will NOT increase the average productivity of labor? -Improvement in the education and health of the population -Technological progress -An increase in the size of the labor force -An increase in the stock of real capital
An increase in the size of the labor force
Which of the following is the best example of economic investment? -Apple builds a new plant to manufacture iPads -A company like Bank of America acquires another company like Merrill Lynch -A retiree purchases U.S. government bonds -Your college purchases a 5-year old building in order to have more classrooms
Apple builds a new plant to manufacture iPads
High rates of unemployment are undesirable because they: -Are associated with higher levels crime and illness -Always lead to a decline in nominal GDP -Cannot be reduced through government policy -Are associated with increases in the price level
Are associated with higher levels crime and illness
Why might a company use barter rather than money to make a trade? -Barter can enable two firms to trade when their cash flows are limited -Money requires a coincidence of wants, barter is more direct -Money is efficient only for large transactions, so barter is preferred for smaller transactions -Barter trade is generally more efficient than money-based trade
Barter can enable two firms to trade when their cash flows are limited
The scalping of tickets for an event is a sign that the stated price on the ticket is: -Below the market clearing price -Equal to the market clearing price -Equal to the quantity demanded -Above the market clearing price
Below the market clearing price
A market for a product reaches equilibrium when: -The price rises further after there is a surplus -The actual quantity bought by buyers equals actual quantity sold by sellers -Price falls further after there is a shortage -Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
Refer to the market graph shown above. A black market where the price is $2.00 could result from price: -Floor set at $1.50 -Ceiling set at $1.50 -Ceiling set at $2.50 -Floor set at $2.00
Ceiling set at $1.50
If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for: -Pepsi to the right -Coke to the right -Pepsi to the left -Coke to the left
Coke to the left
Which point or output-combination in the above graph could the nation produce only if it experienced economic growth? -Combination F -Combination G -Combination C -Combination E
Combination G
In a market system, self-interest is the motivating force that: -Coordinates and creates consistency in the operations of various parts of the economy -Makes owners of resources always want to use their resources themselves -Makes individuals unwilling to deliver anything of value to others -Leads the economy to chaos and confusion, especially the larger economies
Coordinates and creates consistency in the operations of various parts of the economy
Which of the following represents an income flow in the circular flow of domestic output and national income? -Government purchases -Investment expenditures -Net exports -Corporate profits
Corporate profits
Which of the following represents an income flow in the circular flow of domestic output and national income? -Investment expenditures -Corporate profits -Government purchases -Net exports
Corporate profits
Payments that a firm makes to obtain needed resources comprise its: -Profits _Revenues -Capital -Costs
Costs
A business buys $5,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $65. The value added by the business to these products is: -$1,500 -$6,500 -$1,000 -$5,000
$1,500
Refer to the above diagram for the milk market. In this market, the equilibrium price is ____ and equilibrium quantity is ___. -$1.00 per gallon; 35 million gallons -$28 per gallon; 150 million gallons -$1.50 per gallon; 28 million gallons -$1.50 per gallon; 30 million gallons
$1.50 per gallon; 28 million gallons
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy? -$3,290 billion -$3,250 billion -$3,263 billion -$3,237 billion
$3,237 billion
One year nominal GDP was $286 billion and the price index was 88. Real GDP that year was: -$262 billion -$252 billion -$308 billion -$325 billion
$325 billion
The following factors tend to make the real GDP growth rate understate the growth of economic well-being, except: -Improved product quality -More stress-free lifestyle -Debasement of the environment -Added leisure
Debasement of the environment
If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as: -Indexing GDP -Deflating GDP -Compounding GDP -Inflating GDP
Deflating GDP
In a market system, resources will move away from an industry when: -Profits of firms in the industry are rising -Profits of firms in other industries are falling -The production of output in the industry is rising -Demand for the industry's product is decreasing
Demand for the industry's product is decreasing
The term "shock": -Does not tell us whether what has happened is unexpectedly bad or unexpectedly good -Always refers to an unexpectedly bad event -Always refers to a decrease in real GDP and an increase in unemployment -Always refers to an increase in inflation
