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chapter_6 - Principles of Macroeconomics, 9e ­ TB1...

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Unformatted text preview: Principles of Macroeconomics, 9e ­ TB1 (Case/Fair/Oster) Chapter 6 1 Measuring National Output and National Income 6.1 Gro 1 M ul ti pl e C 1) h o i c e The total value of all final goods and services produced within a given period by factors of production located market within a country is A) gross domestic product. B) gross national product. C) net national D) product. net national income. Answer: A Diff: 1 Topic: Gross Domestic Product Skill: Definition 2) Gross domestic product measures A) the total B) spending of everyone in the economy. the value of all output in the economy. C) the total income of everyone in the economy. D) all of the above Answer: D Diff: 2 Topic: Gross Domestic Product Skill: Definition 3) Which of the following is an example of a final good or service? A) wheat a bakery purchases to make bread B) coffee beans C) Starbucks purchases to make coffee lumber D) purchased by a construction company to used in building houses a computer purchased by Federal Express to track shipments Answer: D Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 4) Which of the following is a good or service counted in GDP? A) tires Ford buys to put on a car B) a used tire you buy for your personal car C) a new tire you buy for your personal car D) used tires bought by a used car dealer to put on a car on his lot Answer: C Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 5) Which of the following is an example of an intermediate good? A) the dough you buy to fix yourself a pizza for dinner B) the chocolate C) you buy to make yourself some cookies the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to D) lumber you buy to build a house for your dog Answer: C Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 6) Double counting can be avoided by A) including the B) value of intermediate goods in the current year. not counting the value of intermediate goods in GDP. C) including the D) value of intermediate goods in the GNP but not in the GDP. including the value of intermediate goods in the production year but not in the selling year of those goods. Answer: B Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 7) Which of the following would NOT be counted in 2007's GDP? A) the value of a 2005 boat you purchase from a boat dealer in 2007 B) the 2007 salary of a used motorcycle salesperson C) the D) commissions earned by a real estate agent in selling condominiums built prior to 2007 the value of a refrigerator manufactured in 2007 but not sold in 2007 Answer: A Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 8) Which of the following would be counted in 2003's GDP? A) the value of a loan you take in 2003 B) the value of a TV that was produced in 2002 but not sold until 2003 C) the bonus check a stockbroker gets from his/her company in 2003 D) the value of a bond sold by the federal government Answer: C Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 9) Which of the following is NOT included in 2008's GDP? A) the value of a motorcycle produced in the United States and exported to Japan B) the profit C) earned in 2008 from selling a stock that you purchased in 2005 the value of a motor that is used in the production of a lawn mower D) the commission earned by a headhunter when she locates a job for a client Answer: B Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 10) Gross national product is the total market value of A) all final and B) intermediate goods and service produced by resources owned by a country in a given year. all final and C) intermediate goods and services produced in a country, regardless of who owns the resources. all final goods and services produced in a country in a given year, regardless of who owns the resources. D) all final goods produced by resources owned by a country, regardless of where production takes place. and services Answer: D Diff: 1 Topic: Gross Domestic Product Skill: Definition 11) If no foreign companies produce in a country, but many of the country's companies produce abroad, then A) the country's B) GNP will tend to exceed its GDP. the country's C) GDP will tend to exceed its GNP. the country's D) GNP and GDP will tend to be equal. the country's GDP will tend to be equal to its domestic income. Answer: A Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 12) Which of the following is included in both the U.S. GDP and GNP? A) The value of all cars produced by Ford in Mexico. B) The value of all cars produced by General Motors in the U.S. C) The value of all cars produced by Toyota in the U.S. D) The value of cars produced by Nissan in Japan and the U.S. Answer: B Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 13) Which of the following is NOT counted in the GNP of the United States? A) The wage of a U.S. citizen who works in a foreign country for a foreign firm. B) The interest C) earned by a U.S. bank on loans to a business firm located in Brazil. The profit D) earned by a restaurant located in the United States but owned by a Mexican company. The value of services that are produced by state and local governments