Question 1

The gross domestic product (GDP)of an economy for a particular year is likely to increase if _____.​
A)workers go on longer vacations during that year
B)the length of an average work week decreases​
C)homeowners hire lawn care services rather than maintaining the lawns themselves​
D)people cook food at home instead of buying restaurant meals​
E)the sale of illegal drugs increases​

Accepted Answer

The answer of The gross domestic product (GDP)of an economy...

Question 2

Which of the following is a problem associated with gross domestic product (GDP)as a measure of social welfare?​
A)It includes many nonmarket activities.
B)It takes into account the value of only those goods which are widely used.
C)It takes into account the cost of environmental damage caused by pollution.
D)It includes intermediate goods as a separate entry.
E)It excludes the value of leisure time.

Accepted Answer

GDP does not account for the value of non-market activities such as leisure time, which are important for social welfare. It primarily measures economic activity through market transactions, overlooking non-market factors that contribute to well-being.

Question 3

Which of the following is an example of an injection into the circular flow of income and expenditure?​
A)Consumption
B)Exports​
C)Taxes​
D)Saving​
E)Government borrowing​

Accepted Answer

Exports are an injection into the circular flow of income and expenditure because they represent income earned by domestic producers from foreign buyers. This income enters into the domestic circular flow of income and expenditure, increasing the total income and expenditure in the economy. The other options are not injections but leakages from the circular flow: Consumption, taxes, and saving are all withdrawals from the circular flow of income and expenditure, while government borrowing is a combination of both injection and leakage.

Question 4

Which of the following is an example of a leakage from the circular flow of income and expenditure?​
A)Investment
B)Imports​
C)Government purchases​
D)Exports​
E)Transfer payments​

Accepted Answer

A leakage from the circular flow of income and expenditure occurs when money flows out of the economy. Imports represent a leakage as they involve spending on goods and services that are produced outside of the economy. The other options listed represent injections into the circular flow, as they involve spending within the economy (investment, government purchases) or income redistribution (transfer payments). Exports represent a flow of income into the economy from outside, but not a leakage.

Question 5

The circular flow model shows the flow of:​
A)money in the economy.
B)financial assets in the economy.
C)goods and services in the product market.
D)resources and money in the economy.
E)resources through the resource markets and their allocation in the product market.

Accepted Answer

The answer of The circular flow model shows the flow...

Question 6

The existence of the underground economy causes gross domestic product (GDP)statistics to _____.​
A)understate the true volume of economic activity
B)overstate the aggregate price level in the economy​
C)overstate the standard of living​
D)overstate the profit of firms​
E)understate government spending in an economy​

Accepted Answer

The underground economy consists of transactions that take place "off the books" without being recorded or reported to the government. Therefore, GDP statistics do not capture the full extent of economic activity in the country, resulting in an understatement of the true value of the economy.

Question 7

Which of the following correctly illustrates the leakages-injections approach to GDP?​
A)DI + (NT)= C + I + G + (X ‒ M)
B)S + C + NT = DI​
C)S + C + (NT)= I + G + (X ‒ M)​
D)S + (NT)+ M = I + G + X​
E)S + (NT)= I + G + (X ‒ M)​

Accepted Answer

The leakages-injections approach to GDP considers leakages (savings, taxes, and imports) and injections (investment, government spending, and exports) into the economy. Option D correctly matches leakages (S + NT + M) with injections (I + G + X), illustrating the balance between the two for an economy to be in equilibrium.

Question 8

Which of the following is an example of an injection into the circular flow of income and expenditure?​
A)Government spending
B)Imports​
C)Disposable income​
D)Net taxes​
E)Saving​

Accepted Answer

Government spending is an injection into the circular flow of income and expenditure as it is money that is being injected into the economy from outside of the typical cycle of consumer spending and business investment. This spending can result in increased economic activity and growth. The other options (B-E) are not examples of injections, but rather components within the circular flow of income and expenditure.

Question 9

Which of the following is true of leakages and injections in the circular flow model?​
A)Leakages minus injections equal gross domestic product (GDP).
B)Injections minus leakages equal gross domestic product (GDP.
C)Leakages minus injections equal zero in equilibrium.
D)Leakages must be less than injections for an economy to be in equilibrium.
E)Leakages must be greater than injections for an economy to be growing.

Accepted Answer

In equilibrium, leakages (saving, taxes, and imports) must equal injections (investment, government expenditure, and exports). Therefore, leakages minus injections equal zero. Neither A, B, D nor E is true in general.

Question 10

Lois sells ten sweaters she had knitted to a retail store.The gross domestic product (GDP)of her country _____.​
A)will increase
B)will decrease​
C)will remain unaffected​
D)will increase only if the sweaters are as good as the sweaters sold by other retailers​
E)will increase if the price of each sweater is less than the cost of inputs required​

Accepted Answer

When Lois sells the sweaters to the retail store, this transaction is counted as a part of the country's GDP. Therefore, the GDP will increase as a result of her sale.