Does not tell us whether what has happened is unexpectedly bad or unexpectedly good
The "other things equal" assumption is employed when: -The relationship in direct, but not when it is inverse -The relationship in inverse, but not when it is direct -Economists draw a two-dimensional (or two-axes) graph -The graph of a given relationship is shifting up or down
Economists draw a two-dimensional (or two-axes) graph
"Creative destruction" in a market system is brought about by: -Entrepreneurship -Striking workers -Regulation by the government -Money-based trade
Entrepreneurship
The value of corporate stocks and bonds traded in a given year is: -Included in the calculation of GDP because they make a contribution to the current production of goods and services -Excluded from the calculation of GDP because they make no contribution to current production of goods and services -Included in the calculation of gross private domestic investment -Included in the calculation of net private domestic investment
Excluded from the calculation of GDP because they make no contribution to current production of goods and services
From 2010 to 2050, the "inverse dependency ratio" in the U.S. is expected to: -Remain stable at 2.1 -Rise from 1.5 to 2.8 -Rise from 1.2 to 1.8 -Fall from 1.5 to 1.2
Fall from 1.5 to 1.2
One major aspect of the socio-cultural-political environment of the United States which has generally been conducive to economic growth is the: -Denial of the rights of property ownership -Strict social regulation of production and progress -Enforcement of contracts by the market -Favorable attitude toward work and risk-taking
Favorable attitude toward work and risk-taking
By freedom of enterprise, we mean that individual: -Producers are free to produce whatever the government decides are needed by the society -Workers are free to look for jobs and work in whichever firm will hire them -Consumers are free to buy whatever products will satisfy their needs the most -Firms are free to employ resources, to produce their output, and to sell their products
Firms are free to employ resources, to produce their output, and to sell their products
The market system is said to be characterized by "consumer sovereignty." This is because: -Firms must match their production decisions to the consumers' choices -The prices of consumer goods are regulated by a sovereign government -A sovereign government determines which consumer goods will be produced -Consumer goods are considered to be more important than capital goods
Firms must match their production decisions to the consumers' choices
Which is one of the five fundamental questions that need to be dealt with in any economic system? -How high should the prices of goods and services be? -What makes the rate of unemployment low? -How will goods and services be produced? -Who will be the richest group in the economy?
How will goods and services be produced?
The law of increasing opportunity costs states that: -Increases in the production of one good make the production of that good and easier -Costs of production increase for one good, but costs decrease for the other good -Increases in the production of one good require larger and larger sacrifices of the other good -Increases in wages and other resource costs is what the increasing opportunity costs refer to
Increases in the production of one good require larger and larger sacrifices of the other good
How does human specialization contribute towards increasing an economy's output? -It exploits the differences in abilities -It encourages people to be "jacks-of-all-trades" -It is a process of creative destruction -It pushes each worker to master the whole product
It exploits the differences in abilities
How does human specialization contribute towards increasing an economy's output? -It pushes each worker to master the whole product -It is a process of creative destruction -It exploits the differences in abilities -It encourages people to be "jacks-of-all-trades"
It exploits the differences in abilities
From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the: -Marginal cost of more insurance coverage is negative -Marginal benefit of more insurance coverage is greater than zero -Marginal benefit of more insurance coverage is greater than the marginal cost -Marginal cost of more insurance coverage is equal to the payment for the extra coverage
Marginal benefit of more insurance coverage is greater than the marginal cost
When gross investment is positive, net investment: -Must be positive -Is always zero -May be either positive or negative -Must be negative
May be either positive or negative
Which of the following is not a factor of production? -Capital -Money -Labor -Entrepreneur
Money
The amount of new output produced per year for both consumption and additions to capital stock is measured by: -NDP -Net exports -GDP -Net investment
NDP
A nation's capital stock was valued at $300 billion at the start of the year and $350 billion at the end. Consumption of private fixed capital in the year was $25 billion. Assuming stable prices, gross investment was: -$25 billion -$50 billion -$90 billion -$75 billion
