Question 1

Which approach to calculating GDP is computed using compensation of employees, rental income, profits, net interest, indirect business taxes, and depreciation?

Accepted Answer

A)   The expenditure approach.
B)   The income approach.
C)   The product-market approach.
D)   The circular-flow approach.

Question 2

Which of the following would be included in the government expenditures component of GDP?

Accepted Answer

A)   The export of 100 fighter jets to Japan
B)   Construction costs of a new public school building
C)   Food stamps used by the Smith family
D)   A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school

Question 3

Using the income approach, an estimate of the value of capital worn out producing GDP is:

Accepted Answer

A)   indirect business taxes.
B)   capital consumption allowance or depreciation.
C)   gross private domestic investment.
D)   capital erosion estimate.

Question 4

Gross private domestic investment includes business:

Accepted Answer

A)   purchases of capital goods, all new construction, and purchases of consumer durable goods.
B)   purchases of capital goods, all new construction, and inventory investment.
C)   purchases of capital goods, all new commercial construction, and inventory investment.
D)   purchases of all types of durable goods, all new construction, and inventory investment.

Question 5

Using the income approach, net interest is included because

Accepted Answer

A)   households both receive and pay interest.
B)   households pay but do not receive interest and firms receive but do not pay interest.
C)   firms pay but do not receive interest and households receive but do not pay interest.
D)   it is income to the government but not to households nor firms.

Question 6

GDP does not count:

Accepted Answer

A)   the estimated value of homemaker production.
B)   state and local government purchases.
C)   spending for new homes.
D)   changes in inventories.

Question 7

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

Accepted Answer

A)   money laundering.
B)   the underground economy.
C)   disposable personal income.
D)   indirect national income. B

Question 8

National income is calculated as GDP:

Accepted Answer

A)   plus depreciation.
B)   plus exports.
C)   minus imports.
D)   minus depreciation.

Question 9

If exports rise and imports fall, then:

Accepted Answer

A)   GDP will increase.
B)   GDP will decrease.
C)   GDP may remain unchanged.
D)   net exports will fall.

Question 10

Exhibit 5-11 GDP data (billions of dollars)

In Exhibit 5-11, and using the expenditures approach, gross domestic product (GDP)  equals:

Accepted Answer

A)   $7,010 billion.
B)   $10,360 billion.
C)   $9,660 billion.
D)   $7,860 billion.

Question 11

The largest component of GDP is:

Accepted Answer

A)   personal consumption expenditures.
B)   government spending.
C)   durable goods.
D)   net exports.

Question 12

Which of the following activities would be calculated as part of GDP accounts?

Accepted Answer

A)   Drug trafficking.
B)   Money laundry.
C)   Prostitution.
D)   Purchasing plastic surgery.

Question 13

Which of the following is an example of a stock rather than a flow?

Accepted Answer

A)   Ana collects $5,000 per month rent on her property that she leases.
B)   Brant mows 25 lawns per week.
C)   Connie earns $75,000 per year.
D)   Derek has $2,568 in his checking account.

Question 14

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of compensation of employees, rents, profits, net interest, indirect taxes, and depreciation. This method of deriving GDP is called the:

Accepted Answer

A)   opportunity cost approach.
B)   income approach.
C)   expenditure approach.
D)   monetarist approach.

Question 15

Based on the circular flow model, money flows from households to businesses in:

Accepted Answer

A)   factor markets.
B)   product markets.
C)   neither factor nor product markets.
D)   both factor and product markets.

Question 16

Exhibit 5-8 GDP data (billions of dollars)

In Exhibit 5-8, personal income (PI)  equals:

Accepted Answer

A)   $1,280 billion.
B)   $2,290 billion.
C)   $1,310 billion.
D)   $2,320 billion.

Question 17

Brady pays $37,450 for a new car, including a federal excise tax of $700 and a state sales tax of $1,750. The indirect business tax value added to GDP under the income approach for this purchase is

Accepted Answer

A)   $2,450 because this is income for the government.
B)   $2,450 because this is profit for the firm.
C)   $700 because only federal taxes are included in indirect business taxes; state taxes are excluded.
D)   $1,750 because only state taxes are included in indirect business taxes; federal taxes are excluded.

Question 18

Which of the following purchases would be counted as a final good in the GDP calculation?

Accepted Answer

A)   A family's purchase of a used car.
B)   A speculator's purchase of 100 shares of Apple Computer stock.
C)   A deli's purchase of bread for making its sandwiches.
D)   A business's purchase of new office equipment. D

Question 19

If a homeowner sells a kitchen table and chairs that she no longer wants to use and does not report the income earned from the sale to the Internal Revenue Service, the value of GDP is

Accepted Answer

A)   understated because this transaction took place in the underground economy.
B)   overstated because the sale of the furniture is counted twice in GDP calculations.
C)   unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new.
D)   understated because this purchase was a nonmarket transaction.

Question 20

Exhibit 5-5 Gross domestic product data

As shown in Exhibit 5-5, using the income approach, gross domestic product (GDP)  is:

Accepted Answer

A)   $8,000 billion.
B)   $8,800 billion.
C)   $9,400 billion.
D)   $11,000 billion. D

Exam 15: Gross Domestic Product

Which approach to calculating GDP is computed using compensation of employees, rental income, profits, net interest, indirect business taxes, and depreciation?

Correct AnswerverifiedShow Answer

Which of the following would be included in the government expenditures component of GDP?

Correct AnswerverifiedShow Answer

Using the income approach, an estimate of the value of capital worn out producing GDP is:

Correct AnswerverifiedShow Answer

Gross private domestic investment includes business:

Correct AnswerverifiedShow Answer

Using the income approach, net interest is included because

Correct AnswerverifiedShow Answer

GDP does not count:

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The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

Correct AnswerverifiedB

National income is calculated as GDP:

Correct AnswerverifiedShow Answer

If exports rise and imports fall, then:

Correct AnswerverifiedShow Answer

Exhibit 5-11 GDP data (billions of dollars) In Exhibit 5-11, and using the expenditures approach, gross domestic product (GDP) equals:

Correct AnswerverifiedShow Answer

The largest component of GDP is:

Correct AnswerverifiedShow Answer

Which of the following activities would be calculated as part of GDP accounts?

Correct AnswerverifiedShow Answer

Which of the following is an example of a stock rather than a flow?

Correct AnswerverifiedShow Answer

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of compensation of employees, rents, profits, net interest, indirect taxes, and depreciation. This method of deriving GDP is called the:

Correct AnswerverifiedShow Answer

Based on the circular flow model, money flows from households to businesses in:

Correct AnswerverifiedShow Answer

Exhibit 5-8 GDP data (billions of dollars) In Exhibit 5-8, personal income (PI) equals:

Correct AnswerverifiedShow Answer

Brady pays $37,450 for a new car, including a federal excise tax of $700 and a state sales tax of $1,750. The indirect business tax value added to GDP under the income approach for this purchase is

Correct AnswerverifiedShow Answer

Which of the following purchases would be counted as a final good in the GDP calculation?

Correct AnswerverifiedD

If a homeowner sells a kitchen table and chairs that she no longer wants to use and does not report the income earned from the sale to the Internal Revenue Service, the value of GDP is

Correct AnswerverifiedShow Answer

Exhibit 5-5 Gross domestic product data As shown in Exhibit 5-5, using the income approach, gross domestic product (GDP) is:

Correct AnswerverifiedD

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B

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D

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D