Question 1

Which of the following is included in determining Gross Domestic Product?

Accepted Answer

A)   The purchase of a new car
B)   The purchase of a used car
C)   A housewife preparing breakfast
D)   A gardener canning vegetables for consumption during the winter

Question 2

The two sectors of the economy in the simple circular flow model are

Accepted Answer

A)   the employed and the unemployed.
B)   foreign markets and domestic markets.
C)   households and businesses.
D)   the private sector and the public sector.

Question 3

GDP measures

Accepted Answer

A)   the annual total value of all services produced by factors of production located within a national border.
B)   the annual value of final goods and services produced by factors of production located within a national border.
C)   the annual value of goods and services produced by factors of production owned by companies headquartered in a given country.
D)   the value of all goods and services sold in a given country.

Question 4

Economists consider profit to be

Accepted Answer

A)   a cost of producing goods and services.
B)   the same as a salary.
C)   a reward for incurring losses.
D)   something that should be eliminated by antitrust laws.

Question 5

Constant dollars are

Accepted Answer

A)   the same as current dollars.
B)   dollars corrected for general price level changes.
C)   what nominal GDP is measured in.
D)   when an individual does not receive a cost of living increase.

Question 6

The largest component of gross domestic income is

Accepted Answer

A)   interest payments.
B)   wages.
C)   profits.
D)   taxes.

Question 7

The amount of income received by households prior to the payment of personal income taxes is called

Accepted Answer

A)   disposable wages.
B)   personal income.
C)   national income.
D)   net domestic product.

Question 8

Many economists argue that real GDP is not a good measure of economic well-being because

Accepted Answer

A)   it overvalues the increases in nonmarket transactions.
B)   it excludes Social Security payments made to retirees.
C)   it includes the taxes we pay to the federal government.
D)   it excludes the environmental quality of life.

Question 9

The owner of an oil well in Texas sells 1000 barrels of oil to a refinery in Mexico for $12,000 for refining. This transaction

Accepted Answer

A)   will increase Gross Domestic Product (GDP)  by $12,000.
B)   has no effect on Gross Domestic Product (GDP)  because the refinery is in Mexico.
C)   decreases Gross Domestic Product (GDP)  because oil reserves have fallen by 1000 barrels.
D)   has no effect on Gross Domestic Product (GDP)  because this is the sale of an intermediate product.

Question 10

Which of the following statements is FALSE?

Accepted Answer

A)   Gross Domestic Product (GDP)  measures the market value of final goods and services produced during a particular time period.
B)   Transfers of used goods are not included in Gross Domestic Product (GDP) .
C)   Private transfer payments, such as an inheritance, are included in the Gross Domestic Product (GDP) .
D)   If statisticians counted intermediate goods, the estimate of Gross Domestic Product (GDP)  would be too high.

Question 11

Wheat used for producing bread is

Accepted Answer

A)   a final good.
B)   not going to generate any employment.
C)   an intermediate good.
D)   a durable good.

Question 12

-Refer to the above table. Real GDP in 2012 is

Accepted Answer

A)   146.4.
B)   682.9.
C)   700.
D)   717.5.

Question 13

National income includes all of the following EXCEPT

Accepted Answer

A)   proprietors' income.
B)   net interest.
C)   corporate profits.
D)   depreciation.

Question 14

Constant dollars are dollars

Accepted Answer

A)   corrected for general price level changes.
B)   measured in terms of current-year prices.
C)   issued by the U.S. Treasury with values that fail to change even in the face of inflation or deflation.
D)   issued by the Federal Reserve with values that fail to change even in the face of inflation or deflation.

Question 15

In the factor market, households

Accepted Answer

A)   sell resources.
B)   buy resources.
C)   are neither buyers nor sellers of resources.
D)   are both buyers and sellers of resources.

Question 16

Inventory investment can be defined as

Accepted Answer

A)   changes in the stocks of finished goods and raw materials.
B)   the system of accounts that is used to count certain goods.
C)   goods that must be excluded from the GDP to avoid double counting.
D)   the value of monetary transactions by businesses.

Question 17

Income received by the factors of production is called

Accepted Answer

A)   gross domestic income.
B)   disposable personal income.
C)   personal income.
D)   national income.

Question 18

Which one of the following is true?

Accepted Answer

A)   Net investment is negative when gross investment is greater than depreciation.
B)   Our productive capacity declines when net investment is less than zero.
C)   Negative net investment occurs when imports are less than exports.
D)   Negative net investment occurs when exports are less than imports.

Question 19

The two principle methods of measuring Gross Domestic Product are the

Accepted Answer

A)   flow approach and the stock approach.
B)   expenditures approach and the income approach.
C)   intermediate approach and the value-added approach.
D)   domestic approach and the international approach.

Question 20

Which of the following statements is true?

Accepted Answer

A)   During periods of inflation, nominal GDP increases more rapidly than does real GDP.
B)   Nominal values are expressed in constant dollars.
C)   Real values are expressed in current dollars.
D)   Increases in real GDP are evidence that the distribution of wealth is becoming more equal.

Exam 8: Measuring the Economys Performance

Many economists argue that real GDP is not a good measure of economic well-being because

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-Refer to the above table. Real GDP in 2012 is

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The two sectors of the economy in the simple circular flow model are

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In the factor market, households

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Wheat used for producing bread is

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The two principle methods of measuring Gross Domestic Product are the

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Constant dollars are

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National income includes all of the following EXCEPT

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GDP measures

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Economists consider profit to be

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Inventory investment can be defined as

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Which of the following is included in determining Gross Domestic Product?

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The amount of income received by households prior to the payment of personal income taxes is called

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The owner of an oil well in Texas sells 1000 barrels of oil to a refinery in Mexico for $12,000 for refining. This transaction

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Which one of the following is true?

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Constant dollars are dollars

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Income received by the factors of production is called

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The largest component of gross domestic income is

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Which of the following statements is FALSE?

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Which of the following statements is true?

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