Question 1

Given the following hypothetical data, where C = $3,000; I = $1,200; G = $2,000; X − M = −$500; depreciation = $200; and transfer payments = $800, where C = consumption; I = investment; G = government purchases; X = exports; and M = imports, net domestic product (NDP)  is _____

Accepted Answer

A)   $5,500.
B)   $5,700.
C)   $6,200.
D)   $6,400.
E)   $6,900.F) D) and E)
G) C) and D)

Question 2

If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000 from another firm, earns profits of $500, and sells its output for $14,000, the value added by the firm is _____

Accepted Answer

A)   $12,000.
B)   $8,000.
C)   $6,000.
D)   $2,000.
E)   $500.F) A) and E)
G) C) and D)

Question 3

Suppose the real gross domestic product (GDP)  equals $100 billion this year and the nominal gross domestic product (GDP)  is $200 billion. This implies that the price level has increased by _____compared to the base year.

Accepted Answer

A)   $200 billion
B)   50 percent
C)   $100 billion
D)   100 percent
E)   200 percentF) A) and C)
G) A) and B)

Question 4

If real gross domestic product (GDP)  for a particular year is $5 trillion and the GDP price index for that year is 136, the nominal gross domestic product (GDP)  for that year is _____.

Accepted Answer

A)   $3.7 trillion.
B)   $4 trillion.
C)   $6.8 trillion.
D)   $27 trillion.
E)   $68 trillion.F) A) and B)
G) A) and C)

Question 5

The consumer price index (CPI)  _____ inflation because it includes an item in the market basket only after the product becomes _____.

Accepted Answer

A)   overstates; unpopular
B)   overstates; obsolete
C)   overstates; widely used
D)   understates; widely used
E)   understates; obsoleteF) All of the above
G) A) and B)

Question 6

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)   savings
E)   government borrowingF) B) and E)
G) B) and C)

Question 7

Katrina pays $40 for a meal at a fancy restaurant. The ingredients used cost $10. The value added by the restaurant is _____.

Accepted Answer

A)   $30
B)   $40
C)   $70
D)   $40 plus the wages paid to the chef and waiters
E)   $40 plus the profit earned by the restaurant ownerF) All of the above
G) C) and E)

Question 8

Leakages cause diversion of income from the domestic spending stream.

Accepted Answer

A) True 
 B)False

Question 9

Experts conclude that the CPI has overestimated inflation by how much per year?

Accepted Answer

A)   2.5%
B)   3%
C)   1.5%
D)   1%
E)   0%F) B) and E)
G) C) and E)

Question 10

In order to convert nominal gross domestic product (GDP)  to real gross domestic product (GDP) , we must divide _____

Accepted Answer

A)   real GDP by the price index.
B)   nominal GDP by the price index.
C)   the price index by nominal GDP.
D)   the price index by real GDP.
E)   nominal GDP by 100.F) D) and E)
G) A) and E)

Question 11

Gross domestic product (GDP) does not reflect many things that individuals do for themselves.

Accepted Answer

A) True 
 B)False

Question 12

The gross domestic product (GDP)  excludes _____

Accepted Answer

A)   the increase in inventories during a given period.
B)   the expenditures by government for newly produced goods and services during a given period.
C)   the value of intermediate goods produced in an economy during a given period.
D)   the value of final output during a given period.
E)   household expenditure on durable goods.F) C) and E)
G) A) and D)

Question 13

The gross domestic product (GDP)  of an economy for a particular year is likely to increase if _____

Accepted Answer

A)   workers go on longer vacations during that year.
B)   the length of an average work week decreases.
C)   homeowners hire lawn care services rather than maintaining the lawns themselves.
D)   people cook food at home instead of buying restaurant meals.
E)   the sale of illegal drugs increases.F) A) and B)
G) A) and C)

Question 14

_____ are taxes minus transfer payments.

Accepted Answer

A)   Gross income
B)   Net income
C)   Taxable income
D)   Disposable income
E)   Net taxesF) A) and C)
G) C) and D)

Question 15

Huge quantities of data collected from a variety of sources across the United States are organized under which system?

