Deck 19: Measuring Economic Performance

Question 1

The expenditure approach to measuring GDP involves adding up the purchases of final goods and services by market participants.

Answer 1

True

Question 2

When you buy a pickup truck to use at home,it is included in the investment component of GDP.

Answer 2

False

Question 3

Final goods or services used to compute GDP refer to:

A) the sum of all wages paid to laborers.
B) the factors of production used to produce output.
C) goods and services purchased by the ultimate users.
D) the value of outstanding shares of stock of manufacturing firms.

Answer 3

goods and services purchased by the ultimate users.

Question 4

The expenditure method dictates that GDP is equal to C + I + G + (X - M).

Question 5

National income includes wages and salaries,interest and rent,but not corporate profits.

Question 6

Real GDP per capita increases if the population grows at a rate faster than real GDP.

Question 7

Inflation that causes an increase in the prices of goods and services will,other things being equal,tend to decrease nominal GDP.

Question 8

Gross domestic product is the value of all final goods and services produced within a country during a given period of time.

Question 9

GDP is:

A) the value of all final goods and services produced domestically within a given period of time.
B) the value of all final good and services produced anywhere in the world by a nation's firms within a given period of time.
C) the value of all final goods and services produced by a government within a given period of time.
D) the sum of all currency and coins in circulation.

Question 10

The formula from the expenditure method indicates that GDP is equal to:

A) C + I - G - X - M
B) C + I - G + X - M
C) C + I + G + X - M
D) C + I + G + M - X

Question 11

If nominal GDP in 2011 is greater than nominal GDP in 2010,the economy's real output of goods and services must have risen.

Question 12

A price index creates a measure of how many dollars it would take to maintain a constant purchasing power over time.

Question 13

The flour used in the pizza you bought for dinner last night is considered a final good.

Question 14

The expenditure category of GDP that fluctuates the most over time is investment.

Question 15

Included in the investment category of GDP under the expenditure approach is the purchase of parcels of land for the purposes of realizing capital gains when real estate values rise.

Question 16

In the simple circular flow model of the economy,total expenditures on goods and services equal total household income.

Question 17

GDP is:

A) the total value of all consumer expenditures within a given period.
B) national income after taxes.
C) the total value of all final goods and services plus intermediate goods and services produced domestically within a given period.
D) the value of all final goods and services produced domestically within a given period.

Question 18

Under the expenditure approach to GDP accounting,government purchases of goods and services include welfare payments.

Question 19

The formula for calculating real GDP = (price index/nominal GDP)´ 100.

Question 20

Real GDP accurately reflects both the quantity and quality of goods and services.

Question 21

Which of the following is not included in GDP?

A) the fees for legal services rendered by your attorney
B) the replacement of brake pads on your six-year-old vehicle
C) cash income paid to a day laborer that is not reported to the tax authorities
D) the payments for a chiropractor's services

Question 22

Which of the following is not included in GDP calculations?

A) the value of an accountant's services
B) the value of 500 shares of Microsoft stock sold to an investor
C) the value of high-definition television sets produced, but not sold, during the year
D) the value of a haircut

Question 23

GDP does not directly include:

A) the value of final goods and services produced, but not sold, during a period.
B) the value of services rendered during a period.
C) the value of intermediate goods sold during a period.
D) any of the above.

Question 24

If individuals were paid for their household production,GDP would:

A) increase.
B) not change, but GNP would increase.
C) decrease.
D) not change, but GNP would decrease.

Question 25

Which of the following is included in GDP?

A) a U.S. company purchasing stock of a foreign company
B) a foreign company purchasing stock of a U.S. company
C) a U.S. company purchasing stock of another U.S. company
D) None of the above.

Question 26

Consumption is the purchase of goods and services by:

A) households.
B) government.
C) business firms.
D) foreign buyers.

Question 27

Which of the following is included in the calculated gross domestic product?

A) Mr. Kelly buys a used lawn mower from his neighbor Mr. Templeton.
B) A local ice cream store sells $17,000 worth of cones and sundaes on July 4^th.
C) Suzanne buys a love seat and chair for $85 at the yard sale on the corner.
D) Farmer Fred sells his second tractor to his son.

Question 28

The goods and services that are used in the production of other goods and services are called:

A) gross domestic goods.
B) intermediate goods.
C) final goods.
D) ultimate goods.

Question 29

Intermediate products:

A) produced domestically are not directly reflected in a nation's GDP.
B) produced domestically are reflected directly in a nation's GDP.
C) are imported retail products.
D) are goods that are purchased by the ultimate user.

Question 30

Which of the following products are not included in current U.S.GDP?

A) a Washington apple
B) a Ford Mustang produced last year and sold this year
C) a physical examination at a California health clinic
D) All of the above are included in current U.S. GDP.

Question 31

The expenditure approach to GDP accounting includes:

A) consumption.
B) investment.
C) net exports.
D) all of the above.

