Question 1

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) A) and D)
F) A) and C)

Question 2

Historically, real GDP has increased less rapidly than nominal GDP because:

Accepted Answer

A)   price indices have not reflected improvements in product quality.
B)   the general price level has increased.
C)   technological progress has resulted in more efficient production.
D)   the general price level has declined.E) B) and C)
F) C) and D)

Question 3

Nondurable goods are products:

Accepted Answer

A)   with expected lives of over three years.
B)   with expected lives of less than three years.
C)   with expected lives of over 2 years.
D)   with expected lives of under 2 years.E) All of the above
F) C) and D)

Question 4

Gross domestic product (GDP)  measures and reports output:

Accepted Answer

A)   as an index number.
B)   in percentage terms.
C)   in dollar amounts.
D)   in quantities of physical units (for example, kilos, litres, and bushels) .E) B) and D)
F) B) and C)

Question 5

Which of the following is a final good or service?

Accepted Answer

A)   diesel fuel bought for a delivery truck
B)   fertilizer purchased by a farm supplier
C)   a haircut
D)   Chevrolet windows purchased by a General Motors assembly plantE) All of the above
F) B) and C)

Question 6

In calculating GDP by the income approach, we should sum up:

Accepted Answer

A)   wages, consumption, investment and rent.
B)   wages, rent, interest and profit income.
C)   wages, interest, investment, and exports.
D)   wages, profit income, investment, and consumption.E) A) and D)
F) A) and C)

Question 7

Which of the following best defines disposable income?

Accepted Answer

A)   income received by households less personal taxes
B)   the before-tax income received by households
C)   all income earned by resource suppliers for their current contributions to production
D)   the market value of the annual output net of consumption of fixed capitalE) B) and D)
F) All of the above

Question 8

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 9

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)   intermediate goods.
D)   the underground economy.E) B) and D)
F) A) and B)

Question 10

Following is data for a hypothetical economy. The base year is 2002 (Price index = 100) .
 
-Refer to the above data. From 2003 to 2006, prices rose by:

Accepted Answer

A)   3 percent.
B)   7 percent.
C)   9 percent.
D)   10.7 percent.E) C) and D)
F) A) and B)

Question 11

The table below indicates the price and output data over a five year period for an economy that produces only one good.
 
-Refer to the above data. The nominal GDP for year 4:

Accepted Answer

A)   is $90.
B)   is $55.
C)   is $40.
D)   is $35.E) All of the above
F) B) and C)

Question 12

The growth of GDP may understate changes in the economy's well-being over time if the:

Accepted Answer

A)   distribution of income becomes increasingly unequal.
B)   quality of products and services improves.
C)   environment deteriorates because of pollution.
D)   amount of leisure decreases.E) A) and B)
F) A) and C)

Question 13

Interest and investment income includes:

Accepted Answer

A)   retained earnings.
B)   interest on bonds and loans of money capital and rental income received by households and inputted rent.
C)   taxes which are levied on the corporations' net earnings.
D)   Interest paid to the households for their investment.E) A) and B)
F) A) and C)

Question 14

Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1.
-Refer to the above information. If the per unit prices of the three goods each were $1 in a base year used to construct a GDP price index, then real GDP in the current year:

Accepted Answer

A)   is $110.
B)   is $115.
C)   is $45.
D)   cannot be determined on the basis of this data.E) All of the above
F) A) and D)

Question 15

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 C)
F) B) and D)

Question 16

Welfare payments to families with dependent children are included in GDP.

Accepted Answer

A) True 
 B)False

Question 17

Value added is the value of a firm's output minus:

Accepted Answer

A)   the value of intermediate goods purchased from other firms.
B)   the compensation it pays to employees.
C)   the value of its capital goods.
D)   its depreciation.E) All of the above
F) A) and C)

Question 18

The GDP is the:

Accepted Answer

A)   monetary value of all final goods and services produced within a nation in a particular year.
B)   national income minus all non-income charges against output.
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) C) and D)
F) B) and C)

Question 19

Which of the following is an intermediate good?