Accepted Answer

A)   the budget deficit of the federal government
B)   the stock of capital goods (machinery)  in the nation
C)   the national income accounting system
D)   the balance of trade with other nations
E)   the value of the final goods and services produced in the nationF) A) and D)
G) A) and C)

Question 16

If 2016 is the base year and the price index in 2017 is 90, prices in 2017 are _____ from prices in 2016.

Accepted Answer

A)   1 percent higher
B)   10 percent higher
C)   10 percent lower
D)   9 percent higher
E)   unchangedF) A) and B)
G) A) and E)

Question 17

If an economy produces final output worth $5 trillion, then the aggregate income generated by that production _____

Accepted Answer

A)   will be $5 trillion.
B)   will be more than $5 trillion.
C)   will be $5 trillion minus taxes.
D)   will be less than $5 trillion.
E)   will be $5 trillion plus transaction costs.F) A) and E)
G) B) and E)

Question 18

Which of the following is not true about gross domestic product (GDP) ?

Accepted Answer

A)   It includes only final goods and services.
B)   It reflects production in a particular year.
C)   Intermediate goods and services are excluded to prevent double-counting.
D)   It excludes purchases of financial assets.
E)   It includes transfer payments such as Social Security.F) A) and D)
G) A) and E)

Question 19

If consumption = $5,000; investment = $800, government purchases = $700, exports = $30, imports = $60, and transfer payments = $340, then _____

Accepted Answer

A)   GDP = $7,400.
B)   GDP = $7,740.
C)   GDP = $3,140.
D)   GDP = $6,470.
E)   GDP = $6,840.F) D) and E)
G) A) and E)

Question 20

A shortcoming of national income accounting is that it ignores _____

Accepted Answer

A)   the depreciation of manufactured capital.
B)   spending by poor households who are receiving government transfer payments.
C)   spending on intermediate goods.
D)   the depletion of natural resources.
E)   U.S. products that are sold overseas.F) A) and C)
G) B) and D)

Exam 6: Tracking the U. S. Economy.

If real gross domestic product (GDP) for a particular year is $5 trillion and the GDP price index for that year is 136, the nominal gross domestic product (GDP) for that year is _____.

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If 2016 is the base year and the price index in 2017 is 90, prices in 2017 are _____ from prices in 2016.

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Which of the following is not true about gross domestic product (GDP) ?

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If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000 from another firm, earns profits of $500, and sells its output for $14,000, the value added by the firm is _____

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Gross domestic product (GDP) does not reflect many things that individuals do for themselves.

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_____ are taxes minus transfer payments.

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In order to convert nominal gross domestic product (GDP) to real gross domestic product (GDP) , we must divide _____

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Huge quantities of data collected from a variety of sources across the United States are organized under which system?

Correct AnswerverifiedShow Answer

The consumer price index (CPI) _____ inflation because it includes an item in the market basket only after the product becomes _____.

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Katrina pays $40 for a meal at a fancy restaurant. The ingredients used cost $10. The value added by the restaurant is _____.

Correct AnswerverifiedShow Answer

Given the following hypothetical data, where C = $3,000; I = $1,200; G = $2,000; X − M = −$500; depreciation = $200; and transfer payments = $800, where C = consumption; I = investment; G = government purchases; X = exports; and M = imports, net domestic product (NDP) is _____

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

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The gross domestic product (GDP) of an economy for a particular year is likely to increase if _____

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Leakages cause diversion of income from the domestic spending stream.

Correct AnswerverifiedShow Answer

If an economy produces final output worth $5 trillion, then the aggregate income generated by that production _____

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Suppose the real gross domestic product (GDP) equals $100 billion this year and the nominal gross domestic product (GDP) is $200 billion. This implies that the price level has increased by _____compared to the base year.

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The gross domestic product (GDP) excludes _____

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Experts conclude that the CPI has overestimated inflation by how much per year?

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If consumption = $5,000; investment = $800, government purchases = $700, exports = $30, imports = $60, and transfer payments = $340, then _____

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A shortcoming of national income accounting is that it ignores _____

Correct AnswerverifiedShow Answer

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The consumer price index (CPI) _ inflation because it includes an item in the market basket only after the product becomes _.

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