econ 102 final exam chapter 5 questions

44) If you mow the lawn yourself, the lawn mowing is considered household production. If you pay Larry's Lawn Service to mow your lawn, the lawn mowing is considered A) a service, that will be counted as part of GDP. B) a leisure time activity. C) underground production because it replaces the underground production of you mowing your lawn. D) a service, but is not counted as part of GDP because it simply replaces a service you used to perform. E) rent, and therefore is counted as part of GDP.

A) a service, that will be counted as part of GDP.

4) Consumption expenditure includes spending A) by households. B) on intermediate goods and services by firms. C) by governments when they are buying goods and services that consumers also buy. D) by households and spending on office supplies by firms. E) on office supplies by firms.

A) by households.

30) After calculating net domestic product at factor cost, to calculate GDP using the income approach, in part we must add A) indirect taxes and depreciation. B) interest, rent, and profit. C) wages. D) net operating surplus. E) subsidies.

A) indirect taxes and depreciation.

8) To calculate GDP it is necessary to A) use the market price to place a dollar value on each good produced. B) average the cost of producing a good with the price of the good to place a dollar value on all goods produced. C) add the total amounts of all the goods produced. D) use production cost to place a dollar value on all goods produced .E) use the average market price over the last five years to place a dollar value on all goods produced.

A) use the market price to place a dollar value on each good produced.

2) In the circular flow diagram, S (Saving) and NT (Net Taxes) are A) flows of income B) flows of money C) flows of expenditures D) none of the above

B) flows of money

50) Comparing nominal GDP of 2019 to nominal GDP of twenty years ago A) has no economic meaning. B) is an inaccurate measure of the change in total production. C) will be an accurate measure of the change in total production. D) determines the extent to which the cost of living changed. E) cannot be done because the two GDP measures use different prices.

B) is an inaccurate measure of the change in total production.

28) If nominal GDP increases from one year to the next, then A) prices must have increased. B) production could have increased, decreased, or stayed the same. C) production must have increased. D) prices and production must both have decreased. E) prices and production must both have increased.

B) production could have increased, decreased, or stayed the same.

48) If a wealthy woman marries her butler, quits paying him and does not hire a new butler, then A) GDP definitely increases. B) GDP either does not change or increases. C) GDP definitely decreases. D) GDP definitely does not change. E) There is not enough information given to reach a conclusion.

C) GDP definitely decreases.

24) Statistical discrepancy is calculated as A) Real GDP-nominal GDP C) GDP expenditure total - GDP income total

C) GDP expenditure total - GDP income total

32) The value of leisure time is A) directly included in GDP but, in recent years, has become a decreasing large part of GDP. B) directly included in GDP and, in recent years, has not changed much as a fraction of GDP. C) excluded from GDP. D) included in GDP and, in recent years, has become an increasing large part of GDP. E) zero.

C) excluded from GDP.

40) If we use GDP to measure our standard of living, then our procedure is A) inaccurate because our standard of living only depends on used goods and services. B) accurate only if we use nominal GDP rather than real GDP. C) inaccurate because our standard of living does not depend only on goods and services. D) inaccurate because our standard of living has nothing to do with goods and services. E) accurate because our standard of living depends solely on goods and services.

C) inaccurate because our standard of living does not depend only on goods and services.

34) Which of the following is NOT part of the business cycle? A) trough B) peak C) inflation D) expansion E) recession

C) inflation

42) The business cycle is defined as A) persistent growth in potential GDP. B) changes in the stock market. C) irregular ups and downs in production and jobs. D) changes in financial markets. E) the period of time during which the unemployment rate is rising.

C) irregular ups and downs in production and jobs.

38) The business cycle has two phases A) recession and trough. B) expansion and trough. C) recession and expansion. D) expansion and peak. E) peak and trough.

C) recession and expansion.

36) The U.S. economy is experiencing falling output, falling employment, falling incomes and rising unemployment. These conditions best describe a business cycle A) peak. B) trough. C) recession. D) expansion.

C) recession.

10) Last year U.S. net exports of goods and services was negative. This fact means that last year A) U.S. consumption expenditure plus investment plus government expenditures on goods and services was less than the value of exports plus the value of imports. B) there was an error made when calculating net exports of goods and services for the United States. C) the value of U.S. exports was less than the value of U.S. imports. D) U.S. consumption expenditure plus investment was less than the value of exports plus the value of imports. E) the value of U.S. exports was greater than the value of U.S. imports.

C) the value of U.S. exports was less than the value of U.S. imports.

20) The income approach to measuring GDP is based on summing A) consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services. B) the production of each industry. C) wages, interest, rent, and profits. D) consumption expenditure and wages. E) the values of final goods, intermediate goods and services, used goods, and financial assets.

C) wages, interest, rent, and profits.

18) The expenditure approach to measuring GDP is done by using data on only A) consumption expenditure. B) wages, rent, interest, and profit. C) consumption expenditure and investment. D) consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services. E) consumption expenditure, investment, and government expenditures.

D) consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.

6) Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________. A) consumption; expenditure; value of production B) expenditure; investment; income C) consumption; investment; expenditure D) expenditure; income; value of production E) investment; income; consumption

D) expenditure; income; value of production

22) The category of "rent" in the income approach to GDP A) includes the money paid to rent machinery only. B) includes the money paid to rent apartments only. C) does not have any connection to owner-occupied housing. D) includes the money paid to use land and other rented inputs. E) includes only the imputed rent for owner-occupied housing.

D) includes the money paid to use land and other rented inputs.

12) Gross Domestic Product is defined to be the market value of all the final goods and services produced during a given time period A) by only legal residents of the country. B) by citizens of the country, regardless of their place of residence. C) within and outside a country by that country's citizens. D) within a country. E) within a county minus the market value of all the final goods and services produced by that country's citizens outside the country.

D) within a country.

14) Economists define investment to include purchases of A) capital goods, household durable goods, and inventories. B) capital goods, such as tools, instruments, and buildings. C) capital goods, equity stocks, and inventories. D) capital goods, equity stocks, and bonds. E) capital goods and inventories.

E) capital goods and inventories.

26) Nominal GDP is GDP A) after adjusting for any price changes. B) minus depreciation. C) during a recession. D) that ignores depreciation. E) computed with current market values.

E) computed with current market values.

46) Depreciation is A) part of consumption expenditure. B) the decrease in the purchasing power of a dollar because of inflation. C) fall in the value of an exchange rate. D) part of net domestic product at factor cost. E) the decrease in the value of capital resulting from its use and obsolescence.

E) the decrease in the value of capital resulting from its use and obsolescence.