in the United States. Answer: C Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 14) The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________. A) GDP; GDP B) GNP; GNP C) GNP; GDP D) GDP; GNP Answer: C Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 15) Profits earned in the United States by foreign-owned companies are included in A) the U.S. GDP but not GNP. B) neither the U.S. GDP nor GNP. C) the U.S. GNP but not GDP. D) both the U.S. GDP and GNP. Answer: A Diff: 1 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 16) The GDP of the U.S. in 2002 was around $10 trillion. This means A) that the value of output in the U.S. in 2002 was around $10 trillion. B) that total C) income in the U.S. in 2002 was around $10 trillion. that total D) spending on final goods and services in the U.S. in 2002 was around $10 trillion. all of the above Answer: D Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 17) The GDP includes A) the value of all intermediate goods and services. B) the value of all final goods and services. C) the value of D) both intermediate and final goods and services. the value of all transactions. Answer: B Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 18) Income Mexican citizens earn in the U.S. counts in A) U.S. GNP. B) Mexican GNP. C) Mexican GDP. D) both U.S. and Mexican GDP. Answer: B Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 2 Tr ue /F al 1) s e GDP measures the total income of everyone and the total spending by everyone in the economy. Answer: FALSE Diff: 1 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 2) Total income in the economy can sometimes be greater than total spending. Answer: FALSE Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 3) The income of U.S. citizens working abroad counts in U.S. GDP. Answer: FALSE Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 4) Stock market transactions are part of GNP. Answer: FALSE Diff: 2 Topic: Gross Domestic Product Skill: Conceptual AACSB: Reflective Thinking 5) Value the difference between the value of good as they leave a stage of production and cost of the goods as they added is entered that stage of production. Answer: TRUE Diff: 2 Topic: Gross Domestic Product Skill: Definition 6.2 Calc ulati ng GD P 1 M ul ti pl e C 1) h o i c e The equation for GDP using the expenditure approach is A) GDP = C + I + G + EX - IM. B) GDP = C + I + G + (IM - EX). C) GDP = C + I + G + EX + IM. D) GDP = C + I + G - EX - IM. Answer: A Diff: 1 Topic: Calculating GDP Skill: Definition 2) The single largest expenditure component in GDP is A) government B) spending. investment. C) consumption. D) net exports. Answer: C Diff: 1 Topic: Calculating GDP Skill: Fact Refer to the information provided in Table 6.1 below to answer the questions that follow. Table 6.1 3) Refer to Table 6.1. Personal consumption expenditures in billions of dollars are A) 1,000. B) 1,300. C) 1,500. D) 2,000. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 4) Refer to Table 6.1. The value for gross private domestic investment in billions of dollars is A) 300. B) 375. C) 425. D) 450. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 5) Refer to Table 6.1. The value for net exports in billions of dollars is A) 150. B) 250. C) 650. D) 800. Answer: A Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 6) Refer to Table 6.1. The value of gross domestic product in billions of dollars is A) 3,000. B) 3,075. C) 3,125. D) 3,750. Answer: B Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 7) Refer to Table 6.1. The value of government spending in billions of dollars is A) 100. B) 200. C) 300. D) 500. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills Refer to the information provided in Table 6.2 below to answer the questions that follow. Table 6.2 8) Refer to Table 6.2. Personal consumption expenditures in billions of dollars are A) 900. B) 1,100. C) 1,400. D) 1,600. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 9) Refer to Table 6.2. The value for gross private domestic investment in billions of dollars is A) 740. B) 810. C) 850. D) 890. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 10) Refer to Table 6.2. The value for net exports in billions of dollars is A) -200. B) -150. C) 50. D) 250. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 11) Refer to Table 6.2. The value for gross domestic product in billions of dollars is A) 2,900. B) 3,140. C) 3,440. D) 3,650. Answer: B Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 12) Refer to Table 6.2. The value of government spending in billions of dollars is A) 200. B) 600. C) 800. D) 1,000. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 13) A 8 dishwasher machines in 2005. The company sold 6 in 2005 and added 2 to its inventories. The market company value of the dishwasher machines in 2005 was $200 per unit. What is the value of this company's output produced that will be included in the 2005 GDP? A) $400. B) $1,400. C) $1,600. D) $2,000. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 14) A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as A) part of gross B) private domestic investment. a durable C) consumption good. a service. D) a nondurable consumption good. Answer: A Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 15) The change in business inventories is measured as A) final sales B) minus GDP. final sales plus GDP. C) GDP minus D) final sales. the ratio of final sales to GDP. Answer: C Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 16) In 2007 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2007 A) is $250 billion. B) is $200 billion. C) is $150 billion. D) is $40 billion. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 17) In 2006 final sales equal $350 billion and the change in business inventories is -$60 billion. GDP in 2006 A) is $290 billion. B) is $295 billion. C) is $410 billion. D) cannot be determined from this information. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 18) In 2008 the change in business inventories is -$70 billion and GDP is $200 billion. Final sales in 2008 A) are $130 billion. B) are $200 billion. C) are $270 billion. D) are $340 billion. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 19) In 2007, GDP was exactly equal to final sales. This implies that A) there was B) accumulation of inventories that year. there was a C) decline in inventories that year. there was no D) change in inventories that year. GDP did not grow that year compared to the year before. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 20) If the change in business inventories is zero, then final sales are A) zero. B) less than GDP. C) greater than D) GDP. equal to GDP. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 21) If in a year there is a positive inventory investment, then final sales A) exceed GDP. B) are less than C) GDP. equal GDP. D) are zero. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 22) Net investment equals A) GDP minus B) final sales. gross C) investment minus final sales. gross D) investment minus depreciation. depreciation plus GDP. Answer: C Diff: 1 Topic: Calculating GDP Skill: Definition 23) If net investment is zero, then A) gross B) investment is greater than depreciation. gross C) investment is less than depreciation. gross D) investment equals depreciation. depreciation is zero. Answer: C Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 24) Suppose investment in 2008 was $20 billion and depreciation was $4 billion. Gross investment in 2008 was that net A) $16 billion. B) $20 billion. C) $24 billion. D) $28 billion. Answer: C Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 25) The total value of all capital goods newly produced in a given period is A) the change in B) business inventories. depreciation. C) net investment. D) gross investment. Answer: D Diff: 1 Topic: Calculating GDP Skill: Definition 26) The change in capital stock in a period is equal to A) the ratio of the amount of the capital at the beginning of the period to the amount of depreciation. B) the amount of the capital stock at the beginning of the period plus gross investment minus depreciation. C) the amount of the capital at the beginning of the period plus gross investment. D) the amount of the capital at the beginning of the period minus net investment. Answer: B Diff: 2 Topic: Calculating GDP Skill: Definition 27) Net investment is A) gross B) investment minus depreciation. gross C) investment plus depreciation. depreciation D) minus gross investment. GNP minus final sales. Answer: A Diff: 1 Topic: Calculating GDP Skill: Definition 28) Depreciati on is A) the decrease in the overall price level. B) the additional capital stock in a year. C) the amount of used up machinery in a year. D) the amount of decline in business inventories. Answer: C Diff: 1 Topic: Calculating GDP Skill: Definition 29) If net investment in 2007 is $350 billion and gross investment in 2007 is $500 billion, depreciation in 2007 is A) $0.7 billion. B) $150 billion. C) $175 billion. D) $250 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 30) If net investment in 2008 is $500 billion and gross investment in 2008 is $900 billion, depreciation in 2008 is A) -$500 billion. B) $0. C) $400 billion. D) $1,400 billion. Answer: C Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 31) If gross investment in 2008 is $750 billion and depreciation in 2008 is $850 billion, net investment in 2008 is A) -$50 billion. B) -$100 billion. C) -$800 billion. D) -$1,600 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 32) If gross investment in 2008 is $200 billion and depreciation in 2008 is $1,000 billion, net investment in 2008 is A) -$900 billion. B) -$800 billion. C) $1,000 billion. D) $1,200 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 33) Exports equal A) imports - net B) exports. net exports + C) imports. net exports D) imports. imports + (exports + imports). Answer: B Diff: 1 Topic: Calculating GDP Skill: Definition 34) When calculating GDP, exports are ________ and imports are ________. A) added; added B) added; C) subtracted subtracted; D) added subtracted; subtracted Answer: B Diff: 1 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 35) If the value of net exports is negative, then A) exports exceed imports. B) imports exceed exports. C) exports equal imports. D) imports are zero. Answer: B Diff: 1 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 36) The largest income component of GDP is A) proprietors' B) income. rental