Macroeconomics Test 1

146) If receipts of factor income from the rest of the world are less than payments of factor income to the rest of the world, then

GDP is greater than GNP.

72) The change in business inventories is measured as

GDP minus final sales.

109) If depreciation equals zero and retained earnings equal $5 billion, then

GNP equals net national product.

58) The equation for GDP using the expenditure approach is

GDP = C + I + G + EX - IM.

107) If GNP is $800 billion and depreciation is $90 billion, then net national product is

$710 billion.

116) If personal income is $925 billion and personal income taxes are $70 billion, the value of disposable personal income is

$855 billion.

70) A company produced 8 dishwasher machines in 2012. The company sold 6 in 2012 and added 2 to its inventories. The market value of the dishwasher machines in 2012 was $200 per unit. What is the value of this company's output that will be included in the 2012 GDP?

$1,600.

81) If net investment in 2012 is $350 billion and gross investment in 2012 is $500 billion, depreciation in 2012 is

$150 billion.

108) If GNP is $200 billion and depreciation is $20 billion, then net national product is

$180 billion.

133) In 2012 the change in business inventories is -$30 billion and GDP is $160 billion. Final sales in 2012 are

$190 billion.

104) If GNP is $200 billion, receipts of factor income from the rest of the world are $10 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is

$220 billion.

113) If national income is $600 billion, personal income is $400 billion, personal taxes are $120 billion, then disposable income equals

$280 billion.

106) If GDP is $300 billion, depreciation is $30 billion, and net factor income from the rest of the world is -$40 billion, then net national product is

$310 billion.

140) If net investment in 2012 is $550 billion and gross investment in 2010 is $900 billion, depreciation in 2012 is

$350 billion.

82) If net investment in 2013 is $500 billion and gross investment in 2013 is $900 billion, depreciation in 2013 is

$400 billion.

153) If personal income is $700 billion and personal income taxes are $140 billion, the value of disposable personal income is

$560 billion.

103) If GNP is $600 billion, receipts of factor income from the rest of the world are $50 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is

$580 billion.

83) If gross investment in 2012 is $750 billion and depreciation in 2012 is $850 billion, net investment in 2012 is

-$100 billion.

119) If disposable personal income is $400 billion and personal saving is $8 billion, the personal saving rate is

2%.

155) If disposable personal income is $500 billion and personal saving is $15 billion, the personal saving rate is

3%.

26) The ________ can change the quantity of money in the economy.

Federal Reserve

23) Which of the following statements is FALSE?

Business cycles are always symmetricthe length of an expansion is the same as the length of a contraction.

96) If receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then

GNP is greater than GDP.

110) Net national product is

GNP minus depreciation.

54) The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________.

GNP; GDP

53) Which of the following is included in both the U.S. GDP and GNP?

The value of all cars produced by General Motors in the U.S.

29) An example of a transfer payment is

a Social Security retirement benefit.

30) A transfer payment is

a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment.

47) Which of the following is an example of a final good or service?

a computer purchased by Federal Express to track shipments

13) A period when the economy shrinks is known as

a contraction. a recession. a slump. all of the above.

16) A prolonged and deep recession is called

a depression.

25) The government wants to encourage consumer spending through cutting income taxes. This is an example of

a fiscal policy.

48) Which of the following is a good or service counted in GDP?

a new tire you buy for your personal car

15) In a business cycle, a trough represents the end of

a recession.

85) When calculating GDP, exports are ________ and imports are ________.

added; subtracted

2) Which of the following is a topic studied in Macroeconomics?

aggregate behavior of households and industries

51) Gross national product is the total market value of

all final goods and services produced by resources owned by a country, regardless of where production takes place.

14) In a business cycle, a peak represents the end of

an expansion.

77) If in a year there is a positive inventory investment, then final sales

are less than GDP.

45) The suppliers in the goods-and-services market are

business firms and the rest of the world.

89) Net interest is the interest on loans paid by

businesses.

105) If GDP is $500 billion and depreciation is $40 billion, then net national product

cannot be determined from this information.

39) An increase in the value of an asset over the price initially paid for it is a

capital gain.

27) The diagram that shows the income received and payments made by each sector of the economy is the

circular flow diagram.

87) The largest income component of GDP is

compensation of employees.

59) The single largest expenditure component in GDP is

consumption.

37) A promissory note issued by a corporation when it borrows money is a

corporate bond.

38) Dividends are

corporate profits distributed among shareholders.

9) A decrease in the overall price level is known as

deflation

35) In the circular flow diagram, firms ________ labor and households ________ goods and services.

demand; demand

139) The yearly value of worn out machinery is called

depreciation.

44) A household that spends more than it receives in income during a given period is

dissaving.

