Question 1

Disposable income equals:

Accepted Answer

Disposable income is the amount of money that a household has available for spending and saving after taxes and government transfers have been accounted for. This means that disposable income is calculated by taking a household's total income and subtracting any taxes that they owe, and including any government transfers that they receive. Therefore, option A is the correct answer as it includes both income and government transfers while subtracting taxes.

Question 2

Most households derive the bulk of their income from:

Accepted Answer

Wages are the payment received by individuals in exchange for their labor, and this is the primary source of income for most households. The other options listed (interest, profit, and rent) are sources of income as well, but they are usually secondary sources or only apply to specific households (such as those who own rental properties or have significant investments).

Question 3

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

Accepted Answer

Exports are domestically produced goods and services that are sold to people in other countries.

Question 4

The money spent on domestically produced final goods and services:

Accepted Answer

The money spent on domestically produced final goods and services is one component of GDP, so it is equal to GDP.

Question 5

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

Accepted Answer

Imports involve purchasing goods or services from other countries, leading to an outflow of funds from the domestic economy. Household savings, government tax collections, and transfer payments do not necessarily result in an outflow of funds from the domestic economy.

Question 6

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?

Accepted Answer

Disposable income is the total income received by households minus any taxes paid, which in this figure is $400 ($900 - $500 = $400). Therefore, choice C is correct. Choices A, B, and D are incorrect.

Question 7

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

Accepted Answer

Financial markets, including the bond market and stock market, are the primary channels through which excess savings of households are channeled into investment spending by firms. The bond market allows firms to borrow money by selling bonds while the stock market allows firms to raise capital by selling stocks. Both markets are part of the broader financial market system that connects savers and borrowers. The international market may also play a role in this process, but it is not a direct channel for households to invest in domestic firms.

Question 8

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:

Accepted Answer

This is the formula for calculating gross domestic product (GDP), which measures the total value of all goods and services produced within a country's borders in a particular period of time.

Question 9

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?

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 10

Investment spending is spending on:

Accepted Answer

Investment spending refers to spending on productive physical capital such as machinery, equipment, and buildings that will generate income in the future. Stocks, mutual funds, and corporate bonds are examples of financial investments rather than physical capital investments.

Question 11

Which of the following is NOT a government transfer?

Accepted Answer

The Defense Department payment for a new weapons system is not a government transfer because it is a payment for a good or service, rather than a direct payment to an individual or household. The other options (unemployment compensation, food stamps, and Social Security benefits) are all forms of government transfers.

Question 12

Goods that are produced domestically but sold abroad are:

Accepted Answer

Goods that are produced domestically but sold abroad are known as exports. They contribute to a country's exports and foreign exchange earnings.

Question 13

Government borrowing is:

Accepted Answer

Government borrowing refers specifically to the amount of funds raised by the government in financial markets by issuing bonds or other securities. It does not include government spending on goods and services (which may be funded by borrowing or other sources) or tax revenues.

Question 14

Which one of the following transactions is included in a current year's GDP as investment spending?

Accepted Answer

Investment spending includes purchases of physical capital such as equipment, machinery, and other assets used in the production of goods and services. The purchase of a play-gym set for a day-care business qualifies as investment spending. Purchases of financial assets such as stocks do not count towards GDP as they do not directly contribute to economic production. The purchases of a car or a condo are considered personal consumption expenditures and are also not included in investment spending.

Question 15

In the circular-flow model, households:

Accepted Answer

The answer of In the circular-flow model, households:
...

Question 16

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

Accepted Answer

A government transfer is when the government provides money to individuals or businesses without receiving goods or services in return. Social Security payments are an example of a government transfer because they are payments made to individuals without any goods or services being exchanged. The other options are not examples of government transfers because they involve an exchange of goods or services.

Question 17

The indirect ownership of physical capital refers to households owning:

Accepted Answer

The answer of The indirect ownership of physical capital refers...

Question 18

Disposable income in a particular period is:

Accepted Answer

Disposable income is the income that is available to an individual after taxes have been deducted. Therefore, it is earned income plus government transfer payments less taxes. Option C includes all of these components. Option A only considers total earned income without factoring in taxes and transfers, while option B includes government transfer payments without subtracting taxes. Option D goes one step further and subtracts savings, which is not necessarily a component of disposable income.

Question 19

An example of investment spending is the purchase of a:

Accepted Answer

Investment spending refers to the purchase of long-term assets such as machinery, equipment or structures that are used in the production of goods and services. Buying a new tractor by a farmer is an example of investment spending as it is a long-term asset that will be used to produce crops for years to come. The other choices are not examples of investment spending as they are either short-term or do not involve the purchase of a long-term asset.

Question 20

Investment spending is spending on:

Accepted Answer

Investment spending refers to spending on productive physical capital, such as machinery, equipment, and buildings, that is used in the production of goods and services. Bonds and shares of stock are not included in investment spending because they do not directly contribute to the creation of new goods and services.

Quiz 21: Gdp and the Consumer Price Index

Disposable income equals:

Most households derive the bulk of their income from:

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

The money spent on domestically produced final goods and services:

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

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?

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

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:

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?

Investment spending is spending on:

Which of the following is NOT a government transfer?

Goods that are produced domestically but sold abroad are:

Government borrowing is:

Which one of the following transactions is included in a current year's GDP as investment spending?

In the circular-flow model, households:

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

The indirect ownership of physical capital refers to households owning:

Disposable income in a particular period is:

An example of investment spending is the purchase of a:

Investment spending is spending on: