Question 1

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

Accepted Answer

A)   $384 billion
B)   $442 billion
C)   $431 billion
D)   $417 billionE) None of the above
F) All of the above

Question 2

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

Accepted Answer

A)   $611 billion
B)   $659 billion
C)   $667 billion
D)   $686 billionE) A) and B)
F) A) and C)

Question 3

Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is purchased and used as an input by Firm C, and so on down the line through Firm E, which produces the end product. The total value added by Firms A-E from the production of the end product described here is:

Accepted Answer

A)   $3,000
B)   $3,800
C)   $6,500
D)   $10,300E) A) and C)
F) B) and D)

Question 4

In an economy is experiencing inflation and output growth, nominal GDP will rise faster than real GDP.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   Improvements in product quality over time
B)   Expenditures undertaken to correct pollution
C)   Illegal activities of individuals and businesses
D)   Nonmarket activities, such as the productive work of homemakersE) A) and B)
F) A) and C)

Question 6

Consider the following data for a nation:  The country's real GDP declined between years:

Accepted Answer

A)   1 and 2
B)   2 and 3
C)   3 and 4
D)   4 and 5E) A) and B)
F) B) and D)

Question 7

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 zeroE) None of the above
F) B) and C)

Question 8

A distinguishing characteristic of public transfer payments is that:

Accepted Answer

A)   They include wages to government workers
B)   They are counted as part of government purchases in the calculation of the gross domestic product
C)   They include the cost of maintaining public parks
D)   They involve no contribution to current production in returnE) A) and B)
F) A) and C)

Question 9

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

Accepted Answer

A)   $400 billion
B)   $442 billion
C)   $483 billion
D)   $517 billionE) None of the above
F) A) and B)

Question 10

In the reservoir analogy of stock and flow for the economy:

Accepted Answer

A)   Gross investment is an outflow and depreciation is an inflow
B)   The stock of capital is an outflow and depreciation is an inflow
C)   Net investment is an inflow and the stock of capital is an outflow
D)   Gross investment is an inflow and depreciation is an outflowE) None of the above
F) C) and D)

Question 11

Changes in business inventories are included as part of investment in the national income accounts.

Accepted Answer

A) True 
 B)False

Question 12

Personal income (PI)  refers to all income:

Accepted Answer

A)   Received
B)   Earned
C)   Earned but not received
D)   Received but not earnedE) A) and C)
F) A) and B)

Question 13

Subtracting the purchase of intermediate products and supplies from the value of the sales of final products determines the amount of:

Accepted Answer

A)   Net investment for a business
B)   Profit and cost
C)   Value added from the economic activity
D)   Surplus or deficit from the economic activityE) C) and D)
F) All of the above

Question 14

If nominal GDP in one year is $5,000 billion and the price index is 135, then the real GDP that year would be $3,704 billion.

Accepted Answer

A) True 
 B)False

Question 15

In the reservoir analogy for stock versus flow, the stock of capital is similar to the:

Accepted Answer

A)   Quality of water
B)   Outflow of water
C)   Inflow of water
D)   Level of waterE) B) and D)
F) B) and C)

Question 16

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 goodsE) None of the above
F) A) and D)

Question 17

In November 2009, Econland Motors produced an automobile that was delivered to a local dealership in December 2009. The auto was then sold to Sharon Smith for personal use in February of 2010. Following national income accounting practices, this auto would be counted as part of:

Accepted Answer

A)   Consumption in 2009 and consumption in 2010
B)   Consumption in 2009 and investment in 2010
C)   Negative investment in 2009 and consumption in 2010
D)   Investment in 2009 and negative investment in 2010E) C) and D)
F) All of the above

Question 18

Answer the question based on the following data, using year 1 as the base year. All dollars are in billions.  Refer to the above data. Real GDP increased from year 3 to year 4 by approximately:

Accepted Answer

A)   $68 billion
B)   $75 billion
C)   $98 billion
D)   $215 billionE) A) and D)
F) None of the above

Question 19

Refer to the graph above. The year 2000 must be the:

Accepted Answer

A)   Year when depreciation or capital consumption equaled zero
B)   Base year of the GDP price index
C)   Point in time when GDP equaled 100
D)   Year when the GDP price index is zeroE) B) and C)
F) A) and D)

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. If year 2 is the base year, the price index for year 3 is:

Accepted Answer

A)   120
B)   125
C)   133
D)   150E) A) and D)
F) A) and C)

Exam 7: Measuring Domestic Output and National Income

In the reservoir analogy for stock versus flow, the stock of capital is similar to the:

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A distinguishing characteristic of public transfer payments is that:

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

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Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is purchased and used as an input by Firm C, and so on down the line through Firm E, which produces the end product. The total value added by Firms A-E from the production of the end product described here is:

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Personal income (PI) refers to all income:

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In an economy is experiencing inflation and output growth, nominal GDP will rise faster than real GDP.

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

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In an economy that has stationary production capacity:

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

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Refer to the graph above. The year 2000 must be the:

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Changes in business inventories are included as part of investment in the national income accounts.

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Subtracting the purchase of intermediate products and supplies from the value of the sales of final products determines the amount of:

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In November 2009, Econland Motors produced an automobile that was delivered to a local dealership in December 2009. The auto was then sold to Sharon Smith for personal use in February of 2010. Following national income accounting practices, this auto would be counted as part of:

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Answer the question based on the following data, using year 1 as the base year. All dollars are in billions. Refer to the above data. Real GDP increased from year 3 to year 4 by approximately:

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In the reservoir analogy of stock and flow for the economy:

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

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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. If year 2 is the base year, the price index for year 3 is:

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

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If nominal GDP in one year is $5,000 billion and the price index is 135, then the real GDP that year would be $3,704 billion.

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Consider the following data for a nation: The country's real GDP declined between years:

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