Question 1

In a simple circular-flow diagram,

Accepted Answer

A)   households spend all of their income.
B)   all goods and services are bought by households.
C)   expenditures flow through the markets for goods and services,while income flows through the markets for the factors of production.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 2

Which of the following statements about GDP is correct?

Accepted Answer

A)   GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force.
B)   Money continuously flows from households to government and then back to households,and GDP measures this flow of money.
C)   GDP is to a nation's economy as household income is to a household.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 3

The U.S.government pays an economist at the U.S.Department of Commerce $50,000 in salary in 2006.The economist then retires.In 2007,the government pays him $30,000 in retirement benefits.Which of the following is correct?

Accepted Answer

A)   The 2006 payment is included in 2006 GDP as government purchases,and the 2007 payment is included in 2007 GDP as government purchases.
B)   The 2006 payment is included in 2006 GDP as government purchases,but the 2007 payment is not included in 2007 GDP.
C)   The 2006 payment is included in 2006 GDP as government purchases,and the 2007 payment is included in 2007 GDP as government transfer payments.
D)   The 2006 payment is included in 2006 GDP as government purchases,and the 2007 payment is allocated to previous years' GDP according to the amount of work performed by the economist each year.E) None of the above
F) All of the above

Question 4

A U.S.firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory.In the second quarter of 2010 the firm sells the sweatshirts to consumers.In which quarter(s) does(do) these transactions raise consumption?

Accepted Answer

A)   the first and the second
B)   the first but not the second
C)   the second but not the first
D)   neither the first nor the secondE) B) and D)
F) C) and D)

Question 5

Table 23-1
A country produces only ice cream and pie.Quantities and prices of these goods for the last several years are shown below.The base year is 2008.
Prices and Quantities
 
-Refer to Table 23-1.In 2009,this country's

Accepted Answer

A)   real GDP was $250,and the GDP deflator was 125
B)   real GDP was $250,and the GDP deflator was 120.
C)   real GDP was $240,and the GDP deflator was 125.
D)   real GDP was $240,and the GDP deflator was 120.E) All of the above
F) A) and B)

Question 6

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00.Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7.Taking these four transactions into account,how much is added to GDP?

Accepted Answer

A)   $31
B)   $25
C)   $19
D)   None of the above is correct.E) A) and D)
F) B) and D)

Question 7

Table 10-4
The table below reports nominal and real GDP for the U.S.from 1929 to 1932.
 
-Refer to Table 10-3.If prices had remained constant between 1929 and 1930,GDP would have decreased

Accepted Answer

A)   8.62%.
B)   9.43%.
C)   11.97%.
D)   13.6%.E) A) and B)
F) B) and D)

Question 8

Which of the following is not a correct statement about the growth of real GDP in the U.S.economy?

Accepted Answer

A)   Real GDP in 2009 was almost four times its 1965 level.
B)   Growth was steady between 1965 and 2009.
C)   Continued growth in real GDP enables the typical American to enjoy greater economic prosperity than his or her parents and grandparents did.
D)   The output of goods and services produced grew on average about 3 percent per year between 1965 and 2009.E) A) and B)
F) All of the above

Question 9

Which of the following is not included in GDP?

Accepted Answer

A)   a can of bug spray
B)   the services of an exterminator
C)   the honey produced and sold by a beekeeper
D)   All of the above are included in GDP.E) A) and B)
F) None of the above

Question 10

Additions to inventory subtract from GDP,and when the goods in inventory are sold,the reductions in inventory add to GDP.

Accepted Answer

A) True 
 B)False

Question 11

In the economy of Ukzten in 2010,consumption was $3000,exports were $200,GDP was $8000,government purchases were $1000,and imports were $600.What was Ukzten's investment in 2010?

Accepted Answer

A)   $3200
B)   $3600
C)   $3800
D)   $4400E) B) and C)
F) A) and B)

Question 12

If total spending rises from one year to the next,then

Accepted Answer

A)   the economy must be producing a larger output of goods and services.
B)   goods and services must be selling at higher prices.
C)   either the economy must be producing a larger output of goods and services,or goods and services must be selling at higher prices,or both.
D)   employment or productivity must be rising.E) All of the above
F) A) and C)

Question 13

The investment component of GDP refers to financial investment in stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 14

Table 10-2
The table below contains data for the country of Crete for the year 2010.
 
-Refer to Table 10-2.What were Crete's net exports in 2010?

