Question 1

Which of the following actions will decrease the gross domestic product (GDP) ?

Accepted Answer

A)   Tom's alarm clock breaks, so he buys a new one.
B)   Tom buys a new alarm clock because he tends to sleep through the first alarm.
C)   Tom's alarm clock breaks. He now oversleeps and has to buy a cup of coffee on the way to work instead of making it at home.
D)   Tom gets fired for being late often after his alarm clock breaks.
E)   Tom sells his broken alarm clock and uses the money to buy some French fries.

Question 2

Gross domestic product (GDP) decreases if the quantity of illegal drugs sold decreases.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of an injection into the circular flow of income and expenditure?

Accepted Answer

A)   government spending
B)   imports
C)   disposable income
D)   net taxes
E)   savings

Question 4

We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____

Accepted Answer

A)   10.
B)   equal to zero.
C)   20.
D)   greater than 100.
E)   negative.

Question 5

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

Accepted Answer

A) True 
 B)False

Question 6

A fixed-weight price index uses a process that adjusts the weights continuously year by year.

Accepted Answer

A) True 
 B)False

Question 7

The value-added method to measure GDP does not avoid double-counting.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an example of a leakage from the circular flow of income and expenditure?

Accepted Answer

A)   government purchases of goods and services
B)   taxes
C)   investment
D)   exports
E)   consumption expenditures

Question 9

Nominal gross domestic product (GDP)  is measured in terms of the _____

Accepted Answer

A)   current-year prices.
B)   base-year prices.
C)   export of goods and services.
D)   amount of taxes collected.
E)   hours of employment.

Question 10

Problems with CPI do not include _____

Accepted Answer

A)   a quality bias.
B)   not adjusting for the fact that households shift away from goods that have become more costly.
C)   failing to keep up with the consumer shift toward discount stores.
D)   that it does not allow for some substitution within narrow categories.
E)   that it can distort other measures, such as wages, that use the CPI to adjust for inflation.

Question 11

The consumer price index (CPI) tends to understate the true rate of inflation.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of an injection into the circular flow of income and expenditure?

Accepted Answer

A)   consumption
B)   exports
C)   taxes
D)   saving
E)   government borrowing

Question 13

The circular-flow model shows that _____

Accepted Answer

A)   households are on the demand side of the resource market.
B)   firms are on the demand side of both the product and resource markets.
C)   for each flow of money, there is an equal and opposite flow of products or resources.
D)   firms and governments are on the supply side of the loanable funds market.
E)   governments are on the demand side of the product market and the supply side of the resource market.

Question 14

Which of the following is an example of an injection into the circular flow of income and expenditure?

Accepted Answer

A)   net taxes
B)   saving
C)   transfer payments
D)   government borrowing
E)   disposable income

Question 15

Net exports have averaged a minus 3 percent of GDP during the last decade. This means that _____

Accepted Answer

A)   the sum of exports exceeds GDP.
B)   the sum of consumption and government purchases exceeds GDP.
C)   consumption's share of total spending decreased and government purchases increased.
D)   imports exceeded exports.
E)   the sum of consumption, investment, and government purchases was less than GDP.

Question 16

Which of the following formulas is correct for aggregate income?

Accepted Answer

A)   Aggregate income = DI - NT
B)   Aggregate income = DI + NT
C)   Aggregate income = C+S
D)   Aggregate income = C+I
E)   Aggregate income = C + S - NT

Question 17

Which of the following would be excluded from the gross domestic product (GDP) ?

Accepted Answer

A)   The mayor of a city hiring more workers to improve the sanitation of the city.
B)   The sale of mobiles decreasing significantly.
C)   The government reducing welfare benefits.
D)   A homemaker spending $20 taking the family out to lunch instead of cooking food.
E)   A consumer having his pickup truck tuned up at the local garage.

Question 18

The base year for a price index is the year _____

Accepted Answer

A)   in which prices were lowest.
B)   in which prices were highest.
C)   in which real output was the largest.
D)   in which prices were stable.
E)   that serves as a reference point.

Question 19

If the nominal gross domestic product (GDP)  for a year is $5.4 trillion, and the real gross domestic product (GDP)  for the same year is $3.6 trillion, the GDP price index is _____

Accepted Answer

A)   0.667.
B)   150.
C)   66.67.
D)   50.
E)   33.33.

Question 20

Which of the following correctly illustrates the leakages-injections approach to GDP?

Accepted Answer

A)   DI + (NT)  = C + I + G + (X ‒ M) 
B)   S + C + NT = DI
C)   S + C + (NT)  = I + G + (X ‒ M) 
D)   S + (NT)  + M = I + G + X
E)   S + (NT)  = I + G + (X ‒ M)

Exam 6: Tracking the U. S. Economy.

A fixed-weight price index uses a process that adjusts the weights continuously year by year.

Correct AnswerverifiedShow Answer

Which of the following is an example of an injection into the circular flow of income and expenditure?

Correct AnswerverifiedShow Answer

Which of the following would be excluded from the gross domestic product (GDP) ?

Correct AnswerverifiedShow Answer

The value-added method to measure GDP does not avoid double-counting.

Correct AnswerverifiedShow Answer

The consumer price index (CPI) tends to understate the true rate of inflation.

Correct AnswerverifiedShow Answer

The circular-flow model shows that _____

Correct AnswerverifiedShow Answer

Gross domestic product (GDP) decreases if the quantity of illegal drugs sold decreases.

Correct AnswerverifiedShow Answer

Which of the following is an example of an injection into the circular flow of income and expenditure?

Correct AnswerverifiedShow Answer

We can conclude that there has been inflation since the base year if the GDP price index in the current year is _____

Correct AnswerverifiedShow Answer

Which of the following is an example of an injection into the circular flow of income and expenditure?

Correct AnswerverifiedShow Answer

The base year for a price index is the year _____

Correct AnswerverifiedShow Answer

Problems with CPI do not include _____

Correct AnswerverifiedShow Answer

Which of the following actions will decrease the gross domestic product (GDP) ?

Correct AnswerverifiedShow Answer

Nominal gross domestic product (GDP) is measured in terms of the _____

Correct AnswerverifiedShow Answer

Which of the following is an example of a leakage from the circular flow of income and expenditure?

Correct AnswerverifiedShow Answer

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

Correct AnswerverifiedShow Answer

If the nominal gross domestic product (GDP) for a year is $5.4 trillion, and the real gross domestic product (GDP) for the same year is $3.6 trillion, the GDP price index is _____

Correct AnswerverifiedShow Answer

Which of the following formulas is correct for aggregate income?

Correct AnswerverifiedShow Answer

Net exports have averaged a minus 3 percent of GDP during the last decade. This means that _____

Correct AnswerverifiedShow Answer

Which of the following correctly illustrates the leakages-injections approach to GDP?

Correct AnswerverifiedShow Answer

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