QUESTION 1

1. If the GDP chain price index in a given year is less than 100, real GDP in that year would be greater than nominal GDP.

   True False

1 points

QUESTION 2

1. GDP does count:

   	a.	state and local government purchases.
   	b.	spending for new homes.
   	c.	changes in inventories.
   	d.	none of the above.
   	e.	all of the above.

1 points

QUESTION 3

1. Personal consumption expenditures:

   	a.	represent close to two-thirds of GDP.
   	b.	include all goods and services bought by the government.
   	c.	are equal to personal income minus individual taxes.
   	d.	do not include any intangible consumption items.
   	e.	include durable good purchases but not nondurable good purchases.

1 points

QUESTION 4

1. Exhibit 11-8 GDP data (billions of dollars)
   

   Indirect business taxes	$ 600
   Depreciation	950
   Change in business inventories	50
   Compensation of employees	5,400
   Corporate profits	700
   Durable goods	600
   Exports	100
   Social Security taxes	360
   Transfer payments	300
   Fixed investment	950
   Government spending	800
   Imports	150
   Net interest	500
   Nondurable goods	2,000
   Personal taxes	1,000
   Rental income	200
   Services	4,000

   In Exhibit 11-8, compute disposable personal income (DI). Which of the following is correct?

   	a.	$7,740 billion.
   	b.	$8,350 billion.
   	c.	$5,178 billion.
   	d.	$5,740 billion.
   	e.	$6,450 billion.

1 points

QUESTION 5

1. Exhibit 11-4
   

   Year	Nominal GDP (billions)	Chain price index
   Year 1	600	100.0
   Year 2	1,000	133.3

   Refer to Exhibit 11-4. Between Year 1 and Year 2, the general level of prices increased by approximately:

   	a.	16.7 percent.
   	b.	133.3 percent.
   	c.	33.3 percent.
   	d.	66.7 percent.

1 points

QUESTION 6

1. Nominal gross domestic product is based on the existing prices at which final goods are actually sold.

   True False

1 points

QUESTION 7

1. Which of the following is included in personal income but not in national income?

   	a.	Rent.
   	b.	Compensation for workers.
   	c.	Corporate profits.
   	d.	Proprietors’ income.
   	e.	Social Security payments.

1 points

QUESTION 8

1. In the circular flow model,

   	a.	money flows from the firms to the households through the product market.
   	b.	money flows from the households to the firms through the product market.
   	c.	money flows from the households to the firms through the resource market.
   	d.	resources flow to the households from the firms through the product market.
   	e.	money flows from the households to the firms through both the product market and the resource market.

1 points

QUESTION 9

1. In any year, nominal GDP divided by the GDP chain price index times 100 equals real GDP.

   True False

1 points

QUESTION 10

1. In the circular flow model, who is a seller in the factor markets and a buyer in the product markets?

   	a.	Households.
   	b.	Foreign producers who export final goods and services into the U.S.
   	c.	Transnational corporations.
   	d.	Businesses.

1 points

QUESTION 11

1. Disposable personal income:

   	a.	excludes personal income taxes.
   	b.	includes personal income taxes.
   	c.	excludes transfer payments.
   	d.	is income spent for personal items such as homes and cars.

1 points

QUESTION 12

1. If you buy a brand new, American-made laptop computer to use for taking notes in your economics class, then it will be counted as:

   	a.	none of the following.
   	b.	C.
   	c.	G.
   	d.	I.
   	e.	(X ? M).

1 points

QUESTION 13

1. Which of the following statements is true?

   	a.	National income is total income earned by households whereas personal income is total income received by households (including transfer payments).
   	b.	Disposable personal income equals personal income minus personal taxes.
   	c.	The expenditures approach and the income approach yield the same GDP figure.
   	d.	All of the above.

1 points

QUESTION 14

1. Exhibit 11-6 GDP data (billions of dollars)
   

   Personal consumption expenditures	$850
   Interest	90
   Corporate profits	150
   Government spending	400
   Depreciation	100
   Rental income	70
   Gross private domestic investment	120
   Compensation of employees	830
   Exports	120
   Imports	70
   Indirect business taxes	80
   Proprietors’ income	120
   Personal income taxes	110
   Social Security taxes	50
   Transfer payments	160

   In Exhibit 11-6, personal income (PI) equals:

   	a.	$1,310 billion.
   	b.	$2,320 billion.
   	c.	$1,280 billion.
   	d.	$2,290 billion.
   	e.	$1,400 billion.

1 points

QUESTION 15

1. Gross domestic product is officially measured by adding together the:

   	a.	quantity of each good and service produced by U.S. residents.
   	b.	market value of all final goods and services produced within the borders of a nation.
   	c.	quantity of goods and services produced by companies owned by U.S. citizens.
   	d.	none of the above.