Accepted Answer

A)   -$217
B)   -$88
C)   $88
D)   $217E) C) and D)
F) None of the above

Question 15

Changes in real GDP reflect

Accepted Answer

A)   only changes in prices.
B)   only changes in the amounts being produced.
C)   both changes in prices and changes in the amounts being produced.
D)   neither changes in prices nor changes in the amounts being produced.E) C) and D)
F) A) and B)

Question 16

A farmer sells $50,000 of apples to individuals who take them home to eat and $75,000 of apples to a company that uses them all to produce cider.How much of the farmer's sales will be included as apples in GDP?

Accepted Answer

A)   $0
B)   $50,000
C)   $75,000
D)   $125,000E) A) and C)
F) A) and B)

Question 17

Otherwise legal transactions that go unreported or unrecorded are called

Accepted Answer

A)   the underground economy.
B)   the shadow economy.
C)   the informal economy.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 18

Foreign citizens earn more income in Ireland than Irish citizens earn in foreign countries.

Accepted Answer

A)   Ireland's net factor payments from abroad are positive,and its GDP is larger than its GNP.
B)   Ireland's net factor payments from abroad are positive,and its GNP is larger than its GDP.
C)   Ireland's net factor payments from abroad are negative,and its GDP is larger than its GNP.
D)   Ireland's net factor payments from abroad are negative,and its GNP is larger than its GDP.E) A) and D)
F) B) and C)

Question 19

Other things equal,in countries with higher levels of real GDP per person,life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person.

Accepted Answer

A) True 
 B)False

Question 20

If a U.S.citizen buys a television made in Korea by a Korean firm,then

Accepted Answer

A)   U.S.net exports decrease and U.S.GDP decreases.
B)   U.S.net exports are unaffected and U.S.GDP decreases.
C)   U.S.net exports are unaffected and U.S.GDP is unaffected.
D)   U.S.net exports decrease and U.S.GDP is unaffected.E) B) and C)
F) A) and D)

Exam 23: Measuring a Nations Income

One bag of oranges is sold for $6.00 to a company that turns them into juice which is sold to consumers for $12.00.Another bag of oranges is purchased by a grocery store for $6.00 who then sells it to a consumer for $7.Taking these four transactions into account,how much is added to GDP?

Correct AnswerverifiedShow Answer

Table 23-1 A country produces only ice cream and pie.Quantities and prices of these goods for the last several years are shown below.The base year is 2008. Prices and Quantities -Refer to Table 23-1.In 2009,this country's

Correct AnswerverifiedShow Answer

Which of the following is not included in GDP?

Correct AnswerverifiedShow Answer

The U.S.government pays an economist at the U.S.Department of Commerce $50,000 in salary in 2006.The economist then retires.In 2007,the government pays him $30,000 in retirement benefits.Which of the following is correct?

Correct AnswerverifiedShow Answer

Table 10-4 The table below reports nominal and real GDP for the U.S.from 1929 to 1932. -Refer to Table 10-3.If prices had remained constant between 1929 and 1930,GDP would have decreased

Correct AnswerverifiedShow Answer

A U.S.firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory.In the second quarter of 2010 the firm sells the sweatshirts to consumers.In which quarter(s) does(do) these transactions raise consumption?

Correct AnswerverifiedShow Answer

In a simple circular-flow diagram,

Correct AnswerverifiedShow Answer

Which of the following statements about GDP is correct?

Correct AnswerverifiedShow Answer

A farmer sells $50,000 of apples to individuals who take them home to eat and $75,000 of apples to a company that uses them all to produce cider.How much of the farmer's sales will be included as apples in GDP?

Correct AnswerverifiedShow Answer

If a U.S.citizen buys a television made in Korea by a Korean firm,then

Correct AnswerverifiedShow Answer

Table 10-2 The table below contains data for the country of Crete for the year 2010. -Refer to Table 10-2.What were Crete's net exports in 2010?

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Which of the following is not a correct statement about the growth of real GDP in the U.S.economy?

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The investment component of GDP refers to financial investment in stocks and bonds.

Correct AnswerverifiedShow Answer

Otherwise legal transactions that go unreported or unrecorded are called

Correct AnswerverifiedShow Answer

Changes in real GDP reflect

Correct AnswerverifiedShow Answer

If total spending rises from one year to the next,then

Correct AnswerverifiedShow Answer

Additions to inventory subtract from GDP,and when the goods in inventory are sold,the reductions in inventory add to GDP.

Correct AnswerverifiedShow Answer

Foreign citizens earn more income in Ireland than Irish citizens earn in foreign countries.

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In the economy of Ukzten in 2010,consumption was $3000,exports were $200,GDP was $8000,government purchases were $1000,and imports were $600.What was Ukzten's investment in 2010?

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Other things equal,in countries with higher levels of real GDP per person,life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person.

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