Chapter 4
65) Using the data in the table above, what is the value of GDP? A) $13,516 billion B) $10,679 billion C) $9,541 billion D) $8,403 billion
D
1) Two methods of measuring GDP are A) the income approach and the expenditure approach. B) the income approach and the receipts approach. C) the goods approach and the services approach. D) the saving approach and the investment approach.
A
10) The series of ups and downs the economy tends to move in is called A) the business cycle. B) a recession. C) a depression. D) economic growth.
A
10) If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexicoʹs GDP and U.S. GDP . A) increases; does not change B) does not change; increases C) increases; decreases D) increases; increases
A
10) Of the following, the largest component of GDP is A) personal consumption expenditure. B) gross private domestic investment. C) government expenditure on goods and services. D) net exports of goods and services.
A
104) Using the data in the above table, net private domestic investment equals A) $210. B) $260. C) $510. D) some amount that cannot be determined without more information.
A
109) Nominal GDP is the value of final goods and services A) at the prices of that year. B) at the prices of the immediately previous year. C) at the prices of a base year. D) produced in foreign countries but consumed in the domestic country.
A
11) The business cycle refers to A) fluctuations in the level of real GDP around potential GDP. B) changes in the level of nominal GDP. C) changes in the level of the stock market. D) changes in the level of employment.
A
11) The word ʺfinalʺ in the definition of GDP refers to A) not counting intermediate goods or services. B) the time period when production took place. C) valuing production at market prices. D) counting the intermediate goods and services used to produce GDP.
A
114) gross domestic product is the value of linked back to the prices of a single year. A) Real; total production B) Real; production possibilities C) Productivity; the consumer price index D) Nominal; total production
A
117) In years with inflation, nominal GDP increases real GDP. A) faster than B) slower than C) at the same rate as D) sometimes faster, sometimes slower, and sometimes at the same rate as
A
12) A business cycle is A) the pattern of short-run upward and downward movements in total output. B) the increase in consumer spending that accompanies an increase in disposable income. C) the cyclical change in the nationʹs balance of trade. D) the cyclical movement in the interest rates.
A
120) Which of the following is NOT a component of the incomes approach to GDP? A) net exports B) wages and salaries C) corporate profits D) proprietorsʹ income
A
14) Gross Domestic Product is equal to the sum of consumption expenditure, investment, net exports, and . A) government expenditures on goods and services B) saving C) profits D) net taxes
A
16) Intermediate goods are excluded from GDP because A) their inclusion would involve double counting. B) they represent goods that have never been purchased so they cannot be counted. C) their inclusion would understate GDP D) the premise of the question is incorrect because intermediate goods are directly included in calculating GDP.
A
16) Which of the following statements is true? A) Real GDP fluctuates around potential GDP. B) Potential GDP fluctuates around real GDP. C) Potential GDP is the same as real GDP. D) When all of the economyʹs resources are fully employed, the value of production is called real GDP.
A
17) A ton of coal purchased by your local utility to burn to make electricity would be best described as A) an intermediate good. B) a financial asset. C) a used good. D) a final product.
A
21) In computing GDP, it is essential to A) avoid double counting. B) include government transfer payments. C) include government tax revenues. D) count all intermediate products directly as they are produced.
A
24) The circular flow model shows that consumer goods and services produced by business firms are sold in the A) goods market. B) factor market. C) labor market. D) financial market.
A
25) A common definition of a recession is a period of time A) of at least 6 months during which real GDP decreases. B) with an increase in real economic output from the previous period. C) with no change in real GDP. D) with no change in the dollar (money) value of economic output.
A
26) Goods that are produced this year, stored in inventories, and then sold to consumers next year A) count in this yearʹs GDP. B) count in next yearʹs GDP. C) count in both this yearʹs and next yearʹs GDP. D) are not counted as a part of GDP.
A
27) A new 2010 Honda Civic produced in 2010 and purchased in 2011 is A) part of GDP in 2010. B) part of GDP in 2011. C) not part of GDP in either year because it was produced in one year and sold in another year. D) part of GDP in both 2010 and 2011.
A
27) The circular flow shows that the household sector earns its income by A) selling factors of production. B) buying factors of production. C) selling goods and services. D) selling financial assets.
A
30) An example of ʺinvestmentʺ in computing real GDP using the expenditure approach is the purchase of A) a new set of tools by an auto mechanic, for use in repairing cars. B) 100 shares of IBM stock. C) a 100 year old house by a married couple. D) computer chips by Dell to put in their personal computers.
A
30) When a recession ends, the turning point that immediately follows is called a A) trough. B) peak. C) depression. D) None of the above answers is correct.
A
31) An example of ʺinvestmentʺ in the national income accounts is the purchase of A) a new van by a potter, who packs it with his wares and travels to art shows. B) 100 shares of Canadian stock on the New York Stock Exchange. C) a 100-year-old house that was just put on the protected historic sites list in the year in question. D) a U.S. government bond.
A
31) The low point of economic activity during a business cycle is called the A) trough. B) recession. C) peak. D) failure.
A
33) A trough is the A) lower turning point of a business cycle when an expansion begins. B) lower turning point of a business cycle when a recession begins. C) upper turning point of a business cycle when an expansion begins. D) upper turning point of a business cycle when a recession begins.
A
34) An expansion occurs when the level of real GDP is A) increasing. B) decreasing. C) at a cyclical peak. D) at a cyclical trough.
A
34) The circular flow diagram indicates that A) households sell the services of factors of production to firms. B) firms buy the services of factors of production from the government. C) households sell goods and services to the government. D) firms buy goods and services from households.
A
35) In the national income accounts, government expenditure on goods and services exclude A) transfer payments. B) state and local government purchases. C) local government purchases but include state government purchases. D) spending on national defense.
A
36) Which of the following is included in the government expenditure component of the expenditure approach to GDP? A) state government expenditure on local schools B) transfer payments C) changes in inventories D) taxes
A
39) An economy recovering from a recession A) moves up from its trough to a period of expansion. B) moves up from its peak to a period of expansion. C) moves down from its trough to a period of depression. D) moves down from its peak to a period of expansion.
A
39) In the above figure, flow B represents . A) household purchases of goods and services B) household borrowing C) household income D) firmsʹ payments for labor services
A
4) Potential GDP is the A) the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. B) current value of production in the economy. C) value of production when the economy is in a recession. D) value of production when the economy is at a peak.