1 points

QUESTION 16

1. GDP measures the economy’s production of:

   	a.	intermediate goods.
   	b.	final goods and services.
   	c.	consumer goods and services.
   	d.	capital goods.

1 points

QUESTION 17

1. Which one of the following statements is true?

   	a.	Resource payments flow from households to the government.
   	b.	Taxes flow from foreign economies to the government.
   	c.	Resources flow from households to firms.
   	d.	Resources flow from the government to firms.
   	e.	Goods and services flow from households to foreign economies.

1 points

QUESTION 18

1. Exhibit 11-6 GDP data (billions of dollars)
   

   Personal consumption expenditures	$850
   Interest	90
   Corporate profits	150
   Government spending	400
   Depreciation	100
   Rental income	70
   Gross private domestic investment	120
   Compensation of employees	830
   Exports	120
   Imports	70
   Indirect business taxes	80
   Proprietors’ income	120
   Personal income taxes	110
   Social Security taxes	50
   Transfer payments	160

   In Exhibit 11-6, disposable personal income (PI) is:

   	a.	$2,180 billion.
   	b.	$1,290 billion.
   	c.	$1,180 billion.
   	d.	$2,210 billion.
   	e.	$1,200 billion.

1 points

QUESTION 19

1. Because GDP does not account for improvements in the quality of goods, the GDP calculation:

   	a.	tends to overstate the true value of output in the United States.
   	b.	provides an accurate value of output in the United States.
   	c.	measures the value correctly because price changes always capture the value of quality changes.
   	d.	tends to understate the true value of output in the United States.
   	e.	provides the best measure of output in the United States.

1 points

QUESTION 20

1. Gross domestic product that is based on existing prices is called:

   	a.	nominal GDP.
   	b.	current GDP.
   	c.	money GDP.
   	d.	all of the above.

1 points

QUESTION 21

1. The effect of the Environment Protection Agency (EPA) ordering a firm to clean-up damages from pollution would have which of the following effects?

   	a.	GDP would decrease.
   	b.	GDP remains unchanged.
   	c.	GDP would increase.

1 points

QUESTION 22

1. Which one of the following statements is true in the four-sector circular model?

   	a.	Money flows from households to foreign economies for resources.
   	b.	Money flows from foreign economies to households for exports.
   	c.	Money flows from firms to foreign economies for exports.
   	d.	Money flows from government to households for taxes.
   	e.	Money flows from government to firms for goods and services.

1 points

QUESTION 23

1. Gross domestic product (GDP) includes:

   	a.	only final goods and services.
   	b.	used goods sold in the current time period.
   	c.	foreign goods as well as domestically produced goods.
   	d.	intermediate as well as final goods.

1 points

QUESTION 24

1. The most broadly based price index is the:

   	a.	GDP chain price index.
   	b.	consumer price index.
   	c.	producer price index.
   	d.	real GDP price index.

1 points

QUESTION 25

1. Which of the following is a shortcoming of GDP?

   	a.	GDP measures nonmarket transactions.
   	b.	GDP includes an estimate of illegal transactions.
   	c.	GDP includes an estimate of the value of household services.
   	d.	None of the above are true.

1 points

QUESTION 26

1. Personal income minus personal taxes equals disposable personal income.

   True False

1 points

QUESTION 27

1. Because of transactions which take place in the underground economy, the:

   	a.	GDP calculation tends to understate the actual value of goods sold in the economy.
   	b.	GDP calculation tends to accurately portray the value of goods sold in the economy.
   	c.	value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.
   	d.	GDP calculation tends to overstate the actual value of goods sold in the economy.
   	e.	value of the GDP calculation will be equal to the value of the national income calculation.

1 points

QUESTION 28

1. Which of the following expenditures would be included in GDP for this year?

   	a.	The purchase of a new car.
   	b.	The purchase of a new tire by General Motors for a new car.
   	c.	The purchase of a used car.
   	d.	All of the above would be included.

1 points

QUESTION 29

1. When net exports are negative,

   	a.	depreciation is greater than net investment.
   	b.	exports are greater than investment.
   	c.	imports are greater than investment.
   	d.	imports are greater than exports.
   	e.	exports are greater than imports.

1 points

QUESTION 30

1. Which one of the following statements is true?

   	a.	Money flows from foreign economies to firms for imports.
   	b.	Money flows from firms to households for resources.
   	c.	Money flows from households to firms for resources.
   	d.	Money flows from households to foreign economies for exports.
   	e.	Money flows from government to firms for resources.