Deck 7: GDP and the CPI: Tracking the Macroeconomy

Question 1

The national income and product accounts are calculated by the:

A) Congressional Budget Office.
B) Federal Reserve.
C) Bureau of Economic Analysis.
D) Office of Management and Budget.

Answer 1

Bureau of Economic Analysis.

Question 2

In the circular-flow diagram, firms:

A) demand goods.
B) demand services.
C) supply resources.
D) demand resources.

Answer 2

demand resources.

Question 3

The national income and product accounts keep track of:

A) consumer debt.
B) sales and investment spending by businesses.
C) worker productivity.
D) unemployment rates.

Answer 3

sales and investment spending by businesses.

Question 4

In the circular-flow diagram, the places where goods and services are bought and sold are the:

A) product markets.
B) factor markets.
C) households.
D) firms.

Question 5

In the product markets:

A) households supply goods and services.
B) households supply resources.
C) firms demand goods and services.
D) firms supply goods and services.

Question 6

In the product markets:

A) households supply goods and services.
B) households demand goods and services.
C) firms demand resources.
D) firms supply resources.

Question 7

In the factor markets:

A) households supply goods and services.
B) households supply resources.
C) firms demand goods and services.
D) firms supply goods and services.

Question 8

In the circular-flow diagram, households:

A) supply goods.
B) supply services.
C) supply resources.
D) buy resources.

Question 9

In the circular-flow diagram, an organization that produces goods and services for sale is a:

A) government.
B) factor.
C) household.
D) firm.

Question 10

In the circular-flow diagram, the places where resources, especially capital and labor, are bought and sold are the:

A) product markets.
B) factor markets.
C) households.
D) firms.

Question 11

The national income and product accounts keep track of:

A) consumer spending.
B) interest rates.
C) rates of inflation.
D) exchange rates.

Question 12

In the U.S. economy, the circular-flow diagram does NOT illustrate:

A) growing income inequality.
B) flows of money.
C) flows of goods and services.
D) the purchase and sale of factors of production.

Question 13

The circular-flow diagram illustrates:

A) the minimum wage state by state.
B) fluctuations in exchange rates.
C) changes in worker productivity.
D) the key concepts in the national accounts.

Question 14

In the circular-flow diagram, households:

A) supply goods.
B) supply services.
C) buy resources.
D) buy goods and services.

Question 15

The national accounts do NOT keep track of:

A) the spending of consumers and the government.
B) the sales of producers.
C) business investment.
D) exchange rates.

Question 16

In the circular-flow diagram, a person or a group of people who share income is a:

A) government.
B) factor.
C) household.
D) firm.

Question 17

In the factor markets:

A) households supply goods and services.
B) households demand goods and services.
C) firms demand resources.
D) firms supply resources.

Question 18

The circular-flow diagram is important because it shows that the flow of money into each market or sector of the economy is _____ the flow of money coming out of that sector.

A) greater than
B) equal to
C) less than
D) unrelated to

Question 19

In the circular-flow diagram, firms:

A) supply goods and services.
B) demand goods.
C) supply resources.
D) demand services.

Question 20

According to the circular-flow diagram, which economic agents engage in consumer spending?

A) firms
B) households
C) factor markets
D) financial markets

Question 21

The total income of households after taxes and government transfers is called:

A) disposable income.
B) private savings.
C) aggregate spending.
D) investment.

Question 22

A share in the ownership of a company is a(n):

A) bond.
B) stock.
C) dividend.
D) IOU.

Question 23

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in exports, holding everything else constant, which outcome is likely to occur?

A) a decrease in the nominal GDP
B) a decrease in the real GDP
C) a decrease in the unemployment rate
D) a decrease in the inflation rate

Question 24

_____ is considered to be an IOU.

A) A tock
B) A bond
C) Interest
D) A dividend

Question 25

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. How does the government finance its purchases of goods and services?

A) by printing money
B) by taxes
C) by borrowing
D) by taxes and borrowing

Question 26

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in investment spending, holding everything else constant, which outcome is likely to occur?

A) a decrease in GDP
B) an increase in GDP
C) an increase in the unemployment rate
D) a decrease in the inflation rate

Question 27

Households do NOT derive income from:

A) wages or labor income.
B) interest from lending.
C) rent from allowing firms to use their land.
D) imports.

Question 28

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in consumer spending, holding everything else constant, which outcome is likely to occur?

A) an increase in nominal GDP
B) an increase in real GDP
C) an increase in the unemployment rate
D) an increase in the inflation rate

Question 29

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What are net exports?