Question 32

Which of the following would not be counted as a final good for inclusion in GDP?

A) a piece of glass bought by a consumer to fix a broken window
B) a sheet of glass purchased by General Motors for the side window of a new car
C) a sheet of glass produced this year and ending up in the inventory of a retail hardware store
D) All of the above are counted.

Question 33

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

A) a pair of jeans sold by a clothing retailer
B) cloth sold to a suit manufacturer
C) a share of Wal-Mart stock
D) a used Ford Mustang sold from one neighbor to another

Question 34

Which of the following is not a subcategory of consumption spending?

A) consumer services
B) consumer investment
C) consumer durable goods
D) consumer nondurable goods

Question 35

GDP minus the net income of foreigners is:

A) personal income.
B) national income.
C) GNP.
D) net national income.

Question 36

The expenditure method of measuring GDP is calculated by adding up:

A) the final goods and services produced domestically during a given period.
B) C + I + G + (X - M).
C) domestic production of final goods and services for consumers, firms, government, and the international sector (through net exports).
D) all of the above.

Question 37

Net exports are defined as:

A) exports plus imports.
B) exports minus imports.
C) imports minus exports.
D) exports plus imports minus tariffs.

Question 38

Which of the following is included in GDP calculations?

A) the college tuition paid to enroll in a course
B) a check for $50 received on your birthday
C) cash income received by a self-employed landscaper that is not reported to the IRS
D) sales revenue received from a yard sale

Question 39

Which of the following is not part of GDP?

A) the value of a new home built and purchased during the year
B) the value of shares of Microsoft stock bought and sold during the year
C) the value of long distance telephone services rendered during the year
D) the value of new furniture produced during the year

Question 40

The largest single expenditure component of GDP is:

A) consumption.
B) investment.
C) government purchases.
D) net exports.

Question 41

Fixed investment includes spending on all of the following goods except:

A) machinery.
B) inventory.
C) tools.
D) factory buildings.

Question 42

Which of the following is not included in the investment category under the expenditure approach to GDP accounting?

A) newly constructed residential housing
B) factory buildings
C) stocks and bonds
D) additions to inventory

Question 43

Transfer payments are included in which category under the expenditure approach to GDP accounting?

A) consumption
B) government purchases
C) net exports
D) Transfer payments are not directly included in GDP calculations.

Question 44

Changes in inventories are included in which category under the expenditure approach to GDP accounting?

A) consumption
B) government purchases
C) investment
D) net exports

Question 45

All of the following are examples of producer goods except:

A) machinery.
B) tools.
C) appliances.
D) factory buildings.

Question 46

The most volatile GDP category under the expenditure approach is:

A) wages and salaries.
B) investment.
C) consumption.
D) government purchases.

Question 47

Using the expenditure approach to GDP accounting,which of the following are included in the investment category?

A) the purchase of government bonds
B) the purchase of corporate bonds
C) the purchase of corporate stocks
D) none of the above

Question 48

Which of the following is not considered part of the services category under the expenditure approach to GDP accounting?

A) sporting events
B) haircuts
C) commercial airline transportation
D) privately owned jets

Question 49

Declines in business inventories enter national income accounts:

A) negatively in the consumption category.
B) negatively in the investment category.
C) negatively in the net export category.
D) positively in the profits category.

Question 50

Government purchases,under the expenditure approach to GDP accounting,do not include:

A) state government purchases of plumbing services.
B) Social Security benefit payments to retirees.
C) the salaries of military officers.
D) federal government purchases of computers.

Question 51

Exhibit 19-1 Refer to Exhibit 19-1.Government purchases (G)for the year in question is:

A) $1,350 billion.
B) $3,400 billion.
C) $2,100 billion.
D) $2,550 billion.

Question 52

The investment component of GDP includes:

A) funds in individual retirement accounts.
B) construction of a new steel mill.
C) the sale of shares of Coca-Cola stock.
D) the purchase of a refrigerator by a household.

Question 53

Exhibit 19-1 Refer to Exhibit 19-1.Investments (I)for the year in question is:

A) $2,000 billion.
B) $4,000 billion.
C) $200 billion.
D) $1,800 billion.

Question 54

Residential construction is generally included in which category of GDP?

A) consumption
B) investment
C) government expenditures
D) net exports

Question 55

Exhibit 19-1 Refer to Exhibit 19-1.The consumption (C)figure for the year in question is:

A) $7,000 billion.
B) $6,300 billion.
C) $5,000 billion.
D) $5,700 billion.

Question 56

Which of the following is included in the investment category under the expenditure approach to GDP accounting?

A) stocks
B) bonds
C) durable goods
D) additions to business inventories

Question 57

Exhibit 19-1 Refer to Exhibit 19-1.Net exports of goods and services (X-M)was approximately:

A) -900 billion.
B) -450 billion.
C) 1200 billion.
D) 900 billion.

