Question 1

The purchase of Wal-Mart stock is a part of gross investment but not of net investment.

Accepted Answer

A) True 
 B)False

Question 2

The total income earned through the use of resources, plus taxes on production and on imports, equals

Accepted Answer

A)  national income.
B)  gross domestic product.
C)  personal income.
D)  disposable income.E) B) and C)
F) A) and B)

Question 3

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end.Consumption of private fixed capital in the year was $35 billion.Assuming stable prices, net investment was

Accepted Answer

A)  $35 billion.
B)  $40 billion.
C)  $45 billion.
D)  $75 billion.E) All of the above
F) None of the above

Question 4

The GDP tends to

Accepted Answer

A)  overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives.
B)  understate economic welfare because it includes expenditures undertaken to offset or correct pollution.
C)  understate economic welfare because it does not take into account increases in leisure.
D)  overstate economic welfare because it does not reflect improvements in product quality.E) A) and B)
F) B) and C)

Question 5

The following are examples of final goods in national income accounting, except

Accepted Answer

A)  lumber and steel beams purchased by a construction company.
B)  a tractor purchased by a construction company.
C)  a laptop computer purchased by an executive for personal use.
D)  a desktop computer purchased by an executive for business use.E) B) and C)
F) A) and D) A

Question 6

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016.In 2016, national income accountants would

Accepted Answer

A)  add $10 billion to other elements of investment in calculating total investment.
B)  subtract $10 billion from other elements of investment in calculating total investment.
C)  add $75 billion (= $150/2)  to other elements of investment in calculating total investment.
D)  subtract $75 billion (= $150/2)  from other elements of investment in calculating total investment.E) A) and D)
F) A) and C)

Question 7

Transfer payments are

Accepted Answer

A)  excluded when calculating GDP because they only reflect inflation.
B)  excluded when calculating GDP because they do not reflect current production.
C)  included when calculating GDP because they are a category of investment spending.
D)  included when calculating GDP because they increase the spending of recipients.E) A) and D)
F) B) and C)

Question 8

GDP is the

Accepted Answer

A)  national income minus all nonincome charges against output.
B)  monetary value of all final goods and services produced within the borders of a nation in a particular year.
C)  monetary value of all economic resources used in producing a year's output.
D)  monetary value of all goods and services, final and intermediate, produced in a specific year.E) A) and D)
F) B) and C)

Question 9

The ZZZ Corporation issued $25 million in new common stock in 2016.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, investment

Accepted Answer

A)  of $7 million occurred.
B)  of $25 million occurred.
C)  of $18 million occurred.
D)  has not occurred.E) None of the above
F) A) and D)

Question 10

When gross investment is positive, net investment

Accepted Answer

A)  is always zero
B)  must be negative.
C)  must be positive.
D)  may be either positive or negative.E) All of the above
F) B) and C)

Question 11

Disposable income (DI) includes transfer payments like Social Security benefits and unemployment benefits.

Accepted Answer

A) True 
 B)False

Question 12

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000.The appropriate price index (1985 = 100)  was 120 in 1990 and 125 in 2000.Between 1990 and 2000, real GDP

Accepted Answer

A)  increased by $60 billion.
B)  decreased by $32 billion.
C)  increased by $100 billion.
D)  increased by $117 billion.E) C) and D)
F) A) and D)

Question 13

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result,

Accepted Answer

A)  real GDP will rise more rapidly than nominal GDP.
B)  GDP will tend to increasingly understate the level of output through time.
C)  GDP will tend to increasingly overstate the level of output through time.
D)  the accuracy of GDP will be unaffected through time.E) A) and B)
F) B) and D)

Question 14

Arthur sells $100 worth of cotton to Bob.Bob turns the cotton into cloth, which he sells to Camille for $300.Camille uses the cloth to make prom dresses that she sells to Donita for $700.Donita sells the dresses for $1,200 to kids attending the prom.The total contribution to GDP of this series of transactions is

Accepted Answer

A)  $1,200.
B)  $500.
C)  $2,300.
D)  $1,100.E) A) and B)
F) All of the above

Question 15

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

Accepted Answer

A)  public transfer payments to households.
B)  the consumption of fixed capital.
C)  the underground economy.
D)  intermediate goods.E) A) and B)
F) None of the above

