Question 1

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) A) and B)
G) A) and C)

Question 2

Disposable income equals personal income minus indirect business taxes.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following transactions is not included in GDP?

Accepted Answer

A)  Someone sells drugs in a vacant lot.
B)  Someone sells drugs in a pharmacy.
C)  A doctor treats a patient for drug addiction.
D)  A drug addict spends two months in a drug rehabilitation center.
E)  The drug addict buys cough medicine.F) A) and B)
G) A) and C)

Question 4

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) B) and E)
G) A) and C)

Question 5

The ultimate goal of studying the circular flow model is to understand the flow of

Accepted Answer

A)  money through the market system
B)  consumer spending through the economy
C)  goods and services through the product market
D)  resources, goods, and money through the economy
E)  resources through the resource markets and their allocation in productionF) All of the above
G) D) and E)

Question 6

Which of the following is the best indicator of the performance of the national economy?

Accepted Answer

A)  the federal government budget deficit
B)  the stock of capital goods (machinery)  in the nation
C)  the size of the nation's stock of money
D)  the balance of trade with other nations
E)  the flow of new goods and services produced in the nationF) A) and B)
G) None of the above

Question 7

Which of the following is a leakage from the circular flow?

Accepted Answer

A)  investment
B)  imports
C)  government purchases
D)  government borrowing
E)  transfer paymentsF) A) and E)
G) A) and D)

Question 8

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases, GDP will decrease.

Accepted Answer

A) True 
 B)False

Question 9

If the CPI is 220 one year and 210 the next, the annual rate of inflation as measured by the CPI is approximately

Accepted Answer

A)  -2.3 percent
B)  -4.6 percent
C)  10 percent
D)  4.8 percent
E)  220 percentF) A) and B)
G) A) and E)

Question 10

When a refrigerator worth $1,000 is produced and sold, its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

Accepted Answer

A)  the wages earned by the workers in the firm that produced it
B)  the wages earned by the workers and the profits earned by the owners of the firm that produced it
C)  wages, interest, and rent paid by the firm's owners to those who contributed to making the refrigerator
D)  wages, interest, and rent paid by the firm's owners to those who contributed to making the refrigerator, less taxes
E)  wages, interest, and rent paid by the firm's owners, plus the profit they kept for themselvesF) C) and E)
G) A) and D)

Question 11

Which of the following best describes an intermediate good?

Accepted Answer

A)  It has no value to the seller.
B)  It has no value to the buyer.
C)  It is purchased by a household for future use.
D)  It helps produce another good.
E)  It is sold at a discounted price by middlemen.F) B) and C)
G) A) and E)

Question 12

A fixed-weight price index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that 1986 is our base year (price index equals 100)  and that the 2000 price index was 200. If nominal GDP was $6.2 trillion in 2000, what was real GDP that year (measured in 1986 dollars) ?

Accepted Answer

A)  $3.1 trillion
B)  $6.2 trillion
C)  $12.4 trillion
D)  $18.6 trillion
E)  $24.3 trillionF) B) and E)
G) C) and D)

Question 14

GDP reflects many things; however, it does not reflect the value of production that takes place in a nonmarket setting.

Accepted Answer

A) True 
 B)False

Question 15

Nominal GDP is a better measure of the growth in production than real GDP is.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would not be included in the measurement of GDP?

Accepted Answer

A)  federal government purchases of automobiles
B)  a purchase of California wine by a Canadian firm
C)  employers' payments for employees' medical insurance
D)  a state government's purchase of personal computers
E)  transactions in the underground economyF) A) and B)
G) C) and E)

Question 17

The statement that "GDP values all output equally" means that

Accepted Answer

A)  household production is treated the same as production by firms
B)  depreciation of manufactured capital is treated the same as depletion of natural resources
C)  the purchase of pollution control equipment is valued the same as the pollution itself
D)  leisure time is valued the same as time spent working at a job
E)  the market price of output is the measure of that output's valueF) All of the above
G) B) and D)

Question 18

Exhibit 6-2
 
-Using the information in Exhibit 6-2, how much did the price index change from the base to the curtrent year?.

Accepted Answer

A)  100%
B)  50%
C)  0%
D)  -50%
E)  -100%F) B) and D)
G) None of the above

Question 19

The largest component of aggregate expenditure is

Accepted Answer

A)  government purchases
B)  transfer payments
C)  imports
D)  consumption
E)  investmentF) A) and B)
G) B) and E)

Question 20

The Lee family won a $50 million jackpot and made several major purchases this year, listed below. Which of these would be counted as investment when calculating GDP by the expenditure approach?

Accepted Answer

A)  the former Hollywood home of Gwyneth Paltrow that they bought for $5 million
B)  the villa they just built in the Swiss Alps for $2 million
C)  the secondhand yacht that Mr. Lee purchased for $1 million and expects to sell for a profit before year's end
D)  the vintage Rolls Royce that Mrs. Lee purchased in London for $500,000
E)  the new house that Mrs. Lee had built in Pittsburgh for $200,000 to serve as living quarters for her ten new servantsF) C) and D)
G) B) and D)

Exam 7: Tracking the Us Economy

Which of the following is the best indicator of the performance of the national economy?

Correct AnswerverifiedShow Answer

Exhibit 6-2 -Using the information in Exhibit 6-2, how much did the price index change from the base to the curtrent year?.

Correct AnswerverifiedShow Answer

Nominal GDP is a better measure of the growth in production than real GDP is.

Correct AnswerverifiedShow Answer

When a refrigerator worth $1,000 is produced and sold, its contribution to the GDP is measured on the expenditure side by its sale price and on the income side by

Correct AnswerverifiedShow Answer

Which of the following best describes an intermediate good?

Correct AnswerverifiedShow Answer

The statement that "GDP values all output equally" means that

Correct AnswerverifiedShow Answer

GDP reflects many things; however, it does not reflect the value of production that takes place in a nonmarket setting.

Correct AnswerverifiedShow Answer

The Lee family won a $50 million jackpot and made several major purchases this year, listed below. Which of these would be counted as investment when calculating GDP by the expenditure approach?

Correct AnswerverifiedShow Answer

A fixed-weight price index recognizes the fact that the composition of output changes over time.

Correct AnswerverifiedShow Answer

Disposable income equals personal income minus indirect business taxes.

Correct AnswerverifiedShow Answer

Which of the following transactions is not included in GDP?

Correct AnswerverifiedShow Answer

The largest component of aggregate expenditure is

Correct AnswerverifiedShow Answer

The ultimate goal of studying the circular flow model is to understand the flow of

Correct AnswerverifiedShow Answer

If drug enforcement policies result in price increases for illegal drugs and the quantity sold decreases, GDP will decrease.

Correct AnswerverifiedShow Answer

Which of the following would not be included in the measurement of GDP?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that 1986 is our base year (price index equals 100) and that the 2000 price index was 200. If nominal GDP was $6.2 trillion in 2000, what was real GDP that year (measured in 1986 dollars) ?

Correct AnswerverifiedShow Answer

If the CPI is 220 one year and 210 the next, the annual rate of inflation as measured by the CPI is approximately

Correct AnswerverifiedShow Answer

Which of the following is a leakage from the circular flow?

Correct AnswerverifiedShow Answer

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

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