Question 1

(The following national income data for an economy are in billions of dollars.)   Refer to the above data. The national income in this economy can be estimated by adding items:

Accepted Answer

A)   1 through 7
B)   8 through 11
C)   2 through 7
D)   1 through 13E) A) and B)
F) A) and C)

Question 2

Over a year, a nation's GDP at current prices rose by 15 percent while the price index increased from 100 to 110. GDP at constant prices rose by about:

Accepted Answer

A)   3 percent
B)   5 percent
C)   7 percent
D)   9 percentE) C) and D)
F) A) and C)

Question 3

National income is the sum of employee compensation, profits, and the following items, except:

Accepted Answer

A)   Rent
B)   Interest
C)   Depreciation or consumption of fixed capital
D)   Taxes on production and importsE) A) and B)
F) None of the above

Question 4

Do-it-yourself activities of people are a big part of the "underground economy".

Accepted Answer

A) True 
 B)False  False

Question 5

(The following national income data are in billions of dollars.)   Refer to the above data. This nation's GDP is:

Accepted Answer

A)   $315 billion
B)   $324 billion
C)   $305 billion
D)   $367 billionE) B) and D)
F) A) and C) C

Question 6

An example of intermediate goods would be:

Accepted Answer

A)   Bricks bought by a homeowner for constructing a patio
B)   Sacks of groceries bought by a dentist for his family
C)   Cars bought by a car-rental company
D)   Paper and ink bought by a publishing companyE) A) and D)
F) A) and C) D

Question 7

The expenditures or output approach to GDP measures it by summing up:

Accepted Answer

A)   Compensation of employees, rents, interest, dividends, undistributed corporate profits, proprietors' income, indirect business taxes paid, consumption of fixed capital, and net foreign factor income earned in the United States
B)   Compensation of employees, rents, interest, dividends, corporate profits, proprietors' income, and indirect business taxes, and subtracting the consumption of fixed capital
C)   The total spending for consumption, investment, net exports, and government purchases
D)   The total spending for consumption and government purchases, but subtracting public and private transfer paymentsE) A) and D)
F) A) and C)

Question 8

GDP understates the amount of economic production in the United States because it excludes:

Accepted Answer

A)   Spending for the U.S. military
B)   Transfer payments
C)   Purchases of stocks and bonds
D)   Work performed by people for their own benefitE) A) and C)
F) A) and D)

Question 9

Which would be considered an investment according to economists?

Accepted Answer

A)   A fishing-company owner buys Google shares
B)   A fishing-company buys a few boats from another fishing company that was closing out
C)   A fishing-company owner buys new fishing gear
D)   A fishing-company owner buys fuel to run the boatsE) C) and D)
F) All of the above

Question 10

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320) ; imports ($35) ; exports ($22) ; personal consumption expenditures ($2,460) ; and, government purchases ($470) . What is GDP in this economy?

Accepted Answer

A)   $3,250 billion
B)   $3,263 billion
C)   $3,237 billion
D)   $3,290 billionE) All of the above
F) A) and B)

Question 11

The following data about a hypothetical economy are in billions of dollars.  Refer to the above data. How much are net exports of this economy?

Accepted Answer

A)   +$150 billion
B)   -$20 billion
C)   +$20 billion
D)   -$65 billionE) None of the above
F) B) and C)

Question 12

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 B)
F) None of the above

Question 13

Money spent on the purchase of a new house is included in the GDP as a part of:

Accepted Answer

A)   Household expenditures on durable goods
B)   Personal consumption expenditures
C)   Personal saving
D)   Gross domestic private investmentE) None of the above
F) A) and D)

Question 14

The two ways of looking at GDP are the:

Accepted Answer

A)   Output approach and expenditures approach
B)   Income approach and saving approach
C)   Expenditures approach and income approach
D)   Output approach and consumption approachE) All of the above
F) A) and B)

Question 15

All activities included in GDP serve to enrich society.

Accepted Answer

A) True 
 B)False

Question 16

In the expenditures approach, transfer payments such as unemployment compensation are included in the G component of GDP.

Accepted Answer

A) True 
 B)False

Question 17

When local police and fire departments buy new cars for their operations, these are counted as part of:

Accepted Answer

A)   C
B)   Ig
C)   G
D)   XnE) A) and B)
F) B) and D)

Question 18

"GDP price index" measures changes in the:

Accepted Answer

A)   Value of final output produced in the nation
B)   Prices of the output produced in the nation
C)   Amount of resources available in the nation
D)   Cost of resources employed in the nationE) A) and D)
F) B) and D)

Question 19

Which of the following is included in the expenditures approach to GDP?

Accepted Answer

A)   Spending on meals by consumers at restaurants
B)   Expenditures on used clothing at garage sales
C)   Value of stocks and bonds bought by businessmen
D)   Government spending on welfare paymentsE) A) and B)
F) A) and C)

Question 20

Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.  Refer to the above data. For the years shown, the growth of:

Accepted Answer

A)   Real GDP exceeds the growth of nominal GDP
B)   Nominal GDP exactly reflects increases in real output
C)   Nominal GDP overstates increases in real output
D)   Nominal GDP understates increases in real outputE) B) and D)
F) A) and D)

Exam 7: Measuring Domestic Output and National Income

(The following national income data for an economy are in billions of dollars.) Refer to the above data. The national income in this economy can be estimated by adding items:

Correct AnswerverifiedShow Answer

Over a year, a nation's GDP at current prices rose by 15 percent while the price index increased from 100 to 110. GDP at constant prices rose by about:

Correct AnswerverifiedShow Answer

National income is the sum of employee compensation, profits, and the following items, except:

Correct AnswerverifiedShow Answer

Do-it-yourself activities of people are a big part of the "underground economy".

Correct AnswerverifiedFalse

(The following national income data are in billions of dollars.) Refer to the above data. This nation's GDP is:

Correct AnswerverifiedC

An example of intermediate goods would be:

Correct AnswerverifiedD

The expenditures or output approach to GDP measures it by summing up:

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GDP understates the amount of economic production in the United States because it excludes:

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Which would be considered an investment according to economists?

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The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320) ; imports ($35) ; exports ($22) ; personal consumption expenditures ($2,460) ; and, government purchases ($470) . What is GDP in this economy?

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The following data about a hypothetical economy are in billions of dollars. Refer to the above data. How much are net exports of this economy?

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

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Money spent on the purchase of a new house is included in the GDP as a part of:

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The two ways of looking at GDP are the:

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All activities included in GDP serve to enrich society.

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In the expenditures approach, transfer payments such as unemployment compensation are included in the G component of GDP.

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When local police and fire departments buy new cars for their operations, these are counted as part of:

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"GDP price index" measures changes in the:

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Which of the following is included in the expenditures approach to GDP?

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Answer the question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Refer to the above data. For the years shown, the growth of:

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False

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D

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