Deck 7: Consumer Choice: Maximizing Utility and Behavioral Economics

Question 1

An example of income earned but not received is corporate dividends.

Answer 1

False

Question 2

The GDP of country A may be higher than that of country B because the workers in country A work more hours per week than workers in country B.

Answer 2

True

Question 3

Disposable income equals national income minus personal taxes.

Answer 3

False

Question 4

Of the two types of investment (fixed and inventory),fixed investment is the larger of the two.

Question 5

Net interest is the interest paid out by US households and government minus the interest income they received.

Question 6

Countries with a large GDP must also have a large per-capita GDP.

Question 7

GDP is computed using base-year dollars.

Question 8

Compensation of employees is the largest component of GDP when using the expenditure approach to calculate GDP.

Question 9

Net exports must always be a positive amount.

Question 10

Sales tax is an example of an indirect business tax.

Question 11

The research of economists Stevenson and Wolfers tends to support the Easterlin paradox.

Question 12

If a business firm in Country A produces a good but does not sell it in that same year,that good will not be counted in Country A's GDP.

Question 13

Net domestic product (NDP)is the total value of new goods available in the economy after worn out capital goods have been replaced.

Question 14

A transfer payment is a payment to a person that is made in return for goods and services supplied.

Question 15

If the GDP in one year is greater than it was in the previous year,then economic growth must have occurred.

Question 16

GDP includes some nonmarket goods.

Question 17

Corporate profits is the largest category of national income.

Question 18

Corporate profits can be broken into three categories: dividends,undistributed profits,and corporate profits taxes.

Question 19

Purchases of new residential housing are considered investment,for purposes of computing GDP.

Question 20

Some economists argue that GDP overstates overall economic welfare because it does not include the impact of bads such as pollution.

Question 21

In the definition of GDP,the words "total market value" refer to total

A) dollar value at base prices.
B) dollar value at current prices.
C) subjective value.
D) objective value.
E) a and d

Question 22

Which of the following items is a final good?

A) mustard in a deli
B) tin purchased by a tin can company
C) a sweater purchased by someone in a department store
D) a and b
E) a,b,and c

Question 23

The interest income received by U.S.households and government minus the interest they paid out is termed net interest.

Question 24

Which of the following would definitely not be included in the measurement of GDP?

A) value of the services of a painter who paints your garage
B) value of the services of a person who mows his or her own lawn
C) value of the services of a maid who cleans your house
D) value of the services of a plumber who fixes your kitchen sink

Question 25

Underground activities are not counted in GDP because

A) some underground activities are illegal and the government doesn't want to place,for instance,drug dealers on an equal footing with small businesses.
B) there are no written records of underground activities.
C) of a decision made in the 1930s and no one has gotten around to changing it yet.
D) although it is possible to accurately measure underground activities,it is harder than measuring above-ground activities because with the latter,one doesn't have to dig as deep.

Question 26

Which of the following is counted in GDP?

A) the trading of 100 shares of Microsoft stock
B) the services of a real estate broker
C) government transfer payments
D) the sale of a used car
E) none of the above

Question 27

Which of the following statements is false?

A) The market value of all nonmarket goods is omitted from GDP.
B) The sale of used goods is omitted from GDP.
C) The market value of a person mowing his or her own lawn is omitted from GDP.
D) If a good is produced but not sold,it is included in GDP.

Question 28

The best reason economists take only final goods and services into account when calculating GDP is that

A) this is the way things have always been done,but there is no particular reason why.
B) they want to avoid the problem of final counting.
C) they want to avoid the problem of double counting.
D) this is the only way it can be done.

Question 29

To macroeconomists,investment is mainly the purchases of goods and services

A) by businesses.
B) to hold as wealth,such as gold coins or art.
C) to hold as wealth,such as stocks and bonds.
D) by the government.
E) ​b and c

Question 30

Personal income is equal to consumption plus saving.

Question 31

A complete business cycle can be measured from peak to peak.

Question 32

Net exports equals

A) exports divided by imports.
B) the sum of exports and imports.
C) exports minus imports.
D) exports during the year.
E) none of the above

Question 33

Net domestic product equals gross domestic product minus the capital consumption allowance.

Question 34

Gross Domestic Product (GDP)is the total market value of all

A) final goods and services produced annually within a country's borders.
B) final and intermediate goods and services produced annually within a country's borders.
C) intermediate goods and services produced annually within a country's borders.
D) final goods produced every month within a country's borders.

Question 35

Macroeconomists define consumption as

A) purchases by the business sector.
B) wearing away and breakdown of capital goods.
C) the difference between imports and exports.
D) purchases by the household sector.

Question 36

Using the expenditures approach,GDP is equal to consumption plus investment,plus government purchases,minus net exports.

Question 37

Which of the following illustrates double counting?

A) The total market value of the steel used to produce a car and the total market value of the car itself are summed.
B) The total market value of tennis rackets and the total market value of tennis balls are summed.
C) The total market value of picture frames and the total market value of camera film are summed.
D) The total market value of eyeglasses and the total market value of carpet are summed.
E) b and c

Question 38

Which of the following is a nonmarket good?

A) the corn you grow in your home garden and consume
B) the clothes you sew and sell to a neighbor who pays you by writing you a check
C) the self-portrait hanging in your den
D) a and c
E) a,b,and c

Question 39

Which of the following would not be included in the measurement of GDP?

A) a bill from a car mechanic
B) wages of a card dealer working in a Las Vegas casino
C) commissions of a stockbroker
D) the increased value of shares of stock
E) c and d

Question 40

Gross Domestic Product is computed by using

A) base-year prices.
B) wholesale prices.
C) previous-year prices.
D) current-year prices.

Question 41

To derive net domestic product (NDP)from gross domestic product (GDP),we must subtract ________________ from GDP.

A) the capital consumption allowance
B) gross private domestic investment
C) imports
D) inventory investment
E) the statistical discrepancy

Question 42

An example of income earned but not received is

A) welfare payments.
B) Social Security payments.
C) undistributed profits.
D) a and b
E) a,b,and c

Question 43

In the United States,the largest expenditure component in GDP is

A) gross private domestic investment.
B) government purchases of goods and services.
C) consumption expenditures.
D) net exports.
E) none of the above

Question 44

The expenditure approach to measuring GDP sums

A) consumption,investment,government purchases,and net exports.
B) sales,revenues,income,and wages.
C) profits,compensation of employees,consumption,and investment.
D) net exports,consumption,wages,and salaries.
E) consumption,interest,net exports,and federal government purchases

Question 45

Net domestic product is the total value of

A) all final goods and services produced within a country's borders in a year.
B) only intermediate goods produced within a country's borders in a year.
C) all final goods and services produced within a country's borders in a year minus gross private domestic investment.
D) only intermediate goods produced within a country's borders in a year plus gross private domestic investment.
E) all final goods and services produced within a country's borders in a year minus capital consumption allowance.

Question 46

Capital consumption allowance refers to

A) capital goods being used up in production through natural wear,obsolescence,and accidental destruction.
B) people sending money between countries.
C) the purchase of used factories.
D) the purchase of goods that allow households to consume more services.

Question 47

The largest component of national income in the United States is

A) rental income.
B) proprietors' income.
C) compensation of employees.
D) corporate profits.
E) net interest.

Question 48

Suppose the total market value of all final goods and services produced in economy X this year is $4 million.Of the $4 million worth of goods and services,$3 million is sold and $1 million is held in inventory.For this year,the GDP for economy X is

A) $4 million.
B) $3 million.
C) $1 million.
D) $7 million.
E) none of the above

Question 49

Two ways of measuring Gross Domestic Product are the __________ approach and the __________ approach.

A) expenditure; income
B) expenditure; national product
C) national product; income
D) net national product; personal income

Question 50

Depreciation refers to a decrease in the value of a good caused by

A) an increase in the price level.
B) a decrease in the price level.
C) "wear and tear" of capital goods over time.
D) the depreciation allowance.
E) a decrease in purchasing power.

Question 51

Which of the following statements is true?

A) Indirect business taxes are a component of national income because when added to the other components of national income,the sum must equal GDP.
B) Indirect business taxes must be subtracted from national income to yield a figure equal to GDP.
C) Indirect business taxes are a part of national income because they are considered a payment to a factor of production.
D) Indirect business taxes are not part of national income because they are not considered a payment to a factor of production.

Question 52

In the calculation of national income,dividends paid to stockholders are part of

A) compensation of employees.
B) proprietors' income.
C) rental income.
D) net interest.
E) corporate profits.

Question 53

Government purchases consist of the total dollar amount(s)spent on goods and services by the

A) federal government only.
B) state governments only.
C) local governments only.
D) state and local governments,but not the federal government.
E) federal,state,and local governments.

Question 54

Personal income is

A) equal to GDP.
B) that portion of national income that can be used for consumption and saving.
C) the sum of all payments to suppliers of the factors of production.
D) the amount of income that individuals actually receive.
E) another term for disposable income.

Question 55

Disposable income is

A) equal to GDP minus the capital consumption allowance.
B) that portion of personal income that can be used for consumption and saving.
C) the sum of all payments to suppliers of the factors of production.
D) equal to national income.
E) another term for personal income.

Question 56

National income equals

A) wages + salaries + corporate profits + net income.
B) compensation of employees + proprietors' income + corporate profits + rental income + net interest.
C) compensation of employees + proprietors' income + indirect business taxes + rental income + net interest.
D) the monetary value of fringe benefits + tips + wages + profits + salaries.
E) none of the above

Question 57

Which of the following statements is true?