income. C) compensation of employees. D) corporate profit. Answer: C Diff: 2 Topic: Calculating GDP Skill: Fact 37) What should be subtracted from GDP to calculate national income? A) depreciation B) indirect taxes C) personal income taxes. D) net factor payments to the rest of the world Answer: A Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 38) Proprietor s' income is A) the income of unincorporated businesses. B) the income of all businessesincorporated and unincorporated. C) the income of sole proprietorships. D) the income of partnerships. Answer: A Diff: 2 Topic: Calculating GDP Skill: Definition 39) Net interest is the interest on loans paid by A) businesses, B) households, and the government. businesses and households. C) businesses and the government. D) businesses. Answer: D Diff: 3 Topic: Calculating GDP Skill: Definition 40) Interest paid by households and by the government is A) counted in B) national income, but not in GDP. not counted in GDP because it is not assumed to flow from the production of goods and services. C) not counted in GDP but is counted in GNP because it is paid by U.S. citizens to people living in the United States. D) included in both because it represents an expenditure by one group and a receipt of income by another group. GDP and GNP Answer: B Diff: 3 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 41) What type of tax affects the amount of money you pay for a product? A) direct tax B) income tax C) indirect tax D) all of the above Answer: C Diff: 2 Topic: Calculating GDP Skill: Conceptual 42) Depreciati on is A) subtracted from national income to get GDP. B) added to C) national income to get GDP. subtracted from GNP to get NNP. D) added to GNP to get NNP. Answer: C Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking Refer to the information provided in Table 6.3 below to answer the questions that follow. Table 6.3 43) Refer to Table 6.3. The value for national income in billions of dollars is A) 585. B) 600. C) 635. D) 850. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 44) Refer to Table 6.3. The value for gross domestic product in billions of dollars is A) 485. B) 680. C) 685. D) 710. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 45) Refer to Table 6.3. The value of net factor payments to the rest of the world is A) 5. B) 15. C) 25. D) 35. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 46) Refer to Table 6.3. The value of disposable income A) is 505. B) is 560. C) is 605. D) cannot be calculated given the information in Table 6.3. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 47) If receipts income from the rest of the world exceed payments of factor income to the rest of the world, then of factor A) GDP is greater than GNP. B) GDP equals C) GNP. GNP equals D) NNP. GNP is greater than GDP. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills Refer to the information provided in Table 6.4 below to answer the questions that follow. Table 6.4 48) Refer to Table 6.4. The value for GDP in billions of dollars is A) 910. B) 920. C) 950. D) 1,050. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 49) Refer to Table 6.4. The value for GNP in billions of dollars is A) 900. B) 930. C) 980. D) 1,010. Answer: B Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 50) Refer to Table 6.4. The value for NNP in billions of dollars is A) 890. B) 910. C) 940. D) 970. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 51) Refer to Table 6.4. The value for national income in billions of dollars is A) 890. B) 910. C) 940. D) 970. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 52) Refer to Table 6.4. The value for personal income in billions of dollars is A) 870. B) 890. C) 950. D) 960. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 53) Refer to Table 6.4. The value for disposable personal income in billions of dollars is A) 750. B) 770. C) 820. D) 990. Answer: A Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 54) If GNP is billion, receipts of factor income from the rest of the world are $50 billion, and payments of factor $600 income to the rest of the world are $30 billion, then GDP is A) $520 billion. B) $580 billion. C) $620 billion. D) $680 billion. Answer: B Diff: 3 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 55) If GNP is billion, receipts of factor income from the rest of the world are $10 billion, and payments of factor $200 income to the rest of the world are $30 billion, then GDP is A) $160 billion. B) $210 billion. C) $220 billion. D) $240 billion. Answer: C Diff: 3 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 56) If GDP is $500 billion and depreciation is $40 billion, then net national product A) is $460 billion. B) is $500 billion. C) is $540 billion. D) cannot be determined from this information. Answer: D Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 57) If GDP is billion, depreciation is $30 billion, and net factor income from the rest of the world is -$40 billion, then $300 net national product is A) $230 billion. B) $270 billion. C) $290 billion. D) $310 billion. Answer: D Diff: 3 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 58) If GNP is $800 billion and depreciation is $90 billion, then net national product is A) $710 