Deck 21: Gdp and the Consumer Price Index

Question 1

In the circular-flow diagram, firms:

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

Answer 1

supply goods and services.

Question 2

In the circular-flow diagram, households:

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

Answer 2

supply resources.

Question 3

In the product markets:

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

Answer 3

households demand goods and services.

Question 4

In the circular-flow diagram, firms:

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

Question 5

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 6

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

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

Question 7

The national income and product accounts are calculated by:

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

Question 8

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 9

In the circular-flow diagram, households:

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

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 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 13

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 14

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 15

The national accounts keep track of everything EXCEPT:

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

Question 16

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 17

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 18

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 19

The circular-flow diagram illustrates all of the following in the U.S. economy EXCEPT:

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

Question 20

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.

Question 21

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 22

Private savings is equal to:

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

Question 23

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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 imports, which of the following is likely to happen?

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

Question 24

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

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

Question 25

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

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

Question 26

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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), which of the following is likely to happen if there is a decrease in imports?

A) an increase in the nominal GDP
B) a decrease in the nominal GDP
C) an increase in the unemployment rate
D) an increase in the nominal GDP, a decrease in the nominal GDP, and an increase in the unemployment rate

Question 27

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

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

Question 28

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 29

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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

Question 30

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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

Question 31

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 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) part of private savings.

Question 33

Households derive income from all of the following EXCEPT:

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

Question 34

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) part of private savings.

Question 35

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 36

Which of the following is considered to be an IOU?

A) stock
B) bond
C) interest
D) dividend

Question 37

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 38

Which of the following would accurately characterize the portion of a firm's profit paid to the owner of one share of its stock?

A) interest
B) dividend
C) stock
D) bond

Question 39

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. What is GDP in this economy?

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

Question 40

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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, which of the following is likely to happen?

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 41

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 42

Most households derive the bulk of their income from:

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

Question 43

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

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

Question 44

The money spent on domestically produced final goods and services:

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

Question 45

Which of the following causes an outflow of funds from a domestic economy?

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

Question 46

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

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

Question 47

The market(s) that channel the excess savings of households into investment spending by firms is(are):

A) the stock market.
B) financial markets.
C) the international market.
D) the bond market.

Question 48

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 49

Use the following to answer questions
Figure: Circular-Flow Model
(Figure: Circular-Flow Model) Look at the figure 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 50

Investment spending is spending on:

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

Question 51

Which of the following 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 52

Goods that are produced domestically but sold abroad are:

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

Question 53

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 54

Which one of the following transactions 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 55

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 56

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 57

The indirect ownership of physical capital refers to households owning:

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

Question 58

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 59

An example of investment spending is the purchase of a:

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

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

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. What is the value of net exports?

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

Question 62

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

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

Question 63

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 64

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 65

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure 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 receive income in the form of all of the following EXCEPT:

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

Question 67

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. Which of the following is a type of market?

A) household
B) rest of the world
C) government
D) financial

Question 68

Which of the following 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 69

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

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

Question 70

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. The total flow of funds into and out of financial markets is:

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

Question 71

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 72

Which of the following is 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 73

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. How much is total government spending?

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

Question 74

Purchases of foreign-produced goods and services are:

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

Question 75

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. Which of the following is NOT a sector of the economy shown in the circular-flow model?

A) households
B) firms
C) the rest of the world
D) factor markets

Question 76

Use the following to answer questions
Figure: Expanded Circular-Flow Model
(Figure: Expanded Circular-Flow Model) Look at the figure 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 77

Which one of the following is an example of 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 78

Inventory is counted as investment because:

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

Question 79

A transfer payment is a payment for:

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

Question 80

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.