Question 58

The largest component of consumption expenditures is:

A) durables.
B) nondurables.
C) services.
D) residential structures.

Question 59

Government purchases,under the expenditure approach to GDP accounting,includes all of the following except:

A) welfare payments.
B) salaries of senators.
C) fighter jets purchased by the government.
D) the military payroll.

Question 60

Exhibit 19-1 Refer to Exhibit 19-1.What conclusion regarding exports and imports can be arrived at looking at the data provided?

A) Exports exceeded imports.
B) Imports exceeded exports.
C) Exports equaled imports.
D) Data insufficient to arrive at any conclusion.

Question 61

Which of the following is subtracted from gross national product to arrive at the net national product?

A) net income of foreigners
B) depreciation
C) indirect business taxes
D) transfer payments

Question 62

GDP equals $5 trillion.If consumption equals $3.5 trillion,investment equals $1 trillion,and government spending equals $1.5 trillion,then:

A) exports exceed imports by $1 trillion.
B) imports exceed exports by $1 trillion.
C) net exports equal zero.
D) exports exceed imports by $1.5 trillion.

Question 63

Personal income includes:

A) income received in the form of transfer payments.
B) wages and salaries.
C) interest earnings on bonds.
D) all of the above.

Question 64

Which of the following is not counted as a part of GDP?

A) the purchase of a loaf of bread by a consumer
B) the unsold additions to inventory at a furniture store
C) the purchase of a snowplow by the city of Minneapolis
D) the purchase of 100 shares of Amazon.com stock by your grandmother

Question 65

Which of the following is subtracted from net national product to arrive at national income?

A) net income of foreigners
B) depreciation
C) indirect business taxes
D) transfer payments

Question 66

If a nation's imports exceed its exports:

A) net exports will be positive.
B) GDP will be less than the sum of consumption, investment, and government purchases.
C) GDP will be greater than the sum of consumption, investment, and government purchases.
D) none of the above apply.

Question 67

What is the measure of the income earned by owners of resources used in making final goods and services?

A) personal income
B) national income
C) retained earnings
D) gross domestic income

Question 68

GDP equals $8 trillion.If consumption equals $5.5 trillion,investment equals $500 billion,and government spending equals $1.5 trillion,then:

A) exports exceed imports by $500 billion.
B) imports exceed exports by $500 billion.
C) net exports equal zero.
D) exports exceed imports by $1 trillion.

Question 69

Which component of current U.S.GDP under the expenditure approach is most likely to be negative?

A) consumption
B) government purchases
C) net exports
D) investment

Question 70

What is the measure of the income received by owners of resources used in making final goods and services?

A) factor payments
B) product payments
C) indirect earnings
D) direct earnings

Question 71

For the economy as a whole:

A) income must equal expenditures.
B) expenditures exceed income because of taxes.
C) income exceeds expenditures because of saving.
D) expenditures exceed income because of the government budget deficit.

Question 72

The services rendered by a special agent with the Federal Bureau of Investigation is included in which expenditure category of GDP?

A) consumption
B) investment
C) government purchases
D) net exports

Question 73

Which is greater,gross domestic product or national income? By how much?

A) Gross domestic product < National income; indirect business taxes, depreciation, and income earned by foreigners in the United States
B) Gross domestic product < National income; net exports and indirect business taxes
C) Gross domestic product > National income; net exports and indirect business taxes
D) Gross domestic product > National income; indirect business taxes, depreciation, and income earned by foreigners in the United States

Question 74

If indirect business taxes and depreciation were added to the national income,we obtain:

A) Net National product.
B) Gross National Product.
C) Gross Domestic Product.
D) Personal Income.

Question 75

Which of the following is counted as part of GDP?

A) a bakery buying 100 pounds of cake flour
B) the purchase of a used Ford by a U.S. citizen
C) a social security payment received by a retired teacher
D) none of the above

Question 76

The net national product (NNP)can be obtained from the GDP by:

A) subtracting depreciation.
B) subtracting net income of foreigners and depreciation.
C) including the net income of foreigners.
D) subtracting depreciation and indirect business taxes.

Question 77

Which of the following is not part of U.S.GDP?

A) the value of a Toyota imported from Japan
B) the value of a Ford Mustang produced in the United States and sold in Canada
C) the salary of the governor of Minnesota
D) the value of a Rhode Island attorney's services

Question 78

National income:

A) is a measure of the income earned by owners of resources used in making final goods and services.
B) is a measure of the income received by persons after taxes.
C) equals aggregate income minus the statistical discrepancy.
D) equals GDP minus depreciation.

Question 79

The purchase of a new scanner by a computer graphics business is included in which expenditure category of GDP?

A) consumption
B) investment
C) government purchases
D) net exports

Question 80

Fixed investment includes all of the following except:

A) all purchases by businesses that add to their inventories.
B) all spending on capital goods.
C) all spending on producer goods.
D) all spending on goods that increase future production capabilities.