NOT: $25 billion
Which would be a likely cause of an increase in the demand for pizza? -A reduced desire for take-out and fast-food dining -A decrease in the prices of cheese, pepperoni, and mushrooms -A decrease in the price of hamburger sandwiches -A health report showing eating pizza reduces stress
NOT: A decrease in the prices of cheese, pepperoni, and mushrooms
In a market economy, the incomes of consumers depend primarily upon: -The amount of savings that they have accumulated -Government policies in setting wages and interest rates -The quantity and prices of resources that they possess -How closely connected they are to government and business leaders
NOT: Government policies in setting wages and interest rates
One of the basic economic defenses of economic growth rests on the conclusion that: -A growth-oriented society confers a "work and look to the future" attitude on the members of society -Growth makes the gap between unlimited wants and scarce resources less acute -Growth makes workers less obsolete and more secure in employment -Growth reduces the cost to society of "common property" resources
NOT: Growth makes workers less obsolete and more secure in employment
What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased? -The decrease in demand was greater than the decrease in supply -The increase in supply was greater than the decrease in demand -The increase in demand was greater than the decrease in supply -The decrease in supply was greater than the increase in demand
NOT: The decrease in demand was greater than the decrease in supply
"GDP price index" measures changes in the: -Value of final output produced in the nation -Amount of resources available in the nation -Cost of resources employed in the nation -Prices of the output produced in the nation
NOT: Value of final output produced in the nation
The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the: -Monetary function of prices -Market determination of prices -Guiding function of prices -Circular flow of income
NOT: market determination of prices
Nation A's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation B's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is true? -Nation A's GDP per capita increased from 2013 to 2014, while Nation B's decreased -Nation B's GDP per capita increased from 2013 to 2014, while Nation A's decreased -Nation A's and Nation B's GDP per capita both decreased from 2013 to 2014 -Nation A's and Nation B's GDP per capita both increased from 2013 to 2014
Nation A's and Nation B's GDP per capita both increased from 2013 to 2014
If consumers become pessimistic, the economy is likely to experience a: -Positive supply shock -Negative supply shock -Negative demand shock -Positive demand shock
Negative demand shock
Sharply rising oil prices are most likely to lead to a: -Positive supply shock -Negative supply shock -Negative demand shock -Positive demand shock
Negative supply shock
Under modern economic growth, the annual average increase in output per person is: -Often small, perhaps less than 1% per year -Often not large, perhaps 2% per year -Often large, perhaps greater than 5% per year -Often the same in rich countries as in poor countries
Often not large, perhaps 2% per year
To avoid multiple counting in national income accounts: -Primary, intermediate, and final goods and services should be counted -Both final and intermediate goods and services should be counted -Intermediate goods and services should be counted -Only final goods and services should be counted
Only final goods and services should be counted
Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from: -Point 4 to point 1 -Point 2 to point 5 -Point 4 to point 6 -Point 5 to point 1
Point 4 to point 1
The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant? -How much sellers are charging customers for electric cars -Price of electric cars -Quantity of electric cars demanded by buyers -Price of gasoline cars
Price of gasoline cars
"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the: -Money market through borrowing and saving by households and businesses -Business sector through the mechanism of advertising -Private sector through the earning and spending of income -Public sector through the mechanism of central planning
Private sector through the earning and spending of income
Nominal GDP differs from real GDP because: -Nominal GDP is based on constant prices -Nominal GDP results from adjusting for changes in the price level -Real GDP results from adjusting for changes in the price level -Real GDP is based on current prices
Real GDP results from adjusting for changes in the price level
If the marginal benefit of a good is less than its marginal cost, then the nation should: -Maintain the current level of production of that good -Reduce the production of that good -Reduce the marginal benefit of that good -Produce more of that good
Reduce the production of that good