A
41) In the above figure, household income is shown by flow A) A. B) B. C) C. D) F.
A
43) In the above figure, the distance between points T and U represents A) an expansion. B) a trough. C) a peak. D) a recession.
A
44) Choose the best statement. A) GDP equals aggregate expenditure and equals aggregate income. B) An increase in government purchases increases aggregate expenditure but does not change GDP. C) An increase in compensation of employees increases aggregate income but does not change GDP. D) GDP always equals aggregate expenditure and sometimes equals aggregate income.
A
44) In the above figure, a recession begins at point and an expansion begins at point . A) a; b B) b; c C) b; a D) d; c
A
47) In the above figure, which point represents a situation with significant shortages of labor, capital, and other resources? A) point F B) point G C) point I D) point K
A
48) In the above figure, which point represents an economy which is at the peak part of a business cycle? A) point F B) point G C) point I D) point K
A
50) Gross domestic product can be calculated A) either by valuing the nationʹs output of goods and services or by valuing the income generated in the production process. B) by adding up the personal consumption of all members of the society. C) by adding up the value of all intermediate goods used in the economy. D) by adding up the income tax returns of all members of the society.
A
52) By itself, an increase in exports A) increases GDP. B) decreases GDP. C) means imports decrease by the same amount. D) can either increase or decrease GDP, depending on whether the exports are durable or nondurable.
A
54) Depreciation is defined as the A) decrease in the stock of capital due to wear and tear. B) increase in the stock of capital due to investment by firms. C) increase in the stock of capital due to wear and tear. D) decrease in the stock of capital due to investment by firms.
A
54) Which, if any, of the following causes reported GDP to be less than total economic production? A) the exclusion of household production B) the exclusion of government transfers C) the inclusion of government expenditures D) None of the above cause reported GDP to be less than total production.
A
58) Use the information in the table above to calculate the value of net exports. A) $10 million B) $0 C) -$10 million D) $30 million
A
59) Last year in the country of Nerf imports equaled exports. Nerfʹs GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerfʹs government expenditure on goods and services were . A) $100 million B) $900 million C) $500 million D) zero
A
60) The above table shows some (but not all) national income accounting data for a hypothetical country. According to these data, the value of GDP is billion. A) $2100 B) $1850 C) $2000 D) $2050
A
63) If depreciation is less than gross investment, then net investment is A) positive. B) negative. C) zero. D) This situation could never occur because it is impossible for depreciation to be less than gross investment.
A
64) In the post World War II period, considerable growth in total production took place in the United States. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where A) real GDP gives an overly positive view of economic welfare. B) real GDP gives an overly negative view of economic welfare. C) investment would have been a better measure of total production. D) the pollution counts as a final good.
A
66) Net investment is the A) total amount of gross investment minus depreciation. B) value of software and other network related products. C) profit or loss in the stock market. D) value of the depreciated capital multiplied by the changes in the price level.
A
66) Using the data in the above table, what is the value of net exports? A) -$181 billion B) $181 billion C) $957 billion D) -$957 billion
A
72) What we produce during our working time is as part of GDP and the enjoyment we gain from our leisure time is as part of GDP. A) included; not included B) included; included C) not included; included D) not included; not included
A
76) Proprietorsʹ income is a component of which approach to measuring GDP? A) incomes approach B) expenditure approach C) cost approach D) output approach
A
77) The income approach to measuring GDP A) determines the cost of production, then adjusts it to equal the market value of production. B) sums all incomes earned in the United States and makes no other adjustments because other adjustments are not necessary. C) measures the cost of producing GDP rather than the market value. D) sums the value at each stage of production plus the value of depreciation.
A
84) Which of the following is NOT one of the components for computing GDP based upon the income approach? A) investment B) corporate profits C) compensation of employees D) net interest
A
87) Use the information in the table above plus the fact that indirect taxes less subsidies are $10 billion and depreciation is $30 billion to calculate the value of GDP. A) $180 billion B) $150 billion C) $140 billion D) $130 billion
A
88) The largest component of national income is A) compensation of employees. B) rental income. C) corporate profits. D) proprietorsʹ income.
A
89) Looking at the components of the income approach we see that A) compensation of employees is the largest category. B) consumption is the largest category. C) profits are the largest category. D) rental income is the largest category.
A
9) The largest component of GDP in the expenditure approach is A) personal consumption expenditures. B) gross private domestic investment. C) government expenditure on goods and services. D) net exports.
A
92) When calculating the compensation of employees part of GDP, A) social security contributions must be included. B) fringe benefits are not included. C) taxes withheld on earnings are not included. D) the value of vacation time must be included.
A
108) Nominal GDP is A) real GDP adjusted for price changes. B) GDP valued at prices of that year. C) GDP valued at constant prices. D) real GDP valued at base year prices.
B
110) Normally in the United States the relationship between nominal and real GDP for a given year is A) real GDP is greater than nominal GDP because of price increases. B) nominal GDP is greater than real GDP because of price increases. C) nominal GDP equals real GDP. D) nominal GDP is greater than real GDP because of price decreases.
B
116) Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the countryʹs farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced. A) I and II B) I and III C) II and III D) I, II and III
B
119) Gross private domestic investment is a component of which approach to measuring GDP? A) incomes approach B) expenditure approach C) linking approach D) output approach
B
12) To measure GDP using the expenditure approach you must collect data on A) inflation. B) exports. C) wages. D) saving.
B
13) Aggregate expenditures include all of the following EXCEPT A) consumption of food. B) purchases of intermediate goods. C) purchases of a piece of capital equipment. D) purchases of guns by the government.
B
15) Which of the following items is not a component of the expenditure approach to measuring U.S. GDP? A) purchases of food made by families B) social security payments made by the government C) purchases of U.S.-made movies by Europeans D) purchases of new homes made by families
B
16) In the expenditure approach to GDP, the largest component is A) government expenditure on goods and services. B) personal consumption expenditures. C) gross private domestic investment. D) net exports.
B
17) Real GDP A) fluctuates from year to year but is always below potential GDP. B) fluctuates around potential GDP. C) grows at a constant 3 to 4 percent per year. D) can be called potential GDP when it is adjusted for price changes.
B
19) The largest component of GDP is A) gross private domestic investment. B) personal consumption expenditures. C) net exports of goods and services. D) government expenditure on goods and services.