billion. B) $845 billion. C) $890 billion. D) $980 billion. Answer: A Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 59) If GNP is $200 billion and depreciation is $20 billion, then net national product is A) $100 billion. B) $180 billion. C) $210 billion. D) $220 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 60) If depreciation equals zero and retained earnings equal $5 billion, then A) GNP is less B) than net national product by $5 billion. GNP equals net national product. C) Net national D) product is less than GNP by $5 billion. GNP is greater than GDP by $5 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 61) Net national product is A) GDP plus B) depreciation. GDP minus C) depreciation. GNP minus D) depreciation. GNP plus depreciation. Answer: C Diff: 1 Topic: Calculating GDP Skill: Definition 62) The total income of households is A) net national B) product. personal C) income. national D) income. production income. Answer: B Diff: 1 Topic: Calculating GDP Skill: Definition 63) Personal income is national income minus A) depreciation. B) net factor C) income to the rest of the world. the amount of national income not going to households. D) imports. Answer: C Diff: 2 Topic: Calculating GDP Skill: Fact 64) If national $600 billion, personal income is $400 billion, personal taxes are $120 billion, then disposable income income is equals A) $480 billion. B) $320 billion. C) $280 billion. D) $80 billion. Answer: C Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 65) Which of the following is subtracted from national income to get to personal income? A) retained B) earnings personal C) interest income depreciation D) personal Taxes Answer: A Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 66) Personal income A) is always less than national income. B) is always C) greater than national income. may be greater than or less than national income. D) will always equal national income. Answer: C Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 67) If income is $925 billion and personal income taxes are $70 billion, the value of disposable personal personal income is A) $835 billion. B) $855 billion. C) $890 billion. D) $995 billion. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 68) If saving is -$10 billion and disposable personal income is $370 billion, then personal consumption personal spending A) is $360 billion. B) is $380 billion. C) is $390 billion. D) cannot be determined from this information. Answer: B Diff: 2 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 69) The personal saving rate is A) the difference between total personal spending and personal saving. B) the difference between personal income and disposable personal income. C) the ratio of D) personal income to personal saving. the percentage of disposable personal income that is saved. Answer: D Diff: 2 Topic: Calculating GDP Skill: Definition 70) If disposable personal income is $400 billion and personal saving is $8 billion, the personal saving rate is A) 1.5%. B) 2%. C) 5%. D) 12%. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 71) If the personal saving rate is 5% and personal saving is $10 billion, the value of personal disposable income A) is $100 billion. B) is $200 billion. C) is $500 billion. D) cannot be determined from this information. Answer: B Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 72) Saving rates tend to ________ during boom times and ________ during recession periods. A) rise; rise B) rise; fall C) fall; rise D) fall; fall Answer: C Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 73) Related to Economics in Practice on p. 109 [421]: The value of the used goods sold on eBay from a U.S. seller to a the U.S. buyer is A) counted in U.S. GDP but not GNP. B) counted in U.S. GNP but not GDP. C) counted in both U.S. GDP and GNP. D) not counted in either U.S. GDP or GNP. Answer: D Diff: 2 Topic: Calculating GDP: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking 74) Related to Economics in Practice on p. 109 [421]: If a Swiss dealer sells a newly produced Swiss watch on eBay to the a U.S. customer, the value of the watch is A) counted in U.S. GDP. B) counted in U.S. GDP and Swiss GDP. C) counted in D) Swiss GDP. not counted in either U.S. or Swiss GDP. Answer: C Diff: 2 Topic: Calculating GDP: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking 75) Related to Economics in Practice on p. 113 [425]: The National Income and Product Accounts (NIPAs) allow the policymakers and economists to analyze the impact of A) spending and B) tax plans. price shocks. C) monetary D) policy. all of the above Answer: D Diff: 1 Topic: Calculating GDP: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking 76) Related to Economics in Practice on p. 113 [425]: ________ is responsible for producing and maintaining the the National Income and Product Accounts (NIPAs). A) The Department of the Treasury B) The Federal C) Reserve Bank Congress D) The Department of Commerce Answer: D Diff: 1 Topic: Calculating GDP: Economics in Practice Skill: Fact 2 Tr ue /F al 1) s e Transfer payments are subtracted from national income to get to personal income. Answer: FALSE Diff: 1 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 2) If investment is