Question 11

Marianne and Laura are both homemakers with children.When Laura starts to work as an unpaid volunteer at a hospital,she hires Marianne to care for her young child.In this context,the gross domestic product (GDP)will _____.​
A)increase
B)decrease​
C)remain unaffected​
D)increase if Marianne cares for the child better than Laura​
E)increase if Laura treats patients with more sincerity than the other volunteers​

Accepted Answer

When Laura starts working as an unpaid volunteer, she is contributing to the economy in terms of her time and skills. Even though she is not financially compensated for her work, the value of her contribution is still measured in GDP. By hiring Marianne to care for her child, Laura is also contributing to the economy by creating a job and paying Marianne for her services. This transaction would be counted towards GDP and therefore, it would increase.

Question 12

Which of the following is an example of a leakage from the circular flow of income and expenditure?​
A)Government purchases of goods and services
B)Taxes​
C)Investment​
D)Exports​
E)Consumption expenditures​

Accepted Answer

A leakage occurs when income is kept out of the circular flow of income and expenditure, decreasing the amount of money available for spending. Taxes are a leakage because they decrease individuals' disposable income, which reduces their ability to spend on goods and services. The other choices listed (government purchases, investment, exports, and consumption expenditures) are all examples of injections into the circular flow, as they add income to the economy and increase the amount of money available for spending.

Question 13

Which of the following is likely to be excluded from the gross domestic product (GDP)of a country?​
A)The value of the drugs being sold in a vacant lot
B)The value of the drugs being sold in a pharmacy​
C)A doctor treating a patient in a hospital​
D)The value of a new house bought by an individual​
E)The value of new furnitures bought by an individual​

Accepted Answer

The value of drugs being sold in a vacant lot is likely to be excluded from the GDP as it is an illegal and underground activity not accounted for by the official economy.

Question 14

Which of the following is an example of an injection into the circular flow of income and expenditure?​
A)Net taxes
B)Saving​
C)Transfer payments​
D)Government borrowing​
E)Disposable income​

Accepted Answer

Transfer payments represent an injection into the circular flow of income and expenditure because they represent government spending that is not in exchange for goods or services, but rather is distributed as incomes to individuals or businesses. This injection can increase income and spending in the economy.

Question 15

Which of the following statements is true regarding leakages and injections?​
A)Government transfer payments must equal taxes because one is a leakage and the other is an injection.
B)Imports must equal exports since both are leakages.
C)Government purchases,investment,and exports are leakages from the circular flow of income and expenditure.
D)Savings and net taxes are leakages from the circular flow of income and expenditure.
E)Net taxes are an injection into the circular flow,while exports are a leakage.

Accepted Answer

Leakages refer to any income in the circular flow that is not immediately used for consumption or investment, such as savings and net taxes. Injections refer to any income that comes into the circular flow from outside sources, such as government spending or exports. Therefore, savings and net taxes are examples of leakages while government purchases, investment, and exports are examples of injections. Option A is incorrect because transfer payments and taxes are both considered leakages. Option B is incorrect because imports and exports are both leakages in the circular flow. Option C is incorrect because government purchases and exports are injections, not leakages. Option E is also incorrect because exports are considered injections, not leakages.

Question 16

Which of the following will be excluded from the measurement of gross domestic product (GDP)?​
A)The market value of automobiles purchased by the federal government
B)The market value of California wine purchased by a Canadian firm​
C)The payment of employees' medical insurance​
D)The market value of computers purchased by state governments​
E)The market value of transactions in the underground economy

Accepted Answer

Transactions in the underground economy are excluded from GDP measurement because they are often unrecorded and therefore difficult to measure accurately. The other options all involve legitimate market transactions and will therefore be included in GDP measurement.

Question 17

The circular flow model shows that:​
A)households are on the demand side of the resource market.
B)firms are on the demand side of both the product and resource markets.
C)households are on the supply side of the resource market and the demand side of the product market.
D)firms and governments are on the supply side of the loanable funds market.
E)governments are on the demand side of the product market and the supply side of the resource market.

Accepted Answer

The circular flow model shows that households are on the supply side of the resource market as they provide resources (such as labor) in exchange for income, and on the demand side of the product market as they consume goods and services produced by firms. Firms, on the other hand, are on the demand side of the resource market as they purchase resources from households and other firms, and on the supply side of the product market as they produce goods and services for sale to households and other firms. The other answer choices do not accurately describe the roles of households, firms, and governments in the circular flow model.

Question 18

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that manufactures peanut butter,which sells it for $45.Which of the following is true?​
A)Total value added is $65.
B)The value of final sales is $65.
C)The value of final sales is $25.
D)Total value added is $25.
E)Total value added is $45.

Accepted Answer

The answer of Jimmy Earl,a farmer,sells $20 worth of peanuts...

Question 19

Which of the following is an example of a leakage into the circular flow of income and expenditure?​
A)Saving
B)Exports​
C)Government expenditure on goods​
D)Transfer payments​
E)Investment by firms​

Accepted Answer

The answer of Which of the following is an example...