76) If the change in business inventories is zero, then final sales are

equal to GDP.

136) If in a year there is a negative inventory investment, then final sales

exceed GDP.

12) A period during which aggregate output rises is known as a(n)

expansion

21) If output is rising and unemployment is falling, the economy MUST be in a(n)

expansion

17) Between a trough and a peak, the economy goes through a(n)

expansion.

121) Saving rates tend to ________ during boom times and ________ during recession periods.

fall; rise

36) In the circular flow diagram, households demand ________ and supply ________.

goods and services; labor

46) The total market value of all final goods and services produced within a given period by factors of production located within a country is

gross domestic product.

138) If net investment is positive, then

gross investment is greater than depreciation.

78) Net investment equals

gross investment minus depreciation.

79) Net investment is

gross investment minus depreciation.

34) The demanders in the goods-and-services market are

households, the government, business firms, and the rest of the world.

8) A period of very rapid increase in the overall price level is known as

hyperinflation.

86) If the value of net exports is negative, then

imports exceed exports.

91) What type of tax affects the amount of money you pay for a product?

indirect tax

5) An increase in the overall price level is known as

inflation

120) If the personal saving rate is 5% and personal saving is $10 billion, the value of personal disposable income

is $200 billion.

73) In 2012 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2012

is $250 billion.

74) In 2012 final sales equal $350 billion and the change in business inventories is -$60 billion. GDP in 2012

is $290 billion.

117) If personal saving is -$10 billion and disposable personal income is $370 billion, then personal consumption spending

is $380 billion.

135) If the change in business inventories is positive, then final sales are

less than GDP.

115) Personal income

may be greater than or less than national income.

24) If the central bank decreases the money supply, it is conducting

monetary policy.

151) The total income of the country is

national income.

84) Exports equal

net exports + imports.

137) Gross investment minus depreciation equals

net investment.

90) Interest paid by households and by the government is

not counted in GDP because it is not assumed to flow from the production of goods and services.

50) Double counting can be avoided by

not counting the value of intermediate goods in GDP.

33) In the goods-and-services market, households

only demand.

71) A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as

part of gross private domestic investment.

111) The total income of households is

personal income.

152) National income minus the amount of national income not going to households is

personal income.

154) The percentage of disposable personal income that is saved is the

personal saving rate.

18) Between a peak and a trough, the economy goes through a(n)

recession

114) Which of the following is subtracted from national income to get to personal income?

retained earnings

22) Unemployment generally ________ during recessions and ________ during expansions.

rises; falls.

31) A household that spends less than it receives in income during a given period is

saving.

11) The term business cycle refers to the

short-term ups and downs in the level of economic activity.

41) Rapid increases in the price level during periods of recession or high unemployment are known as

stagflation.

4) Macroeconomics

studies the behavior of the economy as a whole.

56) The GDP of the U.S. in 2012 was around $15.9 trillion. This means

that total income in the U.S. in 2012 was around $15.9 trillion. that total spending on final goods and services in the U.S. in 2012 was around $15.9 trillion. that the value of output in the U.S. in 2012 was around $15.9 trillion. all of the above

55) Profits earned in the United States by foreign-owned companies are included in

the U.S. GDP but not GNP.

112) Personal income is national income minus

the amount of national income not going to households.

80) Depreciation is

the amount of used up machinery in a year.

7) Deflation occurs when

the average price level declines.

6) Aggregate behavior is

the behavior of all households and firms together.

52) If no foreign companies produce in a country, but many of the country's companies produce abroad, then

the country's GNP will tend to exceed its GDP.

88) Proprietors' income is

the income of unincorporated businesses.

141) Compensation of employees is

the largest income component of GDP.

10) The trend of the economy is

the long run growth path of the economy.

118) The personal saving rate is

the percentage of disposable personal income that is saved.

49) Which of the following is an example of an intermediate good?

the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to

40) A dividend is

the portion of a corporation's profits that the firm pays out each period to its shareholders.

1) Which of the following is NOT a topic studied in Macroeconomics?

the price of Dell computers

42) Stagflation occurs when the economy's inflation rate is high and

the unemployment rate is high.

57) The GDP includes

the value of all final goods and services.

19) Unemployment implies that in the labor market

there is an excess supply of labor.

134) In 2012, GDP was exactly equal to final sales. This implies that

there was no change in inventories that year.

75) In 2012, GDP was exactly equal to final sales. This implies that

there was no change in inventories that year.

32) The major lesson of the circular flow diagram is that

total income in the economy must always equal total spending.

43) Welfare payments are an example of

transfer payments.

3) We can use macroeconomic analysis to

understand why economies grow.

20) The unemployment rate equals

unemployed/labor force

28) In the circular flow diagram, the different payments made by firms to households include

wages and profits.