larger than depreciation, the capital stock decreases. Answer: FALSE Diff: 1 Topic: Calculating GDP Skill: Analytic AACSB: Analytic Skills 3) Depreciati on is included in GDP, but excluded from NNP. Answer: TRUE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 4) Final sales plus changes in inventories equals GDP. Answer: TRUE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 5) New houses count as consumer durables. Answer: FALSE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 6) Dairy Queen opens a branch in Estonia. The sales of the restaurant enter the U.S. GDP and the Estonian GNP. Answer: FALSE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 7) Consumer s can spend their entire personal income. Answer: FALSE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 8) The difference between GNP and GDP is depreciation. Answer: FALSE Diff: 2 Topic: Calculating GDP Skill: Conceptual AACSB: Reflective Thinking 9) Disposabl e personal income is personal income minus personal taxes. Answer: TRUE Diff: 2 Topic: Calculating GDP Skill: Definition 6.3 No 1 M ul ti pl e C 1) h o i c e Nominal GDP measures the value of all goods and services A) in constant B) dollars. in current C) dollars. in fixed dollars. D) without inflation. Answer: B Diff: 1 Topic: Nominal versus Real GDP Skill: Definition 2) Gross domestic product measured in terms of the prices of a fixed, or base, year is A) current GDP. B) base GDP. C) real GDP. D) nominal GDP. Answer: C Diff: 1 Topic: Nominal versus Real GDP Skill: Definition 3) Nominal GDP is gross domestic product measured A) in the prices of a base year. B) in current C) dollars. at a constant D) output level but at the base-year prices. as the difference between the current year's GDP and last year's GDP. Answer: B Diff: 1 Topic: Nominal versus Real GDP Skill: Definition 4) Real GDP is gross domestic product measured A) at a constant B) output level but at current prices. in current C) dollars. in the prices of a base year. D) as the difference between the current year's GDP and last year's GDP. Answer: C Diff: 1 Topic: Nominal versus Real GDP Skill: Definition 5) If real GDP in 2007 using 2006 prices is lower than nominal GDP of 2007, then A) prices in 2007 are lower than prices in 2006. B) nominal GDP in 2007 equals nominal GDP in 2006. C) prices in 2007 are higher than prices in 2006. D) real GDP in 2007 is larger than real GDP in 2006. Answer: C Diff:3 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 6) If real GDP in 2008 using 2007 prices is higher than nominal GDP of 2008, then A) prices in 2008 are lower than prices in the base year. B) nominal GDP in 2008 equals nominal GDP in 2007. C) prices in 2008 are higher than prices in the base year. D) real GDP in 2008 is larger than real GDP in 2007. Answer: A Diff: 3 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills Refer to the information provided in Table 6.5 below to answer the questions that follow. Table 6.5 7) Refer to Assume that this economy produces only two goods Good X and Good Y. The value for this economy's Table 6.5. nominal GDP in year 1 A) is $140. B) is $160. C) is $180. D) is $200. Answer: A Diff: 1 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 8) Refer to Assume that this economy produces only two goods Good X and Good Y. The value for this economy's Table 6.5. nominal GDP in year 3 is A) $204. B) $222. C) $250. D) $270. Answer: D Diff: 1 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 9) Refer to Assume that this economy produces only two goods Good X and Good Y. The value for this economy's Table 6.5. nominal GDP in year 2 is A) $168. B) $179. C) $202. D) $214. Answer: B Diff: 1 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 10) Refer to Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the Table 6.5. value for this economy's real GDP in year 2 is A) $168. B) $179. C) $202. D) $214. Answer: A Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 11) Refer to Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the Table 6.5. value for this economy's GDP deflator in year 1 is A) 1. B) 100. C) 110. D) 111. Answer: B Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 12) Refer to Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the Table 6.5. value for this economy's GDP deflator in year 2 is A) 93.9. B) 100. C) 106.5. D) 179. Answer: C Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 13) Refer to Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the Table 6.5. value for this economy's inflation rate between year 1 and year 2 is A) -6.1%. B) -5.5%. C) 6.5%. D) 79%. Answer: C Diff: 3 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 14) The GDP deflator is the A) difference B) between real GDP and nominal GDP multiplied by 100. difference C) between nominal GDP and real GDP multiplied by 100. ratio of nominal GDP to real GDP multiplied by 100. D) ratio of real GDP to nominal GDP multiplied by 100. Answer: C Diff: 1 Topic: Nominal versus Real GDP Skill: Definition 15) If nominal GDP is $8 trillion and real GDP is $6 trillion, the GDP deflator is A) 48. B) 75. C) 133.33. D) 480. Answer: C Diff: 1 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 16) If the GDP deflator is greater than 100, then A) nominal GDP is greater than real GDP. B) nominal GDP is lower than real GDP. C) nominal GDP equals real GDP. D) prices decreased by more than half between the current and the base years. Answer: A Diff: 1 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 17) The GDP year 2 is 110 and the GDP deflator in year 3 is 118. The rate of inflation between years 2 and 3 is deflator in A) 4.55%. B) 7.27%. C) 8%. D) 18%. Answer: B Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 18) The GDP year 2 is 110 using year 1 as a base year. This means that, on average, the price of goods and services is deflator in A) 110% higher in year 2 than in year 1. B) 10% higher in year 2 than in year 1. C) 5% higher in D) year 1 than in year 2. 