B
2) Gross domestic product A) includes all the goods and none of the services produced in an economy in a given time period. B) measures the value of the aggregate production of goods and services in a country during a given time period. C) measures the value of labor payments generated in an economy in a given time period. D) is generally less than federal expenditure in any time perio
B
20) Personal consumption expenditures include A) expenditures by households on goods and services produced only in the United States. B) expenditures by households on goods and services produced in the United States and the rest of the world. C) the purchase of new homes. D) the purchase of used goods and new goods.
B
20) The calculation of the final goods and services sold in an economy would NOT include A) the purchase of a lawnmower by a household. B) General Motorsʹ purchases of tires for new automobiles. C) Ford Motor Companyʹs purchase of a new industrial robot to be used to produce cars. D) the purchase of a service by a household.
B
22) Double counting (counting the same thing twice) in GDP accounting is avoided by not including A) net exports. B) intermediate goods. C) illegal activities. D) depreciation.
B
23) All of the following household expenditures are included in consumption expenditure EXCEPT A) payment to a dentist for filling a tooth. B) purchase of corporate stock. C) purchase of a new purse. D) purchase of hair styling.
B
23) GDP counts only final goods and services because this A) method avoids including any goods that are produced this year and sold next year. B) method avoids double counting of goods going through several stages of production. C) amount can be more easily determined in the marketplace. D) method avoids understating the value of GDP produced during a given year.
B
24) Gross private domestic investment is all purchases of newly produced business capital goods and buildings A) minus the change in business inventories. B) plus the change in business inventories plus residential construction. C) plus fixed investment minus inventory investment. D) plus purchases of capital goods produced in previous years to replace any depreciated capital goods.
B
25) The difference between gross investment and net investment is A) inflation. B) depreciation. C) initial capital. D) consumption.
B
26) A recession is commonly defined as occurring when A) real GDP decreases for a period of 12 or more months. B) real GDP decreases for a period of 6 or more months. C) the unemployment rate rises above 7.5 percent for 6 or more months. D) the unemployment rate rises above 5.0 percent for 12 or more months.
B
26) In the circular flow of income A) households demand goods and services that are supplied by firms, and the firms demand factors that are supplied by intermediate firms. B) households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms. C) households sell goods and services while firms sell factors. D) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from other firms.
B
28) The circular flow of income shows that A) households transact only in the goods market. B) governments purchase goods and services. C) firms generally are the demanders in the goods markets and suppliers in the factor markets. D) None of the above answers is correct.
B
31) Compared to the other sources of spending, net exports is A) large and negative. B) small and negative. C) large and positive. D) small and positive.
B
32) In the national income accounts, the purchase of a new house counts as A) consumption expenditure. B) investment. C) a transfer. D) an addition to inventory.
B
32) What term is used to describe the lowest point of a business cycle? A) peak B) trough C) expansion D) recession
B
36) An expansion ends when the economy A) hits a trough and then enters a recession. B) hits a peak and then enters a recession. C) begins to grow following a peak. D) has grown for two quarters in a row.
B
36) In the circular flow diagram, aggregate expenditure includes the sum of A) saving and investment. B) consumption and investment. C) consumption, investment, and saving. D) income and saving.
B
37) In the circular flow of economic activity A) aggregate expenditure measures the dollar value of purchases of factors. B) aggregate expenditure measures the dollar value of purchases of final goods and services. C) aggregate income measures the dollar value of labor resources only. D) aggregate expenditure is measured as it moves through the financial markets.
B
37) The times during which real GDP increases are referred to as A) contractions. B) expansions. C) anti-cycles. D) corrections.
B
37) Which one of the following transactions in a particular year is included in gross domestic product for that year? A) Social Security payments to retirees B) The government pays a computer services company that assisted in the delivery of Social Security payments to retirees. C) A car is produced in the previous year and remains in inventory for the entire year under consideration. D) A stay-at-home parent performs housework that the family would otherwise have paid a maid $20,000 a year to perform.
B
38) Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that A) real GDP in Dingo was increasing in January 2011. B) an expansion occurred after January 2011. C) Dingo did not experience a recession in 2010. D) Dingoʹs potential GDP fell in 2011.
B
40) In the above figure, flow B represents householdsʹ . A) income B) consumption expenditures C) saving D) investment
B
40) In the computation of GDP, social security payments count as A) transfer payments and are included in GDP. B) transfer payments and are not included in GDP. C) government expenditure on goods and services and are included in GDP. D) government expenditure on goods and services and are not included in GDP.
B
41) Which of the following items is NOT part of government expenditure on goods and services in the GDP accounts? A) gasoline purchases for government car pools B) Social Security expenditures C) new computer hardware for use by the IRS D) drapes to brighten up the presidentʹs office
B
42) In the above figure, consumption expenditure is shown by flow A) A. B) B. C) C. D) F.
B
45) According to the circular flow diagram, the dollar value of a nationʹs output is equal to A) profits. B) total income. C) net income minus taxes. D) wages.
B
45) Transfer payments are not part of government expenditure on goods and services because transfer payments A) are not predictable given the nature of their appropriation and allocation. B) do not represent the purchase of a final good or service. C) are not always spent on goods produced in the U.S. D) The premise of the question is incorrect because transfer payments are part of government purchases of goods and services.
B
46) In the above figure, which point represents the under use of resources? A) point F B) point G C) point H D) point K
B
48) Net exports is negative if A) the value of exports exceeds the value of imports. B) the value of imports exceeds the value of exports. C) the tariff payments are included in the value of imported and exported items. D) too much production occurs in the exporting country during the year.
B
5) Potential GDP A) measures the actual production from year to year. B) measures the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. C) is cyclical. D) Both answers A and C are correct
B
51) An increase in exports of goods or services with no change in imports of goods or services A) decreases GDP. B) increases GDP. C) may increase or decrease GDP depending on whether it is the export of goods or the export of services that increased. D) has no effect on GDP.
B
53) If Ford sells 200 Explorers for a total of $400,000 to Germany, while the United States imports 100 BMWs for a total of $500,000 from Germany, A) U.S. GDP increases because it sells more Explorers. B) U.S. GDP decreases because net exports are negative. C) Germanyʹs GDP decreases. D) U.S. net exports is positive.
B
55) If an American firm produces goods that are sold to a German household, then A) German GDP increases but not U.S. GDP. B) U.S. GDP increases. C) the transaction is considered an export in the German GDP accounts. D) net exports in the United States will not change because an export immediately generates an offsetting import.
