Question 1

Exhibit 11-3  Expenditure approach  As shown in Exhibit 11-3, total expenditures by businesses for fixed investment (capital)  and inventories is:

Accepted Answer

A)   $1,000 billion.
B)   $100 billion.
C)   $400 billion.
D)   $20 billion
E)   $75 billion.

Question 2

Which of the following would not be included in the gross private domestic investment ( I )  category of GDP?

Accepted Answer

A)   A bakery's purchase of a new oven.
B)   A retailer's additions to its inventories.
C)   Newly built residential construction.
D)   A bank's purchase of a U.S. Treasury bond.

Question 3

Gross private domestic investment does not include:

Accepted Answer

A)   spending for new houses.
B)   spending to build up inventories.
C)   unintentional inventory investment.
D)   spending on employee salaries.
E)   spending for office supplies.

Question 4

When depreciation is subtracted from:

Accepted Answer

A)   Personal income, we get national income.
B)   Gross Domestic Product, we get national income.
C)   Gross Domestic Product, we get personal income.
D)   Disposable Personal Income, we get Gross Domestic Product.

Question 5

Why is it important to use real GDP rather than nominal GDP figures when making comparisons of output across time periods?

Accepted Answer

A)   The real GDP figures are a better measure of changes in the general level of prices.
B)   The real figures will reflect changes in the quantity of output and not changes in the general level of prices.
C)   The real figures will reflect changes in the general level of prices as well as changes in the quantity of output.
D)   The real GDP figures adjust for changes in the level of employment.

Question 6

Personal consumption expenditures is the smallest component of total spending.

Accepted Answer

A) True 
 B)False

Question 7

Depreciation or consumption of fixed capital depreciation measures:

Accepted Answer

A)   net investment less gross investment.
B)   the loss of productive ability due to capital intensive production.
C)   capital that is wasted in the production process.
D)   the value of existing capital stock used up in the production process.
E)   the decline in the value of inventories caused by inflation.

Question 8

New residential housing is counted in GDP as a(n) :

Accepted Answer

A)   durable consumption good.
B)   household durable good.
C)   investment good.
D)   inventory expansion.
E)   long-term durable good.

Question 9

Which of the following best describes gross domestic product (GDP) ?

Accepted Answer

A)   The market value of all inputs used to produce all final goods and services in a nation during a period of time.
B)   The market value of all final goods and services produced in a nation during a period of time.
C)   The quantity of all goods and services produced in a nation during a period of time.
D)   The average price of all goods and serviced produced in a nation during a period of time.

Question 10

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

Accepted Answer

A)   Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms.
B)   The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets.
C)   Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms.
D)   The firms in the factor markets pay to households in the form of wages, interest, rent and profit ⎯ for resources demanded.
E)   The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand.

Question 11

Which of the following would not be included in the government consumption expenditures and gross investment ( G )  category of GDP?

Accepted Answer

A)   The payments made to Social Security recipients.
B)   The expenditures made to repair a highway.
C)   The spending for professors at state universities.
D)   The purchase of new china for White House functions.

Question 12

National income is calculated by subtracting ____ from GDP:

Accepted Answer

A)   depreciation.
B)   investment and net exports.
C)   Social Security insurance contributions and transfer payments.
D)   corporate and personal income taxes.

Question 13

Which one of the following statements is true ?

Accepted Answer

A)   Resources flow from the government to firms.
B)   Taxes flow from foreign economies to the government.
C)   Goods and services flow from households to foreign economies.
D)   Resources flow from households to firms.
E)   Resource payments flow from households to the government.

Question 14

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

Accepted Answer

A)   goods and services exchanged during the period.
B)   final goods and services produced domestically during the period.
C)   goods and services produced domestically during the period minus the depreciation of productive assets.
D)   final goods and services plus intermediate goods produced domestically during the period.

Question 15

Exhibit 11-9  GDP data (billions of dollars)   In Exhibit 11-9, national income (NI)  equals:

Accepted Answer

A)   $9,910 billion.
B)   $6,210 billion.
C)   $9,210 billion.
D)   $7,410 billion.
E)   $6,560 billion.

Question 16

Which of the following would be classified as a personal consumption expenditure?

Accepted Answer

A)   All of the following.
B)   Your purchase of a newly constructed house
C)   Your purchase of a preowned house.
D)   Your purchase of one share of Microsoft stock.
E)   Your purchase of this economics course.

Question 17

The sum of payments made to resource owners for the use of their resources is:

Accepted Answer

A)   Gross Domestic Product.
B)   Net Domestic Product.
C)   National Income.
D)   Personal Income.
E)   Disposable personal income.

Question 18

When economists speak of changes in GDP measured in constant dollars, they mean that:

Accepted Answer

A)   money GDP is constant.
B)   the price level is constant.
C)   a price index has been used to adjust money GDP for the effects of inflation.
D)   the growth rate of money GDP has been adjusted for changes in population.

Question 19

Exhibit 11-4  Refer to Exhibit 11-4. Measured in terms of Year 1 prices, real GDP is:

Accepted Answer

A)   600.
B)   750.
C)   900.
D)   1,333.

Question 20

Which of the following is added to arrive at GDP? ​

Accepted Answer

A)   ​ The value of "free" household services provided by at home spouses rather than a paid cook, maid, and baby sitter.
B)   ​ The value of unpaid volunteer time.
C)   ​The unpaid services provided by the natural environment, such as breathable air.
D)   ​Net exports.

Exam 11: Gross Domestic Product

When depreciation is subtracted from:

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National income is calculated by subtracting ____ from GDP:

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Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

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Personal consumption expenditures is the smallest component of total spending.

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The sum of payments made to resource owners for the use of their resources is:

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Which of the following best describes gross domestic product (GDP) ?

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When economists speak of changes in GDP measured in constant dollars, they mean that:

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Which one of the following statements is true ?

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Why is it important to use real GDP rather than nominal GDP figures when making comparisons of output across time periods?

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Gross private domestic investment does not include:

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New residential housing is counted in GDP as a(n) :

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Exhibit 11-3 Expenditure approach As shown in Exhibit 11-3, total expenditures by businesses for fixed investment (capital) and inventories is:

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Depreciation or consumption of fixed capital depreciation measures:

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Exhibit 11-9 GDP data (billions of dollars) In Exhibit 11-9, national income (NI) equals:

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Which of the following would be classified as a personal consumption expenditure?

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Which of the following would not be included in the gross private domestic investment ( I ) category of GDP?

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Exhibit 11-4 Refer to Exhibit 11-4. Measured in terms of Year 1 prices, real GDP is:

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Which of the following is added to arrive at GDP? ​

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Which of the following would not be included in the government consumption expenditures and gross investment ( G ) category of GDP?

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Gross domestic product is the sum of the purchase price multiplied by the quantity of:

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Which of the following is added to arrive at GDP?

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