Question 1

In determining real GDP, economists adjust the nominal GDP by using the

Accepted Answer

A)  national productivity index.
B)  wholesale (producers')  price index.
C)  GDP price index.
D)  consumer price index.E) All of the above
F) B) and C)

Question 2

Nominal GDP is

Accepted Answer

A)  the sum of all monetary transactions that occur in the economy in a year.
B)  the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
C)  the amount of production that occurs when the economy is operating at full employment.
D)  money GDP adjusted for inflation.E) C) and D)
F) A) and C)

Question 3

GDP tends to understate economic welfare because it does not take into account increases in leisure.

Accepted Answer

A) True 
 B)False

Question 4

The value of U.S.imports is

Accepted Answer

A)  added to exports when calculating GDP because imports reflect spending by Americans.
B)  subtracted from exports when calculating GDP because imports do not constitute spending by Americans.
C)  subtracted from exports when calculating GDP because imports do not constitute production in the United States.
D)  added when calculating GDP because imports do not constitute production in the United States.E) A) and D)
F) C) and D)

Question 5

During the 2007-2009 recession,

Accepted Answer

A)  real GO and real GDP fell by roughly the same amount.
B)  real GDP fell by roughly twice the amount that real GO fell.
C)  real GDP fell, while real GO remained unchanged.
D)  real GO fell by roughly twice the amount that real GDP fell.E) All of the above
F) A) and B)

Question 6

The "statistical discrepancy" that the NIPA includes in the data is to account for the following, except

Accepted Answer

A)  equalizing GDP totals produced by the expenditures approach and the income approach.
B)  errors due to people misrepresenting their incomes on their tax returns.
C)  difficulty in accurately estimating depreciation.
D)  household production, or "do-it-yourself" activities of households.E) All of the above
F) B) and C)

Question 7

The value of corporate stocks and bonds traded in a given year is

Accepted Answer

A)  included in the calculation of GDP because they make a contribution to the current production of goods and services.
B)  excluded from the calculation of GDP because they make no contribution to current production of goods and services.
C)  included in the calculation of net private domestic investment.
D)  included in the calculation of gross private domestic investment.E) B) and D)
F) A) and D)

Question 8

GDP in an economy is $11,050 billion.Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion.Net exports must be

Accepted Answer

A)  +$53 billion.
B)  −$47 billion.
C)  −$84 billion.
D)  −$161 billion.E) A) and B)
F) A) and C)

Question 9

The sale of a used automobile would not be included in GDP of the current year because it is a

Accepted Answer

A)  nonmarket transaction.
B)  nonproduction transaction.
C)  purely financial transaction.
D)  private transfer payment.E) C) and D)
F) A) and B)

Question 10

Real GDP accounts for changes in product quality; nominal GDP does not.

Accepted Answer

A) True 
 B)False

Question 11

If depreciation exceeds gross investment,

Accepted Answer

A)  the economy's stock of capital may be either growing or shrinking.
B)  the economy's stock of capital is shrinking.
C)  the economy's stock of capital is growing.
D)  net investment is zero.E) A) and B)
F) None of the above

Question 12

In an economy that has stationary production capacity,

Accepted Answer

A)  GDP is zero.
B)  capital consumption (or depreciation)  is zero.
C)  net investment is zero.
D)  gross investment is zero.E) A) and B)
F) B) and C)

Question 13

An example of final goods in national income accounts would be

Accepted Answer

A)  new lawn mowers purchased by Cut-Rite Lawn Equipment & Supplies.
B)  flowers and pots purchased by homeowner Joe Smith.
C)  chemicals purchased by Green Grass Lawn Care Services.
D)  seedlings and saplings purchased for resale by Wendy's Garden Center.E) A) and C)
F) A) and B)

Question 14

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2.In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

Accepted Answer

A) True 
 B)False

Question 15

In a typical year, which of the following measures of aggregate output and income is likely to be the smallest?

Accepted Answer

A)  gross domestic product
B)  national income
C)  disposable income
D)  personal incomeE) B) and D)
F) None of the above

Question 16

GDP tends to overstate economic well-being because it takes into account

Accepted Answer

A)  all of the illegal activities conducted by organized crime in the economy.
B)  spending on intermediate goods that are used to produce final goods.
C)  total spending to deal with the adverse health effects of some products.
D)  the personal labor time that car owners spend working on car repairs and maintenance of their vehicles.E) B) and C)
F) B) and D)

Question 17

Which of the following is a primary use for national income accounts?

Accepted Answer

A)  to analyze the environmental cost of economic growth
B)  to assess the economic efficiency of specific industries in the economy
C)  to measure changes in the value of production and income in the economy
D)  to determine whether there is a fair and equitable distribution of income in the economyE) A) and D)
F) A) and C)

Question 18

To adjust nominal GDP for a given year in order to obtain real GDP, we multiply the nominal GDP by the price index.

Accepted Answer

A) True 
 B)False

Question 19

Environmental pollution is accounted for in

Accepted Answer

A)  GDP.
B)  PI.
C)  DI.
D)  none of these.E) A) and C)
F) C) and D)

Question 20

The concept of net domestic investment refers to

Accepted Answer

A)  the amount of machinery and equipment used up in producing the GDP in a specific year.
B)  the difference between the market value and book value of outstanding capital stock.
C)  gross domestic investment less net exports.
D)  total investment less the amount of investment goods used up in producing the year's output.E) None of the above
F) A) and B)

Exam 27: Measuring Domestic Output and National Income

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2.In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

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In a typical year, which of the following measures of aggregate output and income is likely to be the smallest?

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The value of U.S.imports is

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Nominal GDP is

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GDP tends to understate economic welfare because it does not take into account increases in leisure.

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Real GDP accounts for changes in product quality; nominal GDP does not.

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During the 2007-2009 recession,

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The concept of net domestic investment refers to

Correct AnswerverifiedShow Answer

GDP in an economy is $11,050 billion.Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion.Net exports must be

Correct AnswerverifiedShow Answer

Environmental pollution is accounted for in

Correct AnswerverifiedShow Answer

To adjust nominal GDP for a given year in order to obtain real GDP, we multiply the nominal GDP by the price index.

Correct AnswerverifiedShow Answer

The "statistical discrepancy" that the NIPA includes in the data is to account for the following, except

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Which of the following is a primary use for national income accounts?

Correct AnswerverifiedShow Answer

The sale of a used automobile would not be included in GDP of the current year because it is a

Correct AnswerverifiedShow Answer

An example of final goods in national income accounts would be

Correct AnswerverifiedShow Answer

GDP tends to overstate economic well-being because it takes into account

Correct AnswerverifiedShow Answer

In an economy that has stationary production capacity,

Correct AnswerverifiedShow Answer

If depreciation exceeds gross investment,

Correct AnswerverifiedShow Answer

The value of corporate stocks and bonds traded in a given year is

Correct AnswerverifiedShow Answer

In determining real GDP, economists adjust the nominal GDP by using the

Correct AnswerverifiedShow Answer

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