B
56) Net investment equals A) capital stock minus depreciation. B) gross investment minus depreciation. C) the total quantity of plant, equipment and buildings. D) gross investment/depreciation.
B
6) In any year, real GDP A) must always be less than potential GDP. B) might be greater or less than potential GDP. C) will always be greater than potential GDP because of the tendency of nations to incur inflation. D) always equals potential GDP.
B
60) Gross investment equals A) net investment - depreciation + change in inventories. B) net investment + depreciation. C) net investment + change in inventories. D) depreciation + change in inventories.
B
60) In part, the underground economy exists because of the A) irrationality of people who choose to evade taxes. B) high tax rates. C) ease of entry into the occupations that compose it. D) greater efficiency of barter transactions compared to monetary ones.
B
62) The difference between gross investment and net investment is A) the capital stock. B) depreciation. C) the real interest rate. D) equal to saving.
B
66) Purchasing power parity prices are used to construct GDP data that A) do not omit the underground economy. B) can be used to make more valid comparisons between one country and another. C) is a proper measure of economic welfare. D) adjust for differences in population.
B
67) Which of the following is NOT a final good? A) a new computer sold to an NYU student B) a new car sold to Avis for use in their fleet of rental cars C) a purse sold to a foreign visitor D) a hot dog sold to a spectator at a Chicago Bears football game
B
72) Using the information in the table above, depreciation equals A) -$90 billion. B) $90 billion. C) -$70 billion. D) some amount that cannot be determined.
B
75) The income approach to measuring GDP sums together A) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, subsidies paid by the government, indirect taxes paid, and depreciation. B) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, indirect taxes paid, and depreciation and subtracts subsidies paid by the government. C) the sales of each firm in the economy. D) the costs of each firm in the economy and then subtracts indirect business taxes and depreciation.
B
78) The five categories of income used in the income approach to the measurement of GDP are A) consumption, saving, rental income, corporate profits, and investment. B) employee compensation, net interest, rental income, corporate profits, and proprietorʹs income. C) employee compensation, consumption, rental income, corporate profits, and proprietorʹs income. D) employee compensation, saving, rental income, corporate profits, and investment.
B
79) Which of the following expressions equals GDP? A) compensation of employees + consumption + depreciation + net investment B) compensation of employees + net interest + rental income + depreciation + corporate profits + proprietorsʹ income + indirect taxes - subsidies C) compensation of employees + net exports + depreciation + corporate profits D) compensation of employees + gross investment + rental income + depreciation + corporate profits + indirect taxes - subsidies
B
8) All of the following are components of the expenditure approach to measuring GDP EXCEPT A) Shaniqʹs purchase of a meal at the Olive Garden in Atlanta. B) a Senator from Iowa being paid the monthly salary. C) the army buying new M1 Abram tanks. D) Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan.
B
8) In any year, real GDP A) must always be less than potential GDP. B) might be greater or less than potential GDP. C) will be greater than potential GDP if the inflation rate is positive. D) always equals potential GDP.
B
8) In the United States, GDP is typically measured A) monthly. B) quarterly. C) daily. D) weekly.
B
80) Which of the following is a component of the incomes approach to GDP? A) consumption expenditure B) wages and salaries C) investment D) government expenditure on goods and services
B
81) The income approach measures GDP by adding together compensation of employees, proprietorsʹ income, ____ . A) net investment, saving, and farmersʹ income B) net interest, rental income, and corporate profits C) net investment, rental income, and corporate profits D) net saving, investment income, and profits
B
83) Which of the following is NOT a part of the income approach to determining GDP? A) rental income B) gross private domestic investment C) net interest D) indirect business taxes
B
85) Which of the following is NOT included in the income approach to measuring GDP? A) net interest B) net exports C) corporate profits D) compensation of employees
B
86) In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies . A) are $1 million B) are $0.5 million C) cannot be calculated D) are -$0.5 million
B
93) In the national income accounts, net interest is the total interest payments received by households on loans made by them minus A) interest received from householdsʹ ownership of government bonds. B) interest payments made by households on their own borrowing. C) interest payments made by households to foreign lenders. D) taxes paid by households on their interest income.
B
95) Which of the following is included in the category of corporate profits when measuring GDP? I. Profits paid as dividends. II. Undistributed profits. III. Income received by owners and operators of businesses. A) I only B) I and II C) I and III D) I, II and III
B
96) An indirect tax is a tax paid by consumers A) to a state or local government. B) when they purchase goods and services. C) on unearned income (as opposed to wages and salaries). D) that is a percentage of the value of their real property.
B
97) An indirect tax is exemplified by A) an income tax. B) a sales tax. C) a subsidy. D) None of the above answers is correct.
B
100) The sum of compensation to employees, rental income, corporate profits, net interest, and proprietorsʹ income is A) gross domestic product. B) gross domestic income. C) net domestic income at factor cost. D) net domestic product.
C
103) Using the data in the above table, gross private domestic investment equals A) $250. B) $260. C) $460. D) some amount that cannot be determined without more information.
C
11) Which of the following is NOT part of the expenditure approach to measuring GDP? A) gross private domestic investment B) net exports of goods and services C) net interest D) personal consumption expenditures
C
111) Of the following, which is correct? A) Nominal GDP does not change when the production of goods and services increases. B) Nominal GDP is not affected by changes in prices of goods and services. C) Nominal GDP increases when the prices of goods and services increase. D) Real GDP changes only when the prices of goods and services really change.
C
112) Real GDP is A) an increase in the average level of prices. B) the value of total production when the unemployment rate is 6 percent. C) the value of total production of all the nationʹs farms, factories, shops and offices measured in the prices of a single year. D) the value of total production of all the nationʹs farms, factories, shops and offices measured at the prices of the year it was produced.
C
118) Suppose an economy has some inflation. Then, after a base year, the value of real GDP will A) be less than nominal GDP. B) not be different from nominal GDP. C) be greater than nominal GDP. D) will be approximately half the value of nominal GDP.
C
13) Which of the following is a final good? A) the memory chips in your new smart phone B) a share of IBM stock C) flour purchased at the store to bake cookies D) flour used by the bakery to bake cookies
C
14) Business cycles are A) irregular, with some having two recessions and no expansion. B) predictable, with a recession following a trough. C) unpredictable, but always have two phases and two turning points. D) unpredictable, and donʹt always have two phases and two turning points.
C
15) Business cycles A) are more volatile during a Republican administration. B) are unpredictable due to political upheavals and global markets. C) follow a pattern of trough, expansion, peak and recession. D) are all identical in duration over the last century.
C
17) Let C represent consumption expenditure, S saving, I gross private domestic investment, G government expenditure on goods and services, and X - M net exports of goods and services. Then GDP equals A) C + S + G + X - M. B) C + S + G - X - M. C) C + I + G + X - M. D) C + I + G - X - M.
C
18) Consumption expenditure is the payment by households for consumption of A) goods but not services. B) services but not goods. C) goods and services. D) services and for saving.
C
18) Which of the following expenditures is for an intermediate good? A) The government buys new tires for its military vehicles. B) A U.S. tire firm sells new tires to Canada. C) General Motors buys new tires to put on the cars itʹs building. D) You buy new tires for your used car
C
19) GDP does not directly include intermediate goods because A) intermediate goods are not valuable. B) intermediate goods are not useful to consumers. C) that would count the intermediate goods twice. D) that would understate the true size of GDP.
C
19) Which of the following is not a phase or turning point of the business cycle? A) recession B) expansion C) shutdown D) trough
C
20) The four parts of the business cycle occur in the following order: A) recession, trough, peak, expansion. B) expansion, trough, peak, recession. C) recession, trough, expansion, peak. D) expansion, trough, recession, peak.
C
21) Which of the following are parts of the business cycles? A) peak and potential GDP B) real GDP and potential GDP C) recession and expansion D) inflation and recession
C
21) Which of the following purchases is included in personal consumption expenditures when determining gross domestic product? A) purchase of a new house because of the arrival of a new baby B) purchase of a new office building C) vacation expenses for a spring trip to Fort Lauderdale D) purchases of jeans to add to a storeʹs inventory
C
23) A common definition of a recession is a time with A) a decline in the price level. B) a decline in interest rates. C) a decrease in real GDP for two or more successive quarters. D) a decrease in real GDP for two or more successive years.
C
25) The factor market can best be described as where A) households buy goods and services. B) firms buy goods and services. C) firms buy the services of labor, land and capital. D) governments sell goods and services.
C
28) Recessions are commonly defined to occur A) whenever unemployment increases. B) when growth in real GDP decreases for two consecutive quarters. C) when growth in real GDP is negative for two consecutive quarters. D) when the unemployment rate exceeds 6 percent.
C
28) Which of the following are examples of the gross private domestic investment component of GDP? I. the purchase of production machinery by IBM II. an increase in the finished goods inventory at Intel A) I only B) II only C) both I and II D) neither I nor II
C
61) Based on the data in the above table, gross domestic product equals A) $2,190. B) $2,840. C) $2,465. D) $2,750.
C
29) Real GDP decreases during A) the movement from trough to peak. B) the movement from below potential GDP back to potential GDP. C) the movement from peak to trough. D) a decrease in unemployment.
C
32) The circular flow diagram shows that A) the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services. B) goods and factor markets are independent. C) the total amount of income generated by the economy equals the total purchases of final goods and services. D) consumption expenditure equals saving.
C
33) All of the following are included in gross private domestic investment expenditure EXCEPT a A) businessʹs purchase of a fleet of cars. B) householdʹs purchase of a new house. C) businessʹs purchase of another companyʹs stock. D) a retail storeʹs purchase of shoes to add to its inventory.
C
38) In the circular flow diagram, aggregate expenditure includes A) consumption expenditure, saving, investment and government expenditure B) consumption expenditure, saving, investment and net exports C) consumption expenditure, investment, government expenditure and net exports D) consumption expenditure, saving, government expenditure and net exports
C
39) Transfer payments A) are included in the government expenditure category in gross domestic product. B) refer to all payments made to households by governments. C) refer to payments made by the government that are not made to purchase a good or service. D) are made by households to firms in exchange for goods and services.
C
40) An economic expansion rather than a recession occurs A) when the federal budget is balanced. B) when the unemployment rate falls below 5 percent. C) when growth in real GDP is positive. D) when the unemployment rate is not changing.
C
41) A peak is the A) lower turning point of a business cycle when an expansion ends. B) lower turning point of a business cycle when a recession ends. C) upper turning point of a business cycle when an expansion ends. D) upper turning point of a business cycle when a recession ends.
C
42) Transfer payments are not included in GDP because A) their market value cannot be accurately determined. B) they do not generate additional income. C) they are not purchases of goods or services. D) their value is included in government expenditure.
C
44) Which of the following is NOT part of GDP calculated using the expenditure approach? A) General Motorsʹ purchases of new capital equipment B) expenditures by the federal government for national defense C) social security payments made to the elderly D) the purchase of new homes by consumers
C
45) In the above figure, a trough is at point and a peak is at point _____ A) a; b B) b; c C) b; a D) d; c
C
46) Government expenditures included in the expenditure approach to GDP include . A) social security and education B) net exports C) buying a new bomber D) Both answers A and C are correct
C
46) Total output and total income in the circular flow model A) are measures of the economyʹs level of savings. B) include only intermediate goods. C) are equal to each other. D) are related because national income is less than national product
C
47) Net exports of goods and services equal the A) exports of goods and services divided by the imports of goods and services. B) exports of goods and services plus the imports of goods and services. C) exports of goods and services minus the imports of goods and services. D) imports of goods and services minus the exports of goods and services.
C
48) Comparing aggregate expenditure and aggregate incomes shows that A) aggregate expenditure is usually greater than aggregate income. B) aggregate income is usually greater than aggregate expenditure. C) they are equal. D) aggregate income can not equal aggregate expenditure if we have any savings
C
49) In 2010, net exports in the United States were A) zero. B) positive. C) negative. D) greater than personal consumption expenditures.
C
50) To calculate GDP using the expenditure approach, in part it is necessary to A) add imports and exports. B) add imports and subtract exports. C) add exports and subtract imports. D) subtract both exports and imports.
C
53) GDP equals A) C+S+G+(X-M) B) C+I+G+(X+M) C) C+I+G+(X-M) D) C+S+G+(X-M)
C
54) An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is true? I. U.S. net exports decrease. II. U.S. investment increases. A) only I B) only II C) both I and II D) neither I nor II
C
55) In calculating GDP, household production is A) included as part of consumption. B) ignored because it is not a large amount. C) not included because there is no market transaction. D) included under employee compensation.
C
55) Suppose Mail Boxes Etc. buys a new copier for its store for $1000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, has occurred. A) replacement investment B) gross investment C) depreciation D) net investment
C
57) Which of the following relationships is correct? A) Net Investment = Gross Investment + Depreciation B) Consumption expenditure = Net Investment - Depreciation C) Gross Investment = Net Investment + Depreciation D) Depreciation = Gross Investment - Consumption expenditure
C
58) Gross investment equals net investment plus A) capital. B) capital gains. C) depreciation. D) dividends paid to the owners of the company
C
59) Gross investment is equal to A) depreciation minus net investment. B) net investment plus capital stock. C) depreciation plus net investment. D) net investment minus capital stock.
C
59) When calculating GDP, underground economic activity is A) the production of goods and services in the home. B) that portion of the time when we are enjoying leisure activities and not producing marketable goods. C) the part of the economy purposely hidden. D) an aspect of the quality of life, such as health and life expectancy.
C
61) Which of the following is NOT included in real GDP? A) production of services, such as the services of hair dressers B) production of goods that last less than a year, such as production of hot dogs C) production that takes place in the underground economy D) production of goods that last more than a year, such as a pair of roller blades
C
62) The underground economy exists for all of the following reasons EXCEPT the A) production of illegal goods. B) avoidance of taxes. C) desire to maintain accurate records of economic transactions. D) avoidance of government regulation.
C
63) Because pollution reduces economic welfare, on this count real GDP as measured A) decreases as pollution increases. B) increases to take into account the expenditures that will be made in the future to clean up the pollution. C) overstates economic welfare. D) understates economic welfare.
C
64) If consumption expenditures are $500 million, net investment is $100 million, depreciation equals $5 million, imports are $50 million, exports are $55 million, government expenditure on goods and services is $220 million, and government transfer payments are $20 million, then GDP is A) $790 million. B) $800 million. C) $830 million. D) $850 million.
C
64) Net investment A) equals gross investment plus depreciation. B) is the only measure of investment used to calculate GDP. C) equals gross investment minus depreciation. D) is equivalent to the existing capital stock in the economy.
C
67) If we compare the U.S. GDP and the Chinese GDP, A) real GDP per person is about the same in the two countries. B) U.S. real GDP per person is less than Chinaʹs real GDP per person once we adjust for currency differences. C) Chinaʹs real GDP per person is less than real GDP per person in the United States. D) real U.S. GDP per person was much larger than Chinaʹs real GDP per person when purchasing power parity prices are used but is less than Chinaʹs real GDP per person when exchange rate prices are used.
C
67) Using the data in the above table, what is the value of national saving? A) $1,202 billion B) $2,837 billion C) $1,053 billion D) -$85 billion
C
68) Using the information in the table above, calculate gross domestic product. A) $118 B) $108 C) $86 D) $78
C
69) Pollution is a by-product of some production processes, so on this count real GDP as measured A) is adjusted downward to take into account the pollution. B) is adjusted upward to take into account the expenditures that will be made in the future to clean up the pollution. C) tends to overstate economic welfare. D) tends to understate economic welfare.
C
69) Using the information in the table above, calculate the governmentʹs budget deficit or surplus. A) $2 B) -$4 C) -$10 D) $4
C
7) In the definition of GDP, ʺmarket valueʺ refers to A) valuing production in production units. B) not counting intermediate products. C) valuing production according to the market price. D) when the production took place.
C
7) The relationship between real GDP and potential GDP is that A) real GDP always equals potential GDP. B) real GDP never equals potential GDP. C) real GDP fluctuates about potential GDP. D) real GDP is always below potential GDP.
C
71) Which of the following statements about the comparison between GDP in China and in the United States is correct? A) Using the exchange rate to value Chinaʹs GDP in dollars shows that Chinaʹs GDP per person exceeds the GDP per person in the United States. B) Using purchasing power parity prices to value Chinaʹs GDP in dollars shows that Chinaʹs GDP per person exceeds the GDP per person in the United States. C) Chinaʹs GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing Chinaʹs GDP in dollars. D) None of the above answers are correct because they are all false statements.
C
9) If Nike, an American corporation, produces sneakers in Thailand this would A) count as part of U.S. GDP since it is a U.S. corporation. B) count for both Thailandʹs GDP and U.S. GDP. C) add to Thailandʹs GDP but not to U.S. GDP. D) add to neither U.S. GDP nor Thailandʹs GDP.
C
1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and intermediate goods and services B) market value of all goods and services C) amount of final and intermediate goods and services D) market value of all final goods and services
D
1) The maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation is called A) real GDP. B) nominal GDP. C) actual GDP. D) potential GDP.
D
101) Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include A) depreciation and investment. B) exports and imports. C) personal taxes and corporate taxes. D) indirect taxes and subsidies.
D
102) Using the data in the table above, gross domestic product equals A) $1,920. B) $1,940. C) $2,150. D) $2,400.
D
105) The above table shows some national income accounting data for a nation. In this nation, gross domestic product is equal to billion. A) $2,000 B) $2,300 C) $2,500 D) $2,800
D
113) Real GDP measures the A) total profits earned by all businesses valued using prices from a single year. B) changes in the prices of output measured in dollars. C) general upward drift in prices. D) value of total production linked to prices of a single year.
D
115) Real Gross Domestic Product is A) the amount of people unemployed divided by the total labor force. B) the productivity of labor. C) the most that can be produced when the economyʹs resources are fully employed. D) the value of total production linked back to the prices of a single year.
D
12) A loaf of bread purchased by one of your instructors would be best described as A) an intermediate good. B) a financial asset. C) a used good. D) a final good.
D
13) The business cycle is the A) regular growth rate of the real GDP. B) regular fluctuations of real GDP below potential GDP. C) irregular fluctuations of prices around real GDP. D) irregular fluctuations of real GDP around potential GDP.
D
14) In 2011, Ozzie purchased a 2008 Ford Escort from his neighbor for his son, purchased a 2007 ʺone ownerʺ Camry from Larchmont Toyota for his wife, bought a 2011 new Ford for himself, and sold his 2000 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2011? A) all four transactions B) all three purchases but not the sale C) the purchase of the Ford and the Caravan D) only the purchase of the Ford
D
15) Which of the following expenditures associated with the production of a new high -performance SUV will be directly included in GDP? A) the sale of bonds to finance the construction of the assembly plant B) the purchase of used welding robots to assemble to vehicles C) the purchase of new tires to be installed on the new vehicles D) the purchase of new machine tools to manufacture the engines
D
18) The term ʺbusiness cycleʺ most closely refers to the A) fluctuating profits of firms. B) fiscal year. C) accounting period used by firms. D) alternating periods of expansions and recessions.
D
2) GDP can be computed as the sum of A) all sales that have taken place in an economy over a period of time. B) the total expenditures of consumers and business over a period of time. C) the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. D) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.
D
2) Potential GDP is A) another name for real GDP. B) always different from real GDP. C) the level of GDP not adjusted for price changes. D) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
D
22) Personal consumption expenditures include all of the following EXCEPT spending on A) consumer durable goods. B) consumer nondurable goods. C) consumer services. D) new housing.
D
22) Which of the following is TRUE regarding business cycles? I. Cycles are predictable. II. In each cycle, a peak follows an expansion. III. Potential GDP fluctuates around real GDP. A) I and II B) I and III C) II and III D) II only
D
24) A recession is commonly defined as a period with A) negative growth rate in real GDP that lasts at least one quarter. B) positive growth rate in real GDP that lasts at least one quarter. C) positive growth rate in real GDP that lasts at least two quarters. D) negative growth rate in real GDP that lasts at least two quarters.
D
27) By common definition, a recession occurs when A) the international deficit worsens for at least two successive quarters. B) the government budget deficit exceeds the national debt. C) the inflation rate exceeds 3.5 percent. D) real GDP decreases for at least two successive quarters.
D
29) In the calculation of gross domestic product by the expenditure approach, the ʺinvestmentʺ component is A) net investment. B) gross investment minus depreciation. C) gross investment plus depreciation. D) gross investment.
D
29) Which of the following is true regarding the circular flow diagram? I. ʺAggregate incomeʺ is the flow of income earned by firms. II. Retained earnings are considered income earned by firms rather than part of householdsʹ income. III. The government, households, and firms all have transactions in the goods market. A) I only B) I and II C) I and III D) III only
D
3) GDP using the expenditure approach equals the sum of personal consumption expenditures plus A) gross private investment. B) gross private investment plus government expenditure on goods and services. C) gross private investment plus government expenditure on goods and services minus imports of goods and services. D) gross private investment plus government expenditure on goods and services plus net exports of goods and services.
D
3) Gross domestic product is a measure of the total value of all A) sales in an economy over a period of time. B) consumer income in an economy over a period of time. C) capital accumulation in an economy over a period of time. D) final goods and services produced in an economy over a period of time
D
3) Potential GDP is A) the maximum GDP that an economy actually achieves throughout its entire history. B) the level of GDP achieved during periods when 100 percent of the labor force is employed. C) a goal that can never be achieved by the economy. D) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
D
30) If we compare the four sources of spending in the economy we see that A) household consumption is the smallest. B) government expenditure is the largest. C) business investment is the largest. D) household consumption is the largest.
D
33) The circular flow diagram shows A) how nominal GDP is distinct from real GDP. B) how the prices of factors are determined. C) the effects of inflation in a simple economy. D) the flows between different sectors of the economy.
D
34) In the national income accounts, government expenditure on goods and services refer to those purchases made by A) federal and state governments only. B) the federal government only. C) state and local governments only. D) all levels of government.
D
35) An expansion A) follows a peak. B) is defined as a period of negative real GDP growth. C) comes just before a trough. D) is defined as a period of real GDP increases.
D
35) In the circular flow model of an economy, households A) receive income from buyers of goods and services. B) receive income from the sale of factors in the goods markets. C) pay firms for the use of their factors. D) receive income from producers for the use of factors in the factor markets.
D
38) Which of the following is included in government expenditures when measuring GDP? A) Social Security payments B) unemployment compensation payments C) pension payment made to past presidents D) the current presidentʹs salary
D
4) Gross domestic product (GDP) is the in a given time period. A) value of personal consumption expenditures, gross private domestic investment, and federal government expenditures B) sum of wage and salary compensation of employees and corporate profits C) value of all final and intermediate goods and services produced by the economy excluding those goods exported to foreign nations D) market value of final goods and services produced by the economy
D
4) The expenditure approach measures GDP by adding A) compensation of employees, rental income, corporate profits, net interest, and proprietorsʹ income. B) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, subsidies paid by the government, indirect taxes paid, and depreciation. C) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, indirect taxes paid, and depreciation and subtracting subsidies paid by the government. D) consumption expenditure, gross private domestic investment, net exports of goods and services, and government expenditure on goods and services.
D
42) In the above figure, the distance between points S and T represents A) an expansion. B) a trough. C) a peak. D) a recession.
D
43) Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income A) I equals II, but not III. B) I equals III, but not II. C) II equals III, but not I. D) I equals II equals III.
D
43) Which of the following transfer payments is included in GDP? A) Social Security payments B) welfare payments C) veteranʹs benefits D) none of the above
D
47) The circular flow shows that A) aggregate production equals aggregate expenditure. B) aggregate expenditure is less than aggregate income. C) GDP equals aggregate income. D) Both answers A and C are correct.
D
49) Gross domestic product (GDP) is A) the value of all final goods and services produced in a country during a year. B) the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports. C) the sum of compensation of employees, proprietorsʹ income, net interest, rental income, corporate profits, depreciation, and indirect business taxes minus subsidies. D) all of the above
D
49) In the above figure, the letters A, B, and C represent which positions in the business cycle? A) peak, expansion, and recession, respectively B) recession, expansion, and peak, respectively C) expansion, peak, and recession, respectively D) peak, recession, and expansion, respectively
D
5) Gross domestic product (GDP) measures the A) number of final goods and services produced in the economy in a given time period. B) number of final goods and services sold in the economy in a given time period. C) market value of old and new final goods and services sold in the economy in a given time period. D) market value of final goods and services produced in the economy in a given time period.
D
5) The four categories of expenditure used by the expenditure approach method to calculate GDP are A) consumption expenditure, taxes, saving and investment. B) consumption expenditure, investment, net imports and saving. C) saving, taxes, government expenditure and investment. D) consumption expenditure, investment, government expenditure and net exports.
D
50) Real GDP is not a perfect indicator of economic welfare because _______ A) it includes the underground economy B) it includes a direct measure of health and life expectancy C) it underestimates inflation D) economic welfare depends on many factors not measured or not measured accurately by real GDP
D
51) Gross domestic product is the A) value of the final goods and services produced in a country during a specific time. B) total amount that buyers spent on the final goods and services produced in a country during a specific time. C) total amount of income earned in producing the final goods and services in a country during a specific time. D) All of the above answers are correct.
D
51) Real GDP does not show the state of economic welfare in a country in part because GDP omits I. household production. II. leisure time available. III. the quality of the environment. A) I only B) I and III C) II and III D) I, II and III
D
52) Real GDP can be criticized as a measure of economic welfare because it ___________ A) does not include the value of products produced in the household. B) does not take account of the degradation of environmental quality. C) does not include leisure time available to a society. D) All of the above answers are correct.
D
52) Which of the following is correct? A) Aggregate expenditure equals GDP but is less than aggregate income. B) Aggregate income is greater than GDP but equal to aggregate expenditure. C) Aggregate income is greater than aggregate expenditure but equal to GDP. D) Aggregate income, aggregate expenditure and GDP are all equal.
D
53) A country that has a large real GDP per person might not necessarily have a high level of economic welfare because it may have A) very little political freedom. B) environmental problems. C) little leisure time. D) All of the above answers are correct.
D
56) In the calculation of GDP by the expenditure approach, exports from the United States must be A) subtracted because they are included in the consumption of a foreign country. B) ignored because they are not bought by U.S. citizens. C) subtracted if they are bought by foreign firms for investment purposes. D) added.
D
56) Which of the following is NOT included in real GDP? A) production of services, such as the services of doctors B) production of goods that last more than one year, such as television sets C) production of goods that do not last more than one year, such as gasoline D) production in the home
D
57) If a larger fraction of the adult population is working in the marketplace, household production A) counted in real GDP increases. B) not counted in real GDP increases. C) counted in real GDP decreases. D) not counted in real GDP decreases.
D
57) Using the information in the table above, calculate the value of GDP. A) $185 million B) $145 million C) $195 million D) $140 million
D
58) Reported GDP increases when, in fact, total production is unchanged when i. there is a shift from household production to market production. ii. a previously illegal activity is legalized. A) i only B) ii only C) Neither i nor ii D) Both i and ii
D
6) GDP is defined as the market value of all in a given time period. A) final goods produced in a country B) final goods and services produced by citizens of a particular country regardless of where in the world they are located C) final goods and services produced in a country by only the citizens of the country D) final goods and services produced in a country
D
6) In the equation, GDP = C + I + G + X - M, G refers to A) federal government expenditures plus all transfer payments. B) local, state, and federal government spending for all purposes. C) the taxes and expenditures of all government units. D) local, state, and federal government expenditure on goods and services, but does not include transfer payments.
D
61) is gross investment minus . A) The capital stock; net investment B) The capital stock; depreciation C) Depreciation; replacement investment D) Net investment; depreciation
D
62) The above table shows data from the GDP accounts of Hypothetica. Hypotheticaʹs GDP is billion. A) $270 B) $210 C) $190 D) $160
D
63) If imports are $100 million less than exports, government expenditures are $500 million, consumer expenditures are $1 billion, and gross investment spending is $500 million, then GDP is A) $1 billion. B) $1.9 billion. C) $2 billion. D) $2.1 billion.
D
65) Net investment equals A) gross investment + depreciation. B) depreciation + addition to inventories. C) savings - depreciation. D) gross investment - depreciation
D
65) Which of the following would lead GDP to overstate economic welfare? A) the existence of home-cooked meals B) restaurant workers that under-report tip income C) a self-employed CPA who takes a longer than normal vacation D) electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution
D
68) GDP equals A) aggregate expenditure. B) aggregate income. C) the value of the aggregate production in a country during a given time period. D) all of the above
D
68) The use of purchasing power parity prices A) decreases the real GDP per person statistics published by the International Monetary Fund. B) weakens the validity of cross country comparisons of economic welfare. C) increases the amount by which U.S. GDP is larger than that of any other nation. D) accounts for differences in the prices of the same goods in different countries when measuring real GDP.
D
7) The components of the expenditure approach to measuring GDP include all of the following EXCEPT A) net exports. B) government expenditure on goods and services. C) investment. D) the implicit payments for unpaid household work.
D
70) Using the information in the table above, calculate gross domestic product. A) $5,130 billion B) $5,320 billion C) $4,760 billion D) $4,690 billion
D
70) Which of the following is NOT a reason that real GDP is a poor measure of a nationʹs economic welfare? A) Real GDP omits measures of political freedom. B) Real GDP does not take into account the value of peopleʹs leisure time. C) Real GDP does not include the underground economy. D) Real GDP overvalues household production.
D
71) Using the information in the table above, net exports equals A) $1,370 billion. B) $650 billion. C) $20 billion. D) -$70 billion.
D
73) From the data in the above table, GDP equals A) $1,120. B) $1,280. C) $1,290. D) $1,360.
D
74) The approach to GDP that sums compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, depreciation, and indirect taxes and subtracts subsidies is the A) opportunity cost approach. B) expenditure approach. C) added cost approach. D) income approach.
D
82) Which of the following items is NOT a component of the income approach to measuring U.S. GDP? A) interest earned on savings deposits B) profits made by businesses C) income earned by businesses that export goods D) investment
D
9) ______refers to a period when the decreases_________. A) Recession; growth rate of nominal GDP B) Recession; growth rate of output per person C) Productivity growth slowdown; growth rate of real GDP D) Productivity growth slowdown; growth rate of output per person
D
90) Compensation paid to employees represented of GDP for the United States in 2010. A) about 5 percent B) approximately 15 percent C) 35 percent D) more than 50 percent
D
91) Which of the following is included in ʺcompensation of employeesʺ part of the income approach to measuring GDP? I. Wages and salaries. II. Pension fund contributions. III. Social security contributions. A) I only B) I and II C) I and III D) I, II and III
D
94) Rental income includes A) the payment for the use of land. B) the payment for the use of all rented inputs. C) no income from rental housing because most houses are occupied by their owners. D) Both answers A and B are correct.
D
98) Which of the following best represents an indirect tax? A) federal income tax B) state income tax C) local property tax D) sales taxes paid on goods and services
D
99) The presence of creates a difference in the value between the market price and the factor cost of a product. A) indirect taxes and consumption B) subsidies and direct taxes C) corporate profits and subsidies D) indirect taxes and subsidies
D