A) $0
B) $30
C) $60
D) $100

Question 30

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in exports, holding everything else constant, which outcome is likely to occur?

A) a decrease in the nominal GDP
B) an increase in the real GDP
C) a decrease in the unemployment rate
D) an increase in the inflation rate

Question 31

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is the value of GDP in this economy?

A) $100
B) $400
C) $500
D) $600

Question 32

Stock in a company is:

A) a share of ownership of the company.
B) an IOU that pays interest.
C) a portion of a firm's profits paid to shareholders.
D) a component of private savings.

Question 33

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in consumer spending, holding everything else constant, which outcome is likely to occur?

A) an increase in GDP
B) a decrease in GDP
C) an increase in the unemployment rate
D) a decrease in the inflation rate

Question 34

Private savings is equal to:

A) disposable income less taxes.
B) disposable income less consumption.
C) wealth.
D) wealth plus government transfer payments.

Question 35

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. What is disposable income?

A) $0
B) $100
C) $400
D) $500

Question 36

The portion of a firm's profit paid to the owner of one share of its stock would accurately be characterized as:

A) an interest payment.
B) a dividend.
C) a stock.
D) a bond.

Question 37

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in government spending, holding everything else constant, which outcome is likely to occur?

A) an increase in the nominal GDP
B) a decrease in the real GDP
C) an increase in the unemployment rate
D) a decrease in the inflation rate

Question 38

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in government spending, holding everything else constant, which outcome is likely to occur?

A) an increase in the nominal GDP
B) an increase in the real GDP
C) an increase in the unemployment rate
D) an increase in the inflation rate

Question 39

A bond is:

A) a share of ownership of a company.
B) an IOU that pays interest.
C) a portion of a firm's profits paid to shareholders.
D) a component of private savings.

Question 40

Use the following to answer questions:
(Figure 7-1: Circular-Flow Model) Use Figure 7-1: Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is a decrease in investment spending, holding everything else constant, which outcome is likely to occur?

A) an increase in the nominal GDP
B) an increase in the real GDP
C) an increase in the unemployment rate
D) an increase in the inflation rate

Question 41

Which example is NOT a government transfer?

A) unemployment compensation
B) food stamps
C) payments by the Defense Department for a new weapons system
D) Social Security benefits paid to someone who is retired

Question 42

Government borrowing is:

A) the amount of funds raised by government in financial markets.
B) government spending on goods and services.
C) government tax revenues.
D) the amount of funds raised by government in the financial markets, government spending on goods and services, and government tax revenues.

Question 43

An example of investment spending is the purchase of a:

A) bond by a banker.
B) loaf of bread by your aunt.
C) new tractor by a farmer.
D) ticket to a football game by a student.

Question 44

Which example illustrates consumption expenditure?

A) Samantha bought an oven for her cooking show on Food Network.
B) Stephanie bought a laptop for her brother.
C) Jim purchased 200 shares of Google stock.
D) Herman Smith spent $1,500 to buy a used car for his son.

Question 45

Which transaction is included in a current year's GDP as investment spending?

A) ABC company purchased 10,000 shares of IBM stock.
B) Ronnie bought a new BMW.
C) Anton purchased his friend's condo.
D) Maggie bought a play-gym set for her day-care business.

Question 46

Disposable income in a particular period is:

A) total earned income.
B) earned income plus government transfer payments.
C) earned income plus government transfer payments less taxes.
D) earned income plus government transfer payments less taxes and savings.

Question 47

Disposable income equals:

A) income plus government transfers minus taxes.
B) income plus government spending minus taxes.
C) income minus taxes plus government spending.
D) income minus taxes minus government transfers.

Question 48

Purchases of foreign-produced goods and services are:

A) net exports.
B) exports.
C) imports.
D) transfer payments.

Question 49

Most households derive the bulk of their income from:

A) wages.
B) interest.
C) profit.
D) rent.

Question 50

Domestically produced goods and services sold to people in other countries are known as:

A) imports.
B) investments.
C) exports.
D) transfer payments.

Question 51

Which factor causes an outflow of funds from a domestic economy?

A) household savings
B) government tax collections
C) government transfer payments
D) imports

Question 52

Investment spending is spending on:

A) productive physical capital.
B) stocks.
C) mutual funds.
D) corporate bonds.

Question 53

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's:

A) disposable income.
B) gross domestic product.
C) trade deficit.
D) budget deficit.