110% higher in year 1 than in year 2. Answer: B Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 19) The GDP year 2 is 95 using year 1 as a base year. This means that, on average, the price of goods and services is deflator in A) 105% higher in year 2 than in year 1. B) 5% higher in C) year 2 than in year 1. 5% higher in D) year 1 than in year 2. 105% higher in year 1 than in year 2. Answer: C Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 2 Tr ue /F al 1) s e If in the same period output doubles and the price level remains the same, nominal GDP doubles. Answer: TRUE Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 2) A GDP deflator is real GDP divided by nominal GDP times 100. Answer: FALSE Diff: 2 Topic: Nominal versus Real GDP Skill: Definition 3) If the GDP deflator next year is less than the GDP deflator this year, then the price level has fallen. Answer: TRUE Diff: 2 Topic: Nominal versus Real GDP Skill: Analytic AACSB: Analytic Skills 4) GDP measured in base year prices is real GDP. Answer: TRUE Diff: 2 Topic: Nominal versus Real GDP Skill: Definition 5) If nominal GDP rises, then so must real GDP. Answer: FALSE Diff: 2 Topic: Nominal versus Real GDP Skill: Conceptual AACSB: Reflective Thinking 6) If real GDP rises, then so must nominal GDP. Answer: FALSE Diff: 2 Topic: Nominal versus Real GDP Skill: Conceptual AACSB: Reflective Thinking 7) If real GDP increased during a year, then output must have increased. Answer: TRUE Diff: 2 Topic: Nominal versus Real GDP Skill: Conceptual AACSB: Reflective Thinking 6.4 Lim 1 M ul ti pl e C 1) h o i c e GDP is not a perfect measure of social welfare and the society's economic well-being because A) it does not say anything about the distribution of income. B) GDP C) accounting rules do not adjust for production that causes negative externalities. it does not D) include all economic activities in the economy. all of the above Answer: D Diff: 2 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 2) Legalizin g all forms of illegal activities would A) reduce B) measured GDP. reduce the size of the underground economy and increase measured GDP. C) reduce both the underground economy and measured GDP. D) increase the size of the underground economy and reduce measured GDP. Answer: B Diff: 2 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 3) Per capita gross national income (GNI) decreases when A) GNI and the B) population increase at the same rate. GNI does not change and the population increases. C) GNI and the D) population decrease at the same rate. GNI increases and the population does not change. Answer: B Diff: 2 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 4) Gross national income is A) GNP converted into dollars using an average exchange rate over several years adjusted for rates of inflation. B) GDP converted into dollars using an average exchange rate over several years adjusted for rates of inflation. C) GNP measured using an incomes approach. D) GNP divided by population. Answer: A Diff: 2 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 5) The base year of an index is A) the year chosen for the weights in a fixed weight procedure. B) the year C) currently being calculated. the last year of the index. D) the first year of the index. Answer: A Diff: 2 Topic: Limitations of the GDP Concept Skill: Fact 6) Fixed weight indexes A) account for B) responses to supply shifts. account for C) response to demand shifts. generally D) become less accurate the farther in time they are from the base year. generally become less accurate the closer in time they are to the base year. Answer: C Diff: 2 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 2 Tr ue /F al 1) s e All economic activities in the economy are included in the GDP. Answer: FALSE Diff: 1 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 2) The costs of pollution are subtracted from the value of final sales before calculating GDP. Answer: FALSE Diff: 1 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 3) A weakness in the concept of GDP is that it ignores income distribution. Answer: TRUE Diff: 1 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 4) Productio n in the illegal or underground economy is not reflected in GDP. Answer: TRUE Diff: 1 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking 5) Fixed weight indexes can not account for new goods. Answer: TRUE Diff: 1 Topic: Limitations of the GDP Concept Skill: Conceptual AACSB: Reflective Thinking ...
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