Question 1

Lois sells ten sweaters she had knitted to a retail store. The gross domestic product (GDP)  of her country _____.

Accepted Answer

A)   will increase
B)   will decrease
C)   will remain unaffected
D)   will increase only if the sweaters are as good as the sweaters sold by other retailers
E)   will increase if the price of each sweater is less than the cost of inputs requiredF) A) and E)
G) A) and D)

Question 2

Gross domestic product ( GDP) is a good measure of social welfare since it includes the value of leisure time.

Accepted Answer

A) True 
 B)False

Question 3

The table below shows the current and base-year prices of different goods in a market basket. The consumer price index (CPI)  for the current year is _____.

Accepted Answer

A)   2
B)   50
C)   55
D)   182
E)   200F) B) and D)
G) B) and C)

Question 4

Nominal gross domestic product (GDP) is a better measure of growth in production than real GDP.

Accepted Answer

A) True 
 B)False

Question 5

If the consumer price index (CPI)  this year is 162 and last year it was 170, the inflation rate

Accepted Answer

A)   is positive.
B)   is negative.
C)   has decreased since last year.
D)   has increased since last year.
E)   is the same as last year.F) C) and E)
G) B) and C)

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)   Saving
E)   Government borrowingF) B) and D)
G) A) and B)

Question 7

The table below shows the current and base-year prices of different goods in a market basket. The table shows that the price of the market basket in the current year is _____ higher than the price of the market basket in the base year.

Accepted Answer

A)   100 percent
B)   50 percent
C)   1 percent
D)   200 percentE) B) and C)
F) A) and D)

Question 8

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.F) None of the above
G) B) and D)

Question 9

Which of the following is true about the consumer price index (CPI)  and the GDP price index?

Accepted Answer

A)   Both measures weigh prices by quantities consumed in some base year.
B)   Both yield identical numbers for price level changes for any two years.
C)   Both CPI and GDP price index underestimate changes in the price level in an economy.
D)   The CPI measures changes in relative prices of goods, while the GDP price index measures changes in the absolute price level of a fixed basket of goods and services.
E)   CPI includes products that are widely used, while GDP price index includes all goods and services.F) A) and B)
G) A) and C)

Question 10

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) F) C) and E)
G) C) and D)

Question 11

If the nominal gross domestic product (GDP)  for the year 2000 was $6.2 trillion and the price index was 200, the real gross domestic product (GDP)  for 2000 was _____.

Accepted Answer

A)   $3.1 trillion
B)   $6.2 trillion
C)   $12.4 trillion
D)   $18.6 trillion
E)   $24.3 trillionF) A) and B)
G) A) and C)

Question 12

Which of the following expenditures is included in the consumption component of the gross domestic product (GDP) ?

Accepted Answer

A)   The money spent on the purchase of stocks
B)   The money spent on the purchase of used furnitures
C)   The money spent on the purchase of a used car
D)   The money spent on the purchase of kitchen appliances
E)   The money spent on the purchase of bonds issued by the governmentF) C) and D)
G) B) and D)

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)   households are on the supply side of the resource market and the demand side of the product market.
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.F) B) and E)
G) D) and E)

Question 14

If real gross domestic product (GDP)  in a particular year is $5,000 trillion and nominal gross domestic product (GDP)  in that same year is $4,000 trillion, then the:

Accepted Answer

A)   consumer price index (CPI)  is 125.
B)   economic activity has decreased by 20 percent.
C)   GDP price index is 125.
D)   GDP price index is 80.
E)   economy has grown by 20 percent.F) C) and E)
G) A) and E)

Question 15

The gross domestic product (GDP)  excludes:

Accepted Answer

A)   the value of a new building.
B)   the value of new stocks and shares.
C)   the cost of a new vending machine.
D)   government expenditure on a new bridge.
E)   the money spent on the purchase of legal services by a household.F) A) and B)
G) A) and E)

Question 16

If the nominal gross domestic product (GDP) is $6 trillion for a particular year, and the real GDP is $3 trillion, then the GDP price index is 167.

Accepted Answer

A) True 
 B)False

Question 17

Real gross domestic product (GDP)  is measured in terms of _____.

Accepted Answer

A)   current-year prices
B)   base-year prices
C)   foreign currencies
D)   the quality of goods produced
E)   hours of employmentF) All of the above
G) B) and C)

Question 18

Which of the following is not an example of intermediate goods or services?

Accepted Answer

A)   Steel used in the manufacture of cars
B)   Pizzas bought at a restaurant
C)   Legal services hired by a public accounting firm
D)   Glass used to manufacture sunglasses
E)   Vegetables used by a restaurantF) B) and C)
G) All of the above

Question 19

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 expendituresF) A) and E)
G) C) and E)

Question 20

Net taxes are indirect business taxes plus transfer payments.

Accepted Answer

A) True 
 B)False

Exam 6: Tracking the U S Economy

The circular flow model shows that:

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If the nominal gross domestic product (GDP) is $6 trillion for a particular year, and the real GDP is $3 trillion, then the GDP price index is 167.

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If the consumer price index (CPI) this year is 162 and last year it was 170, the inflation rate

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If real gross domestic product (GDP) in a particular year is $5,000 trillion and nominal gross domestic product (GDP) in that same year is $4,000 trillion, then the:

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

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Which of the following is true about the consumer price index (CPI) and the GDP price index?

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

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The gross domestic product (GDP) excludes:

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Which of the following expenditures is included in the consumption component of the gross domestic product (GDP) ?

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

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Real gross domestic product (GDP) is measured in terms of _____.

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The table below shows the current and base-year prices of different goods in a market basket. The consumer price index (CPI) for the current year is _____.

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Net taxes are indirect business taxes plus transfer payments.

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Which of the following is not an example of intermediate goods or services?

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Gross domestic product ( GDP) is a good measure of social welfare since it includes the value of leisure time.

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Lois sells ten sweaters she had knitted to a retail store. The gross domestic product (GDP) of her country _____.

Correct AnswerverifiedShow Answer

Nominal gross domestic product (GDP) is a better measure of growth in production than real GDP.

Correct AnswerverifiedShow Answer

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

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The table below shows the current and base-year prices of different goods in a market basket. The table shows that the price of the market basket in the current year is _____ higher than the price of the market basket in the base year.

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If the nominal gross domestic product (GDP) for the year 2000 was $6.2 trillion and the price index was 200, the real gross domestic product (GDP) for 2000 was _____.

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