Question 20

Gross domestic product (GDP)figures tend to understate the quantity of goods and services available because:​
A)GDP excludes the value of goods produced at home.
B)many items are counted twice or more in the intermediate stages of production.
C)more women are entering the labor force.
D)firms often add less to inventories than they planned to.
E)exports are subtracted from GDP but imports are not added.

Accepted Answer

GDP often underestimates the total quantity of goods and services because it does not include the economic value of goods and services produced and consumed within the household, such as home-cooked meals and home maintenance.

Quiz 6: Tracking the Useconomy

The gross domestic product (GDP) of an economy for a particular year is likely to increase if _____.

Which of the following is a problem associated with gross domestic product (GDP) as a measure of social welfare?

Which of the following is an example of an injection into the circular flow of income and expenditure?

Which of the following is an example of a leakage from the circular flow of income and expenditure?

The circular flow model shows the flow of:

The existence of the underground economy causes gross domestic product (GDP) statistics to _____.

Which of the following correctly illustrates the leakages-injections approach to GDP?

Which of the following is an example of an injection into the circular flow of income and expenditure?

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

Lois sells ten sweaters she had knitted to a retail store.The gross domestic product (GDP) of her country _____.

Marianne and Laura are both homemakers with children.When Laura starts to work as an unpaid volunteer at a hospital,she hires Marianne to care for her young child.In this context,the gross domestic product (GDP) will _____.

Which of the following is an example of a leakage from the circular flow of income and expenditure?

Which of the following is likely to be excluded from the gross domestic product (GDP) of a country?

Which of the following is an example of an injection into the circular flow of income and expenditure?

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

Which of the following will be excluded from the measurement of gross domestic product (GDP) ?

The circular flow model shows that:

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that manufactures peanut butter,which sells it for $45.Which of the following is true?

Which of the following is an example of a leakage into the circular flow of income and expenditure?

Gross domestic product (GDP) figures tend to understate the quantity of goods and services available because:

Quiz 6: Tracking the Useconomy

The gross domestic product (GDP) of an economy for a particular year is likely to increase if _____.​

Which of the following is a problem associated with gross domestic product (GDP) as a measure of social welfare?​

Which of the following is an example of an injection into the circular flow of income and expenditure?​

Which of the following is an example of a leakage from the circular flow of income and expenditure?​

The circular flow model shows the flow of:​

The existence of the underground economy causes gross domestic product (GDP) statistics to _____.​

Which of the following correctly illustrates the leakages-injections approach to GDP?​

Which of the following is an example of an injection into the circular flow of income and expenditure?​

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

Lois sells ten sweaters she had knitted to a retail store.The gross domestic product (GDP) of her country _____.​

Marianne and Laura are both homemakers with children.When Laura starts to work as an unpaid volunteer at a hospital,she hires Marianne to care for her young child.In this context,the gross domestic product (GDP) will _____.​

Which of the following is an example of a leakage from the circular flow of income and expenditure?​

Which of the following is likely to be excluded from the gross domestic product (GDP) of a country?​

Which of the following is an example of an injection into the circular flow of income and expenditure?​

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

Which of the following will be excluded from the measurement of gross domestic product (GDP) ?​

The circular flow model shows that:​

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that manufactures peanut butter,which sells it for $45.Which of the following is true?​

Which of the following is an example of a leakage into the circular flow of income and expenditure?​

Gross domestic product (GDP) figures tend to understate the quantity of goods and services available because:​

The gross domestic product (GDP) of an economy for a particular year is likely to increase if _____.

Which of the following is a problem associated with gross domestic product (GDP) as a measure of social welfare?

Which of the following is an example of an injection into the circular flow of income and expenditure?

Which of the following is an example of a leakage from the circular flow of income and expenditure?

The circular flow model shows the flow of:

The existence of the underground economy causes gross domestic product (GDP) statistics to _____.

Which of the following correctly illustrates the leakages-injections approach to GDP?

Which of the following is an example of an injection into the circular flow of income and expenditure?

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

Lois sells ten sweaters she had knitted to a retail store.The gross domestic product (GDP) of her country _____.

Marianne and Laura are both homemakers with children.When Laura starts to work as an unpaid volunteer at a hospital,she hires Marianne to care for her young child.In this context,the gross domestic product (GDP) will _____.

Which of the following is an example of a leakage from the circular flow of income and expenditure?

Which of the following is likely to be excluded from the gross domestic product (GDP) of a country?

Which of the following is an example of an injection into the circular flow of income and expenditure?

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

Which of the following will be excluded from the measurement of gross domestic product (GDP) ?

The circular flow model shows that:

Jimmy Earl,a farmer,sells $20 worth of peanuts to a factory that manufactures peanut butter,which sells it for $45.Which of the following is true?

Which of the following is an example of a leakage into the circular flow of income and expenditure?

Gross domestic product (GDP) figures tend to understate the quantity of goods and services available because: