Question 1

The consumer price index measures changes in

Accepted Answer

A)  the prices of all goods and services
B)  the prices of goods that are sold
C)  the total cost of a specific market basket of consumer goods and services
D)  the total costs of all goods and services
E)  the total costs of goods and services purchased by firmsF) B) and D)
G) A) and B)

Question 2

If the GDP price index rises from 100 to 110 to 115 over three consecutive year, the inflation rate is decreasing.

Accepted Answer

A) True 
 B)False

Question 3

If a firm's inventory decreases, the GDP counts the net decrease as a reduction in investment.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not an injection into the circular flow?

Accepted Answer

A)  saving
B)  domestic exports
C)  government expenditure on goods
D)  transfer payments
E)  investment by firmsF) C) and E)
G) D) and E)

Question 5

Which of the following is the best example of an investment as defined by economists?

Accepted Answer

A)  a household's purchase of 100 shares of Apple computer stock
B)  a firm's purchase of 100 shares of General Electric stock
C)  a firm's purchase of a bond issued by General Mills
D)  a firm's purchase of a U.S. savings bond
E)  a firm buying personal computers for its secretarial staffF) None of the above
G) A) and C)

Question 6

A decrease in GDP necessarily means that consumer welfare has decreased.

Accepted Answer

A) True 
 B)False

Question 7

Nominal GDP is measured in

Accepted Answer

A)  current-year prices
B)  base-year prices
C)  real dollars
D)  quantity of goods produced
E)  hours of employmentF) C) and D)
G) None of the above

Question 8

The country of Fishland had a GDP of 1,000 doubloons (the monetary unit)  in 2003 and 1,500 doubloons in 2004. The GDP price index was 100 in 2003 and 150 in 2004. Between 2003 and 2004 real GDP in Fishland

Accepted Answer

A)  increased by 500 doubloons
B)  increased by 333 doubloons
C)  increased by 50 doubloons
D)  remained the same
E)  decreased by 50 doubloonsF) A) and E)
G) All of the above

Question 9

If a firm hires labor for $20,000, pays rent of $12,000, buys raw materials for $6,000, earns profits of $3,000, and sells its output for $41,000, the firm's value added is

Accepted Answer

A)  $0
B)  $15,000
C)  $35,000
D)  $38,000
E)  $41,000F) A) and B)
G) C) and D)

Question 10

If the CPI is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A)  4.5 percent
B)  8.6 percent
C)  9.4 percent
D)  15 percent
E)  175 percentF) D) and E)
G) A) and C)

Question 11

Exhibit 6-3
 
-Refer to Exhibit 6-3. Between 2004 and 2005, real GDP for this nation

Accepted Answer

A)  increased by about $5 billion
B)  decreased by about $5 billion
C)  remained almost constant
D)  increased by about $2 billion
E)  cannot be determined from the information givenF) B) and C)
G) B) and E)

Question 12

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment. According to the circular flow model, the government's budget

Accepted Answer

A)  must be in deficit
B)  must be in surplus
C)  must be balanced
D)  could be in a surplus or a deficit
E)  could be in balance or a surplusF) A) and D)
G) B) and D)

Question 13

The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.

Accepted Answer

A)  overstates, unpopular
B)  overstates, obsolete
C)  overstates, widely used
D)  understates, widely used
E)  understates, obsoleteF) None of the above
G) A) and E)

Question 14

An imputed payment

Accepted Answer

A)  is a payment that is due but not made
B)  is a payment not made through the market and therefore not counted in GDP
C)  refers to nonmarket goods and services being valued as if they were sold on a market
D)  refers to governmental services being valued at the cost of production
E)  refers to consumers imputing a value to the paymentF) A) and B)
G) A) and C)

Question 15

Real GDP is the same thing as

Accepted Answer

A)  total spending on all goods and services
B)  constant-dollar GDP
C)  net domestic product
D)  nominal GDP adjusted for taxes
E)  domestic incomeF) A) and B)
G) None of the above

Question 16

If Bureau of Labor Statistics data collectors find that the model of car they priced the previous month is no longer available on the market, they

Accepted Answer

A)  just drop that product from the calculation of the CPI
B)  ask the manufacturer to choose another of its models for the CPI calculation
C)  must look for an available model with very similar features
D)  keep entering the price of the car from the last month it was available
E)  None of the answers is correctF) A) and B)
G) A) and C)

Question 17

If U.S. net investment is positive, the nation's capital stock is growing.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the largest component of GDP?

Accepted Answer

A)  investment (I) 
B)  government spending (G) 
C)  consumption (
C)  
D)  net exports (X - M) 
E)  taxes (T) F) C) and E)
G) B) and D)

Question 19

Double counting in the value added approach to GDP refers to

Accepted Answer

A)  corporate income being taxed twice
B)  the amount of income taxes paid to states that is taxable by the federal government
C)  calculating GDP twice using the income and expenditures methods
D)  adding the value of exports to GDP and subtracting the value of imports
E)  counting the total value of a final output in addition to the value of the inputs used to make itF) D) and E)
G) A) and E)

Question 20

Exhibit 6-3
 
-Refer to Exhibit 6-3. Between 2002 and 2003, real GDP for this nation

Accepted Answer

A)  decreased by slightly more than $5 billion
B)  increased by slightly more than $4 billion
C)  remained constant
D)  increased by only about $1 billion
E)  cannot be determined from the information givenF) None of the above
G) B) and D)

Exam 6: Tracking the Us Economy

Suppose that the economy is in equilibrium with a trade surplus and with saving less than investment. According to the circular flow model, the government's budget

Correct AnswerverifiedShow Answer

If a firm's inventory decreases, the GDP counts the net decrease as a reduction in investment.

Correct AnswerverifiedShow Answer

Exhibit 6-3 -Refer to Exhibit 6-3. Between 2002 and 2003, real GDP for this nation

Correct AnswerverifiedShow Answer

If a firm hires labor for $20,000, pays rent of $12,000, buys raw materials for $6,000, earns profits of $3,000, and sells its output for $41,000, the firm's value added is

Correct AnswerverifiedShow Answer

A decrease in GDP necessarily means that consumer welfare has decreased.

Correct AnswerverifiedShow Answer

The country of Fishland had a GDP of 1,000 doubloons (the monetary unit) in 2003 and 1,500 doubloons in 2004. The GDP price index was 100 in 2003 and 150 in 2004. Between 2003 and 2004 real GDP in Fishland

Correct AnswerverifiedShow Answer

Exhibit 6-3 -Refer to Exhibit 6-3. Between 2004 and 2005, real GDP for this nation

Correct AnswerverifiedShow Answer

If Bureau of Labor Statistics data collectors find that the model of car they priced the previous month is no longer available on the market, they

Correct AnswerverifiedShow Answer

Nominal GDP is measured in

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Which of the following is the largest component of GDP?

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An imputed payment

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Real GDP is the same thing as

Correct AnswerverifiedShow Answer

Double counting in the value added approach to GDP refers to

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If U.S. net investment is positive, the nation's capital stock is growing.

Correct AnswerverifiedShow Answer

The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.

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If the CPI is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately

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The consumer price index measures changes in

Correct AnswerverifiedShow Answer

If the GDP price index rises from 100 to 110 to 115 over three consecutive year, the inflation rate is decreasing.

Correct AnswerverifiedShow Answer

Which of the following is the best example of an investment as defined by economists?

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Which of the following is not an injection into the circular flow?

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The CPI inflation because it includes an item in the market basket only after the product becomes .

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