Question 1

If real GDP declines in a given year, nominal GDP:

Accepted Answer

A)   Must also be declining
B)   Must also be increasing
C)   May either rise or fall
D)   Is likely to remain constantE) C) and D)
F) All of the above

Question 2

The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:

Accepted Answer

A)   Output in 2005 was higher than in 2004
B)   Prices in 2005 were higher than in 2004
C)   Output in 2005 was lower than in 2004
D)   Prices in 2005 were lower than in 2004E) None of the above
F) B) and D)

Question 3

GDP does not include which of the following activities?

Accepted Answer

A)   Businesses installing anti-pollution equipment
B)   Households spending to enhance security of their neighborhoods
C)   Couples remodeling their own homes
D)   Families eating out in restaurantsE) A) and B)
F) A) and D)

Question 4

In an economy that is experiencing a shrinking production capacity:

Accepted Answer

A)   Gross domestic investment is negative
B)   Net private domestic investment is zero
C)   Depreciation is negative
D)   Depreciation exceeds gross investmentE) C) and D)
F) All of the above

Question 5

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 6

(The following national income data are in billions of dollars.)   Refer to the above data. National income in this economy is:

Accepted Answer

A)   $804 billion
B)   $940 billion
C)   $975 billion
D)   $1,019 billionE) None of the above
F) C) and D)

Question 7

Business inventories increase when firms produce:

Accepted Answer

A)   More than they sell, and the inventory increase is added to GDP
B)   Less than they sell, and the inventory increase is added to GDP
C)   More than they sell, and the inventory increase is subtracted from GDP
D)   Less than they sell, and the inventory increase is subtracted from GDPE) All of the above
F) C) and D)

Question 8

When U.S. households buy new imported European and Japanese cars, the total value of the cars is counted as part of C in the GDP accounts.

Accepted Answer

A) True 
 B)False

Question 9

To avoid multiple counting in national income accounts:

Accepted Answer

A)   Only final goods and services should be counted
B)   Intermediate goods and services should be counted
C)   Both final and intermediate goods and services should be counted
D)   Primary, intermediate, and final goods and services should be countedE) A) and B)
F) B) and C)

Question 10

U.S. GDP in 2012 was about:

Accepted Answer

A)   $8.1 trillion
B)   $15.7 trillion
C)   $890 billion
D)   $1200 billionE) B) and C)
F) A) and B)

Question 11

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 negativeE) None of the above
F) A) and B)

Question 12

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 incomeE) B) and C)
F) All of the above

Question 13

In 2011, the three largest economies in the world were (listed in order, from largest) :

Accepted Answer

A)   The U.S., China, Germany
B)   China, the U.S., Japan
C)   The U.S., China, Japan
D)   China, the U.S., GermanyE) All of the above
F) A) and C)

Question 14

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 15

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)   Tractor purchased by a construction company
C)   Laptop computer purchased by an executive for personal use
D)   Desktop computer purchased by an executive for business useE) B) and D)
F) None of the above

Question 16

The following data about a hypothetical economy are in billions of dollars.  Refer to the above data. GDP in this economy is:

Accepted Answer

A)   $6,080 billion
B)   $6,230 billion
C)   $6,380 billion
D)   $6,400 billionE) A) and B)
F) A) and C)

Question 17

(The following national income data for an economy are in billions of dollars.)   Refer to the above data. Which items need to be accounted for in going from National Income to GDP?

Accepted Answer

A)   1, 12, and 13
B)   2, 11, and 12
C)   13 only
D)   1 and 2E) A) and D)
F) All of the above

Question 18

A product that was produced in 2013 and not sold until 2014 is counted as part of GDP in 2013.

Accepted Answer

A) True 
 B)False

Question 19

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

Accepted Answer

A)   2 percent
B)   8 percent
C)   19 percent
D)   25 percentE) None of the above
F) All of the above

Question 20

(GDP figures are in billions of dollars.)   Refer to the above table. What was real GDP in Year 2?

Accepted Answer

A)   $4,820 billion
B)   $4,875 billion
C)   $4,911 billion
D)   $5,320 billionE) A) and B)
F) A) and C)

Exam 7: Measuring Domestic Output and National Income

If real GDP declines in a given year, nominal GDP:

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The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

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The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:

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

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

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(GDP figures are in billions of dollars.) Refer to the above table. What was real GDP in Year 2?

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Business inventories increase when firms produce:

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A product that was produced in 2013 and not sold until 2014 is counted as part of GDP in 2013.

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

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(The following national income data for an economy are in billions of dollars.) Refer to the above data. Which items need to be accounted for in going from National Income to GDP?

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GDP does not include which of the following activities?

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In an economy that is experiencing a shrinking production capacity:

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The following data about a hypothetical economy are in billions of dollars. Refer to the above data. GDP in this economy is:

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U.S. GDP in 2012 was about:

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When U.S. households buy new imported European and Japanese cars, the total value of the cars is counted as part of C in the GDP accounts.

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To avoid multiple counting in national income accounts:

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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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(The following national income data are in billions of dollars.) Refer to the above data. National income in this economy is:

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When gross investment is positive, net investment:

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In 2011, the three largest economies in the world were (listed in order, from largest) :

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