Question 1

Which is true of leakages and injections in the circular flow?

Accepted Answer

A)  Leakages minus injections equal GDP.
B)  Injections minus leakages equal GDP.
C)  Leakages minus injections equal zero in equilibrium.
D)  Domestic leakages must equal domestic injections.
E)  Leakages must be greater than injections for the economy to be growing.F) None of the above
G) B) and C)

Question 2

If real GDP is $5 trillion for a particular year and the GDP price index is 140,then nominal GDP is $7 trillion.

Accepted Answer

A) True 
 B)False

Question 3

If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion,then the

Accepted Answer

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

Question 4

If real GDP for the base year is $3 trillion,then nominal GDP for that year is

Accepted Answer

A)  $.03 trillion
B)  $0.3 trillion
C)  $3 trillion
D)  $30 trillion
E)  $300 trillionF) A) and D)
G) C) and D)

Question 5

If the real GDP equals $100 billion this year and nominal GDP is $200 billion,the price level since the base year has increased

Accepted Answer

A)  $200 billion
B)  50 percent
C)  $100 billion
D)  100 percent
E)  200 percentF) C) and D)
G) B) and E)

Question 6

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 the quantities consumed in some base year.
B)  Both yield identical numbers for price level changes for any two years.
C)  A price level change indicated by the CPI is usually smaller because it includes only prices for a limited number of goods.
D)  The CPI measures changes in relative prices of goods; the GDP price index measures changes in the price level.
E)  A price level change indicated by the GDP price index is usually smaller because people tend to find substitutes for goods whose prices rise sharply.F) C) and D)
G) D) and E)

Question 7

Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

Accepted Answer

A)  GDP = $2,720
B)  GDP = $3,060
C)  GDP = $3,140
D)  GDP = $3,400
E)  GDP cannot be determined due to insufficient dataF) A) and C)
G) A) and E)

Question 8

Which of the following would be included in GDP?

Accepted Answer

A)  payment of the monthly telephone bill by Mr.Laconic
B)  the purchase of corporate stock by Steven Jones
C)  the purchase of a used limousine by Harold Abel
D)  the value of a pair of mittens your mother knitted for you
E)  the $300 George saved because he painted his own garageF) A) and B)
G) B) and E)

Question 9

The country of Fishland had a GDP of 1,000 doubloons (the monetary unit) in 2003 and 1,500 doubloons in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004 real GDP in Fishland

Accepted Answer

A)  increased by 500 doubloons
B)  increased by 333 doubloons
C)  increased by 50 doubloons
D)  remained the same
E)  decreased by 50 doubloonsF) A) and B)
G) C) and D)

Question 10

The price index in the base year always equals

Accepted Answer

A)  0
B)  1
C)  100
D)  infinity
E)  0.01F) C) and E)
G) D) and E)

Question 11

Which of the following statements is true regarding leakages and injections?

Accepted Answer

A)  Government transfer payments must equal taxes because one is a leakage and one is an injection.
B)  Imports must equal exports since both are leakages.
C)  Saving must equal investment for the economy to be in equilibrium.
D)  Since leakages equal injections,aggregate income equals aggregate expenditure.
E)  Net taxes are an injection into the circular flow; net exports are a leakage.F) B) and E)
G) A) and D)

Question 12

Gross Domestic Product measures the

Accepted Answer

A)  market value of all final goods and services produced by a nation's citizens,residents and firms of a nation regardless of the location of production
B)  market value of all final goods and services produced by resources located within a nation regardless of who owns those resources
C)  market value of all goods and services produced by resources located within a nation regardless of who owns those resources
D)  market values of all goods and services produced by a nation's citizens and firms regardless of the location of production
E)  market value of all goods and services produced within a nation by resources owned by residents and firms of that nationF) C) and E)
G) B) and C)

Question 13

The national income accounting system measures economic activity based on the concept of the

Accepted Answer

A)  triangular flow of output and income through different sectors of the economy
B)  stock of precious metals accumulated in the public treasury
C)  comparative advantage of crucial national industries
D)  circular flow of output and income through different sectors of the economy
E)  balance sheets of all a country's corporationsF) B) and E)
G) A) and C)