Question 16

An economy is enlarging its stock of capital goods

Accepted Answer

A)  when net investment exceeds gross investment.
B)  when gross investment exceeds replacement investment.
C)  whenever gross investment is positive.
D)  when replacement investment exceeds gross investment.E) A) and D)
F) None of the above B

Question 17

Transfer payments are included in

Accepted Answer

A)  NI.
B)  PI.
C)  GDP.
D)  NDP.E) B) and C)
F) C) and D) B

Question 18

The GDP deflator or price index equals

Accepted Answer

A)  gross private domestic investment less the consumption of fixed capital.
B)  gross national product less net foreign factor income earned in the United States.
C)  nominal GDP divided by real GDP.
D)  real GDP divided by nominal GDP.E) C) and D)
F) B) and D)

Question 19

The following are incomes earned but not received by the nation's households, except

Accepted Answer

A)  corporate income taxes.
B)  Social Security contribution.
C)  transfer payments.
D)  undistributed corporate profits.E) B) and D)
F) B) and C)

Question 20

The service a homeowner performs when she mows her yard is not included in GDP because

Accepted Answer

A)  this is a nonmarket transaction.
B)  this is a nonproduction activity.
C)  this is a noninvestment transaction.
D)  multiple counting would be involved.E) B) and C)
F) None of the above

Exam 27: Measuring Domestic Output and National Income

The purchase of Wal-Mart stock is a part of gross investment but not of net investment.

Correct Answer
verified

The total income earned through the use of resources, plus taxes on production and on imports, equals

Correct Answer
verified

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end.Consumption of private fixed capital in the year was $35 billion.Assuming stable prices, net investment was

Correct Answer
verified

The GDP tends to

Correct Answer
verified

The following are examples of final goods in national income accounting, except

Correct Answer
verified
A

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016.In 2016, national income accountants would

Correct Answer
verified

Transfer payments are

Correct Answer
verified

GDP is the

Correct Answer
verified

The ZZZ Corporation issued $25 million in new common stock in 2016.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, investment

Correct Answer
verified

When gross investment is positive, net investment

Correct Answer
verified

Disposable income (DI) includes transfer payments like Social Security benefits and unemployment benefits.

Correct Answer
verified

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000.The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000.Between 1990 and 2000, real GDP

Correct Answer
verified

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result,

Correct Answer
verified

Correct Answer
verified

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

Correct Answer
verified

An economy is enlarging its stock of capital goods

Correct Answer
verified
B

Transfer payments are included in

Correct Answer
verified
B

The GDP deflator or price index equals

Correct Answer
verified

The following are incomes earned but not received by the nation's households, except

Correct Answer
verified

The service a homeowner performs when she mows her yard is not included in GDP because

Correct Answer
verified

Exam 27: Measuring Domestic Output and National Income

The purchase of Wal-Mart stock is a part of gross investment but not of net investment.

Correct AnswerverifiedShow Answer

The total income earned through the use of resources, plus taxes on production and on imports, equals

Correct AnswerverifiedShow Answer

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end.Consumption of private fixed capital in the year was $35 billion.Assuming stable prices, net investment was

Correct AnswerverifiedShow Answer

The GDP tends to

Correct AnswerverifiedShow Answer

The following are examples of final goods in national income accounting, except

Correct AnswerverifiedA

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016.In 2016, national income accountants would

Correct AnswerverifiedShow Answer

Transfer payments are

Correct AnswerverifiedShow Answer

GDP is the

Correct AnswerverifiedShow Answer

The ZZZ Corporation issued $25 million in new common stock in 2016.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, investment

Correct AnswerverifiedShow Answer

When gross investment is positive, net investment

Correct AnswerverifiedShow Answer

Disposable income (DI) includes transfer payments like Social Security benefits and unemployment benefits.

Correct AnswerverifiedShow Answer

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000.The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000.Between 1990 and 2000, real GDP

Correct AnswerverifiedShow Answer

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

Correct AnswerverifiedShow Answer

An economy is enlarging its stock of capital goods

Correct AnswerverifiedB

Transfer payments are included in

Correct AnswerverifiedB

The GDP deflator or price index equals

Correct AnswerverifiedShow Answer

The following are incomes earned but not received by the nation's households, except

Correct AnswerverifiedShow Answer

The service a homeowner performs when she mows her yard is not included in GDP because

Correct AnswerverifiedShow Answer

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A

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B

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B

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