The market system automatically corrects a surplus condition in a competitive market by: -Raising the price of the commodity in question while decreasing the quantity demanded -Reducing the price of the commodity in question while decreasing the quantity demanded -Raising the price of the commodity in question while increasing the quantity demanded -Reducing the price of the commodity in question while increasing the quantity demanded
Reducing the price of the commodity in question while increasing the quantity demanded
For many decades prior to the Industrial Revolution, the standards of living in England and China: -Increased steadily -Increased many times over -Declined substantially -Remained roughly constant
Remained roughly constant
The simple circular flow model shows that workers and capital-owners offer their services to firms through the: -Government agencies -Resource markets -Product markets -Employment agencies
Resource markets
A major effect of the rise in the rate of productivity growth in the United States is a(n): -Increase in the competitiveness of U.S. goods in foreign markets -Rise in the growth of living standards -Rise in the rate of inflation -Increase in the relative prices of U.S. goods in foreign markets
Rise in the growth of living standards
Which of the following best describes the "invisible hand" concept? -Ample regulation of business by the government will maximize the public's best interests -The market system works best when resources are free to move from one use to another -The problem of scarcity can best be overcome in a system of mixed capitalism -Self-interest in a market system will automatically promote the public interest as well
Self-interest in a market system will automatically promote the public interest as well
Laissez-faire capitalism limits the government's economic functions to the following, except: -Setting prices of individual goods and services -Establishing a legal environment to enforce contracts among individuals -Preventing individuals and firms from coercing others -Protecting private property rights
Setting prices of individual goods and services
Which of the following is included in the expenditures approach to GDP? -Government spending on welfare payments -Spending on meals by consumers at restaurants -Value of stocks and bonds bought by businessmen -Expenditures on used clothing at garage sales
Spending on meals by consumers at restaurants
Inventories held by firms: -Tend to increase the severity of short-run fluctuations -Are held by businesses because they are a costless way of responding to demand shocks -Are the result of positive demand shocks -Tend to reduce the severity of short-run fluctuations
Tend to reduce the severity of short-run fluctuations
Disinvestment occurs when: -Businesses have larger inventories at the end of the year than they had at the start -Businesses sell machinery and equipment to one another -The consumption of private fixed capital exceeds gross private domestic investment -The prices of investment goods rise faster than the prices of consumer goods
The consumption of private fixed capital exceeds gross private domestic investment
In a command system: -Self-interest motivates and commands each business firm's decisions and actions -Market traders command what outputs are produced and how they are allocated -The head of each family decides what to do with the family's resources -The government makes production and allocation decisions
The government makes production and allocation decisions
GDP tends to underestimate the productive activity in the economy because it excludes the value of output from: -Public transfer payments to households -The consumption of fixed capital -The underground economy -Intermediate goods
The underground economy
In a market system, the distribution of goods and services among consumers is largely determined by: -A random factor that is almost impossible to predict -Whoever has the closest connection to firms and the government -Whoever needs the goods and services the most -The willingness and ability of consumers to pay the prices
The willingness and ability of consumers to pay the prices
The service a homeowner performs when she mows her yard is not included in GDP because: -This is a nonproduction activity -This is a nonmarket transaction -Multiple counting would be involved -This is a noninvestment transaction
This is a nonmarket transaction
Economists and policy makers are committed to encouraging a high and growing level of real GDP because: -This means a higher level of unemployment -This means greater consumption opportunities -This implies a lower price level -This implies an increase in investment
This means greater consumption opportunities
The following are incomes earned but not received by the nation's households, except: -Transfer payments -Undistributed corporate profits -Corporate income taxes -Social security contribution
Transfer payments
Suppose that inventories are falling. We could expect that, in the future: -Real GDP will likely decrease -We can't predict what will happen to unemployment -Unemployment will likely increase -Unemployment will likely decrease
Unemployment will likely decrease
