1.

The statistic used by economists to measure the value of economic output is:

A.

the CPI.

B.

GDP.

C.

the GDP deflator.

D.

the unemployment rate.



2.

The total income of everyone in the economy is exactly equal to the total:

A.

expenditure on the economy's output of goods and services.

B.

consumption expenditures of everyone in the economy.

C.

expenditures of all businesses in the economy.

D.

government expenditures.



3.

All of the following are measures of GDP except the total:

A.

expenditures of all businesses in the economy.

B.

income from all production in the economy.

C.

expenditures on all final goods produced.

D.

value of all final production.



4.

The amount of capital in an economy is a ______ and the amount of investment is a ______.

A.

flow; stock

B.

stock; flow

C.

final good; intermediate good

D.

intermediate good; final good



5.

The market value of all final goods and services produced within an economy in a given period of time is called:

A.

industrial production.

B.

gross domestic product.

C.

the GDP deflator.

D.

general durable purchases.



6.

To compute the value of GDP:

A.

goods and services are valued at market prices.

B.

the sale of used goods is included.

C.

production for inventory is not included.

D.

goods and services are valued by weight.



7.

Since GDP includes only the additions to income, not transfers of assets, ______ are not included in the computation of GDP.

A.

final goods

B.

used goods

C.

consumption goods

D.

goods produced for inventory



8.

When a firm sells a product out of inventory, GDP:

A.

increases.

B.

decreases.

C.

is not changed.

D.

increases or decreases, depending on the year the product was produced.



9.

Assume that a tire company sells 4 tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that should be counted in GDP is:

A.

$20,000.

B.

$20,000 less the automobile company's profit on the car.

C.

$20,900.

D.

$20,900 less the profits of all three companies on the items that they sold.



10.

The value added on an item produced means:

A.

a firm's profits on the item sold.

B.

the value of the labor inputs in the production of an item.

C.

the value of a firm's output less the value of its costs.

D.

the value of a firm's output less the value of the intermediate goods that the firm purchases.



11.

In computing GDP,

A.

expenditures on used goods are included.

B.

production added to inventories is excluded.

C.

the amount of production in the underground economy is imputed.

D.

the value of intermediate goods is included in the market price of the final goods.



12.

To avoid double counting in the computation of GDP, only the value of ______ goods are included.

A.

final

B.

used

C.

intermediate

D.

investment



13.

The underground economy:

A.

is included in the latest GDP accounts.

B.

includes only illegal activities.

C.

includes domestic workers for whom Social Security tax is not collected.

D.

excludes the illegal drug trade.



14.

Nominal GDP means the value of goods and services is measured in ______ prices.

A.

current

B.

real

C.

constant

D.

average



15.

Real GDP means the value of goods and services is measured in ______ prices.

A.

current

B.

actual

C.

constant

D.

average



16.

The GDP deflator is equal to:

A.

the ratio of nominal GDP to real GDP.

B.

the ratio of real GDP to nominal GDP.

C.

real GDP minus national GDP.

D.

nominal GDP minus real GDP.



17.

If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ______ percent.

A.

2

B.

3

C.

5

D.

8



18.

The national income accounts identity, for an open economy, is:

A.

Y = C + I + G - NX.

B.

Y = C + I + G + NX.

C.

Y = C + I + G.

D.

Y = C + I - G.



19.

In the national income accounts, goods bought for future use are classified as which type of expenditure?

A.

services

B.

investment

C.

government purchases

D.

net exports



20.

In the national income accounts, government purchases are goods and services purchased by:

A.

the federal government.

B.

the federal and state governments.

C.

state and local governments.

D.

federal, state, and local governments.



21.

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad.

A.

plus; plus

B.

minus; minus

C.

minus; plus

D.

plus; minus



22.

National income equals net national product:

A.

minus depreciation.

B.

plus depreciation.

C.

minus indirect business taxes.

D.

plus indirect business taxes.



23.

The largest component of national income is:

A.

corporate profits.

B.

compensation of employees.

C.

proprietors' income.

D.

net interest.



24.

Disposable personal income:

A.

is computed by subtracting personal tax and nontax payments from personal income.

B.

is generally greater than personal income.

C.

includes corporate profits but not dividends.

D.

does not include government transfers to individuals.



25.

The CPI is determined by computing:

A.

an average of prices of all goods and services.

B.

the price of a basket of goods and services that changes every year, relative to the same basket in a base year.

C.

the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.

D.

nominal GDP relative to real GDP.



26.

An increase in the price of imported goods will show up in:

A.

the CPI but not in the GDP deflator.

B.

the GDP deflator but not in the CPI.

C.

both the CPI and the GDP deflator.

D.

neither the CPI nor the GDP deflator.



27.

Assume that the market basket of goods and services purchased in 2002 by the average family in the United States costs $14,000 in 2002 prices, whereas the same basket costs $21,000 in 2004 prices. However, the basket of goods and services actually purchased by the average family in 2004 costs $20,000 in 2004 prices, whereas this same basket would have cost $15,000 in 2002 prices. Given this data, a Laspeyres index of 2004 prices would be:

A.

1.05.

B.

approximately 1.07.

C.

approximately 1.33.

D.

1.50.



28.

The GDP deflator is a:

A.

Laspeyres price index.

B.

Paasche price index.

C.

Laspeyres quantity index.

D.

Paasche quantity index.



29.

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not considered unemployed if that person:

A.

is going to school.

B.

is waiting for a new job to start.

C.

has been temporarily laid off.

D.

is out of a job and looking for work.



30.

The labor-force participation rate is the percentage of the:

A.

adult population that is employed.

B.

adult population that is in the labor force.

C.

labor force that is employed.

D.

labor force that is unemployed.



31.

Okun's law is the ______ relationship between GDP and the ______.

A.

negative; unemployment rate

B.

negative; inflation rate

C.

positive; unemployment rate

D.

positive; inflation rate




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