A) The main items that comprise indirect business taxes include excise taxes,income taxes,and property taxes.
B) Capital consumption allowance is also known as depreciation.
C) A sales tax is an example of an indirect business tax.
D) b and c
E) a,b,and c

Question 58

An example of income received but not earned is

A) government transfer payments.
B) undistributed profits.
C) compensation of employees.
D) rental income.
E) a and c

Question 59

Investment is equal to all purchases of newly produced capital goods

A) minus changes in business inventories.
B) plus fixed investment minus inventory investment.
C) plus changes in business inventories.
D) plus changes in business inventories plus purchases of new residential housing.

Question 60

In the United States,which is the largest dollar figure?

A) disposable personal income
B) gross domestic product
C) per-capita GDP
D) personal income

Question 61

Refer to Exhibit 7-1.What is the value of national income?

A) $4,351
B) $4,252
C) $4,403
D) $2,996
E) $4,542

Question 62

Refer to Exhibit 7-2.GDP in 2019 is

A) $49.
B) $51.
C) $86.
D) $92.
E) not possible to calculate without the CPI.

Question 63

Refer to Exhibit 7-1.What is the value of net domestic product?

A) $5,840
B) $5,731
C) $5,650
D) $5,767
E) $6,637

Question 64

Refer to Exhibit 7-1.Which of the following summations represents net domestic product?

A) GDP - $222
B) GDP - $331
C) GDP - $412
D) GDP - $295
E) GDP + $134

Question 65

Suppose there are five goods in the economy,A-E.The current-year quantity of each is 10A,20B,30C,40D,and 50E.Current-year prices are $1 for each unit of A,$2 for each unit of B,$3 for each unit of C,$4 for each unit of D,and $5 for each unit of E.Base-year prices are $1 for each good.Real GDP in the current year equals _________ and GDP equals _________.

A) $550; $150
B) $130; $530
C) $150; $550
D) $530; $130
E) none of the above

Question 66

"Economic growth" has occurred if

A) inflation rate between this year and last year is zero or less.
B) GDP this year exceeds the Real GDP this year.
C) unemployment rate this year is above the natural rate of unemployment.
D) Real GDP this year is greater than Real GDP last year.

Question 67

The typical U.S.business cycle,measured peak to peak,lasts approximately

A) 4 to 5 years.
B) 8 to 10 years.
C) 1 to 3 years.
D) 6 months to 2 years.

Question 68

Which of the following would not be included in the calculation of this year's GDP?

A) a headlight bulb purchased at Joe's Auto Supply by Olivia to replace a burnt out bulb in her car
B) a headlight bulb purchased by Ford Motor Co.from a supplier
C) a headlight bulb produced but not sold this year and thus ending up as inventory
D) none of the above,i.e.,all would be included

Question 69

Refer to Exhibit 7-1.What is the value of personal income?

A) $4,252
B) $4,388
C) $5,072
D) $3,996
E) $4,207

Question 70

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

A) intermediate; that year's
B) intermediate; base-year
C) final; that year's
D) final; base-year

Question 71

Real GDP is always measured in

A) cheaper dollars.
B) quality of goods produced.
C) base-year dollars.
D) nominal dollars.
E) current dollars.

Question 72

Refer to Exhibit 7-1.Which of the following summations represents GDP using the expenditure approach?

A) $4,150 + $751 + $850 + $300
B) $4,150 + $751 + $850 - $331 + $300
C) $4,150 + $751 + $850 + $331 + $300
D) $4,150 + $751 + $850 + $331 + $300 - $320
E) $4,150 + $751 + $850 + $331 + $300 - $320 + $111

Question 73

Sophia just bought shares of IBM stock for $25,000 and paid a $350 commission to her broker.How did this impact GDP?

A) GDP increased by $25,350
B) GDP increased by $350
C) GDP increased by $25,000
D) GDP increased by $24,650
E) it had no impact on GDP

Question 74

The base year is the year

A) in which prices are unstable.
B) in which prices are lowest.
C) in which prices are highest.
D) that serves as a reference point or benchmark.
E) in which nominal output is largest.

Question 75

If in the process of calculating GDP,the market value of all intermediate goods is added to the market value of all final goods,this would

A) overstate the actual value of GDP.
B) produce the correct value of GDP.
C) understate the actual value of GDP.
D) avoid the possible error of double counting.

Question 76

Refer to Exhibit 7-1.What is the value of disposable income?

A) $3,618
B) $4,795
C) $3,727
D) $4,207
E) $4,017

Question 77

Refer to Exhibit 7-1.What is the value of gross domestic product?

A) $6,062
B) $5,731
C) $3,072
D) $6,382
E) $2,637

Question 78

Refer to Exhibit 7-2.Assuming that 1990 is the base year,Real GDP in 2019 is

A) $49.
B) $51.
C) $86.
D) $92.
E) not possible to calculate without the CPI.

Question 79

Real GDP is GDP

A) in current-year prices.
B) in base-year prices.
C) in GDP-prices.
D) in that year's prices.

Question 80

Refer to Exhibit 7-2.GDP in 1990 is

A) $49.
B) $51.
C) $86.
D) $92.
E) impossible to calculate without the CPI.