Accepted Answer

A)   the purchase of gasoline for a ski trip to B.C
B)   the purchase of a pizza by a college or university student
C)   the purchase of baseball bats by a professional baseball team
D)   the purchase of jogging shoes by a professorE) All of the above
F) C) and D)

Question 20

Assume an economy which is producing only one product. Output and price data for a three-year period are as follows.
 
-Refer to the above data. If year 2 is chosen as the base year, real GDP for year 1 is:

Accepted Answer

A)   $25.
B)   $100.
C)   $50.
D)   $80.E) B) and D)
F) B) and C)

Exam 5: Measuring the Economys Output

Correct Answer
verified

In calculating GDP by the income approach, we should sum up:

Correct Answer
verified

Historically, real GDP has increased less rapidly than nominal GDP because:

Correct Answer
verified

Assume an economy which is producing only one product. Output and price data for a three-year period are as follows. -Refer to the above data. If year 2 is chosen as the base year, real GDP for year 1 is:

Correct Answer
verified

Welfare payments to families with dependent children are included in GDP.

Correct Answer
verified

Following is data for a hypothetical economy. The base year is 2002 (Price index = 100) . -Refer to the above data. From 2003 to 2006, prices rose by:

Correct Answer
verified

Gross domestic product (GDP) measures and reports output:

Correct Answer
verified

Which of the following is an intermediate good?

Correct Answer
verified

Transfer payments are:

Correct Answer
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Interest and investment income includes:

Correct Answer
verified

The GDP is the:

Correct Answer
verified

The growth of GDP may understate changes in the economy's well-being over time if the:

Correct Answer
verified

Which of the following is a final good or service?

Correct Answer
verified

The GDP deflator or price index equals:

Correct Answer
verified

Nondurable goods are products:

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

Which of the following best defines disposable income?

Correct Answer
verified

The table below indicates the price and output data over a five year period for an economy that produces only one good. -Refer to the above data. The nominal GDP for year 4:

Correct Answer
verified

Value added is the value of a firm's output minus:

Correct Answer
verified

Exam 5: Measuring the Economys Output

Correct AnswerverifiedShow Answer

In calculating GDP by the income approach, we should sum up:

Correct AnswerverifiedShow Answer

Historically, real GDP has increased less rapidly than nominal GDP because:

Correct AnswerverifiedShow Answer

Assume an economy which is producing only one product. Output and price data for a three-year period are as follows. -Refer to the above data. If year 2 is chosen as the base year, real GDP for year 1 is:

Correct AnswerverifiedShow Answer

Welfare payments to families with dependent children are included in GDP.

Correct AnswerverifiedShow Answer

Following is data for a hypothetical economy. The base year is 2002 (Price index = 100) . -Refer to the above data. From 2003 to 2006, prices rose by:

Correct AnswerverifiedShow Answer

Gross domestic product (GDP) measures and reports output:

Correct AnswerverifiedShow Answer

Which of the following is an intermediate good?

Correct AnswerverifiedShow Answer

Transfer payments are:

Correct AnswerverifiedShow Answer

Interest and investment income includes:

Correct AnswerverifiedShow Answer

The GDP is the:

Correct AnswerverifiedShow Answer

The growth of GDP may understate changes in the economy's well-being over time if the:

Correct AnswerverifiedShow Answer

Which of the following is a final good or service?

Correct AnswerverifiedShow Answer

The GDP deflator or price index equals:

Correct AnswerverifiedShow Answer

Nondurable goods are products:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following best defines disposable income?

Correct AnswerverifiedShow Answer

The table below indicates the price and output data over a five year period for an economy that produces only one good. -Refer to the above data. The nominal GDP for year 4:

Correct AnswerverifiedShow Answer

Value added is the value of a firm's output minus:

Correct AnswerverifiedShow Answer

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