Question 14

Because of activity in the underground economy,

Accepted Answer

A)  GDP statistics understate the true volume of economic activity
B)  GDP statistics overstate the true prices in the economy
C)  consumers are not as well off as GDP statistics indicate
D)  firms' profits are higher than GDP statistics indicate
E)  government revenue is higher than GDP statistics indicateF) A) and D)
G) C) and D)

Question 15

The base year for a price index is the year

Accepted Answer

A)  in which prices are lowest
B)  in which prices are highest
C)  in which real output is largest
D)  in which prices were stable
E)  that serves as a reference pointF) None of the above
G) C) and D)

Question 16

A farmer grows wheat and sells it to a bakery for $5.The bakery bakes the wheat into bread,which it sells to a distributor for $20.The distributor sells the bread to a supermarket for $30,which sells the bread to customers for $50.Which of the following is true?

Accepted Answer

A)  The value added by the distributor is $30.
B)  The supermarket contributed more,in value added,than the bakery.
C)  As a result of this activity,GDP rises by $50 minus the value added at each stage of production.
D)  Counting the value added at each stage instead of the final selling price creates a serious problem of double counting.
E)  The value added by the farmer is $20 because the wheat,which is worth $5,is necessary for each of the three remaining stages of production.F) B) and D)
G) All of the above

Question 17

A chain-weighted index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 18

How does net domestic product (NDP) differ from gross domestic product (GDP) ?

Accepted Answer

A)  GDP includes expenditures for gross products that pollute the environment; NDP does not.
B)  GDP is gross because it values spending on each good and service in dollar terms; NDP excludes taxes.
C)  GDP includes exports; NDP omits exports.
D)  GDP includes all government spending; NDP subtracts taxes.
E)  GDP includes that part of the capital stock used up in the production process; NDP does not.F) A) and C)
G) B) and D)

Question 19

Which of the following is the best example of an intermediate good?

Accepted Answer

A)  the flowers Mr.Grover buys at a local nursery
B)  the flowers that Timmy Grover,age three,brought Mrs.Grover after he picked them from a neighbor's garden
C)  the flour Grandma Grover buys to make a birthday cake
D)  the flour that Joe buys so that he can eat pizza three nights a week
E)  the flour Amy orders each month for the bakery she managesF) B) and E)
G) B) and C)

Question 20

Whenever there is inflation,the increase in nominal GDP will overstate growth in the economy.

Accepted Answer

A) True 
 B)False

Exam 6: Tracking the Useconomy

If real GDP is $5 trillion for a particular year and the GDP price index is 140,then nominal GDP is $7 trillion.

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If real GDP for the base year is $3 trillion,then nominal GDP for that year is

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The price index in the base year always equals

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Whenever there is inflation,the increase in nominal GDP will overstate growth in the economy.

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Which of the following would be included in GDP?

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The country of Fishland had a GDP of 1,000 doubloons (the monetary unit) in 2003 and 1,500 doubloons in 2004.The GDP price index was 100 in 2003 and 150 in 2004.Between 2003 and 2004 real GDP in Fishland

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The base year for a price index is the year

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Use the following data to calculate GDP: consumption = $2,000; gross investment = $600; government purchases = $500; net exports = -$40; transfer payments = $340.

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If the real GDP equals $100 billion this year and nominal GDP is $200 billion,the price level since the base year has increased

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Because of activity in the underground economy,

Correct AnswerverifiedShow Answer

A farmer grows wheat and sells it to a bakery for $5.The bakery bakes the wheat into bread,which it sells to a distributor for $20.The distributor sells the bread to a supermarket for $30,which sells the bread to customers for $50.Which of the following is true?

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Which of the following statements is true regarding leakages and injections?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The national income accounting system measures economic activity based on the concept of the

Correct AnswerverifiedShow Answer

A chain-weighted index recognizes the fact that the composition of output changes over time.

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Which of the following is the best example of an intermediate good?

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If real GDP in a particular year is $5,000 trillion and nominal GDP in that same year is $4,000 trillion,then the

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Gross Domestic Product measures the

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Which is true of leakages and injections in the circular flow?

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How does net domestic product (NDP) differ from gross domestic product (GDP) ?

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