Question 54

Goods that are produced domestically but sold abroad are:

A) imports.
B) exports.
C) part of domestic consumption.
D) investment.

Question 55

The money spent on domestically produced final goods and services is:

A) equal to GDP.
B) equal to exports minus imports.
C) subtracted in the circular-flow model.
D) equal to GDP, equal to exports minus imports, and subtracted in the circular-flow model.

Question 56

In the circular-flow model, households:

A) receive transfer payments from the government.
B) buy resources in the factor markets.
C) sell products in the market for goods and services.
D) issue stocks and bonds to raise capital.

Question 57

A transfer payment is a payment for:

A) a military transfer to a war zone.
B) which no services were rendered by the government.
C) transfer of a debt to a different person.
D) being transferred to a different city by your employer.

Question 58

An example of a government transfer is a(n):

A) expenditure on an interstate highway.
B) bequest from a deceased relative.
C) Social Security payment.
D) salary for a member of the armed forces.

Question 59

The indirect ownership of physical capital refers to households owning:

A) cash.
B) stocks.
C) savings accounts.
D) their house.

Question 60

Investment spending is spending on:

A) productive physical capital.
B) bonds.
C) shares of stock.
D) productive physical capital, bonds, and shares of stock.

Question 61

Inventory is counted as investment because it:

A) is used for future production.
B) is a source of future sales.
C) has no opportunity cost.
D) is tax deductible.

Question 62

An example of investment spending is the:

A) amount of funds raised by the government in the financial markets.
B) purchase of government bonds by a private household.
C) purchase of a freezer by an ice-cream parlor.
D) purchase of stock shares by a mutual fund.

Question 63

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of funds into and out of households is:

A) $1,020.
B) $1,000.
C) $850.
D) $700.

Question 64

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. How does the government finance its spending?

A) taxes of $150 plus borrowing of $70
B) foreign borrowing and sales of stock of $110
C) investment spending of $120
D) net exports of $80

Question 65

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The government has a budget:

A) surplus of $150.
B) surplus of $220.
C) deficit of $70.
D) deficit of $200.

Question 66

Households do NOT receive income in the form of:

A) wages.
B) dividends.
C) interest and rent.
D) investment spending.

Question 67

Use the following to answer questions:
The value, at current market prices, of the final goods and services produced within a country during a particular period is:

A) disposable personal product.
B) gross foreign factor output.
C) gross personal product.
D) gross domestic product.

Question 68

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is GDP?

A) $200
B) $700
C) $1,000
D) $1,080

Question 69

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model What is the value of net exports?

A) -$20
B) $20
C) $50
D) $130

Question 70

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of funds into and out of financial markets is:

A) $70.
B) $110.
C) $170.
D) $300.

Question 71

A laptop computer purchased by a private individual for personal use is considered to be:

A) consumption spending.
B) investment spending.
C) private saving.
D) a transfer of income.

Question 72

Which factor is NOT included in investment spending in the national income accounts?

A) new residential construction
B) the purchase of machinery and other productive physical capital
C) the purchase of stocks and bonds by a business
D) spending on inventories

Question 73

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The flow of funds into and out of the rest of the world is:

A) $30.
B) $80.
C) $160.
D) $240.

Question 74

A laptop computer that is purchased by an accounting firm is considered to be:

A) consumption spending.
B) investment spending.
C) private saving.
D) a pretax dividend.

Question 75

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model How much is total government spending?

A) $20
B) $220
C) $370
D) $200

Question 76

Which example illustrates consumption?

A) a new computer purchased by Federal Express for one of its corporate executives
B) a storage facility for a moving company
C) a new car purchased for personal use
D) a dump truck purchased by a demolition company

Question 77

Use the following to answer questions:
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model. What is the value of disposable income?

A) $1,020
B) $1,000
C) $870
D) $850

Question 78

Gross domestic product is defined as:

A) consumer spending + government purchases of goods and services + financial spending + exports - imports.
B) consumer spending + government transfers + investment spending + exports - imports.
C) disposable income + taxes + investment spending + exports + imports.
D) consumer spending + government purchases of goods and services + investment spending + exports - imports.

Question 79

Goods that are produced in a particular period but NOT sold in that period:

A) go into inventory and are called consumption.
B) end up in inventory and are included in investment.
C) are finally included in depreciation when they are sold.
D) are classified as intermediate goods.

Question 80

The total of the values added at every stage of production for a good leads to the:

A) total cost of the labor used to produce the good.
B) prices of the factors of production used to produce the good.
C) final value of the good.
D) intermediate value of the good.