Question 1

Which of the following is an accurate statement about real national income?

Accepted Answer

Real national income adjusts for changes in the price level to reflect the economy's actual output, unlike nominal national income which can change due to price level changes without a change in output.

Question 2

In order to determine the economy's real GDP growth rate between two time periods,we should look at

Accepted Answer

Real national income in each time period, which is equal to nominal national income corrected for price-level changes, is the best indicator of the economy's real GDP growth rate between two time periods because it accounts for changes in prices and provides an accurate measure of the economy's output. Nominal national income may be affected by changes in prices, so it may not accurately reflect changes in the quantity of goods and services produced. Potential national income is a theoretical concept and not a measure of actual output. Real national income corrected for quantity changes does not account for changes in prices, which can lead to inaccurate measures of economic growth. Only considering the real national product from the latest time period does not provide a comparison to a previous time period and therefore cannot determine the growth rate.

Question 3

In macroeconomics,if the value of the national product increases,there is

Accepted Answer

When the value of the national product increases, there is an equal increase in the value of income claims on that output. This is because national product refers to the total value of goods and services produced within a country in a given period, and the income generated from these goods and services is distributed among households, businesses, and the government. Therefore, an increase in the value of the national product leads to an equal increase in the income claims on that output.

Question 4

Suppose that in 2019 Canada's automobile manufacturers produced 2 million cars priced at $20 000 each; in 2020 they produced 1 million cars priced at $40 000 each.Ceteris paribus,the change in nominal national income is

Accepted Answer

The nominal national income remains the same because in both years the total value of cars produced is $40 billion (2019: 2 million cars * $20,000 = $40 billion; 2020: 1 million cars * $40,000 = $40 billion).

Question 5

Consider a small economy with 3 individuals.Individual A produces 100 chickens that sell for $8 each.Individual B produces 50 bags of corn that sell for $10 each.Individual C produces 40 bushels of apples that sell for $20 each.National income in this economy is

Accepted Answer

Individual A produces goods worth 100 x $8 = $800.
Individual B produces goods worth 50 x $10 = $500.
Individual C produces goods worth 40 x $20 = $800.
Therefore, the national income is $800 + $500 + $800 = $2100.

Question 6

Consider a small economy with 3 individuals where each individual produces and sells $1000 worth of final goods and services.The national income for this economy is

Accepted Answer

The national income of the small economy is simply the sum of the income of each individual, which is $1000 each. Therefore, the national income is $3000.

Question 7

Suppose Appliance Mart buys a used refrigerator for $100,repairs it,and resells it for $250.The result of this transaction is to

Accepted Answer

The transaction results in an increase in the value of national product by $150, which is equal to the difference between the selling price of $250 and the cost of the used refrigerator of $100. This increase represents the value added by Appliance Mart through repairing and reselling the refrigerator.

Question 8

Which of the following is an equivalent term for "full-employment output"?

Accepted Answer

Full-employment output refers to the level of output a country can produce when its resources are fully employed. This is often referred to as potential output as well. Therefore, the equivalent term for "full-employment output" is potential output.

Question 9

In macroeconomics,the "output gap" is the difference between

Accepted Answer

The output gap is the difference between potential or full employment output and actual output in the economy. It measures the extent to which an economy is operating below its potential capacity. Potential real national income refers to the maximum level of output that an economy can produce with its available resources and technology. Actual real national income, on the other hand, is the actual level of output produced in the economy. Therefore, the output gap is the difference between these two measures, i.e., potential real national income minus actual real national income.

Question 10

A nation's real national income in a given year measures the

Accepted Answer

Real national income measures the value of output produced by the economy, adjusted for inflation or changes in prices over time. It is usually measured in constant dollars, which allows for a more accurate comparison of national income over time. Current-dollar national income (A) does not account for inflation, and is therefore less accurate. The level of national income subject to taxation by the federal government (C) varies based on tax policies and regulations, and provides no indication of the actual value of national output. The market value of national output (D) is a valid measure of national income, but does not account for changes in prices over time. Opportunity cost (E) is not relevant to measuring national income.

Question 11

An example of a topic outside the scope of macroeconomics is

Accepted Answer

Changes in the price of a particular good in a specific market is a microeconomic topic, as it focuses on individual markets and not the overall economy. The other options all relate to macroeconomics, as they pertain to the economy as a whole rather than specific markets.

Question 12

In macroeconomics,what is the output gap?

Accepted Answer

The output gap is the difference between the actual output of an economy (often measured as actual GDP) and its potential output (the level of output that could be produced if the economy were operating at full capacity, with full employment). This is often represented symbolically in economic models, and "Y" typically represents actual output while "YS" or similar symbols might represent potential output, with other symbols representing adjustments or specific conditions. The notation "Y^*." is not standard, but the correct answer is the one that refers to the difference between actual and potential output, which is the essence of the output gap concept.

Question 13

An equivalent term for "real national income" is

Accepted Answer

Real national income is the measure of national income adjusted for inflation or changes in price levels, which gives a more accurate picture of changes in the economy over time. The term "constant-dollar national income" is also used to refer to this concept. Nominal national income (A) refers to the current dollar value of national income, without adjusting for inflation. Actual national income (D) may refer to either nominal or real national income, depending on the context. Potential national income (E) refers to the maximum amount of output an economy can produce with its available resources, and is not directly related to measures of actual or real national income.

Question 14

To compare the economy's aggregate output in two different time periods,economists compare the

Accepted Answer

To accurately compare the economy's aggregate output in two different time periods, it is important to adjust for changes in the general price level between the two periods. Real national income accounts for changes in inflation and provides a more accurate measure of the economy's output. Nominal national income, potential national income, unemployment rates, and inflation rates all do not account for changes in the price level, making them less accurate measures for comparing aggregate output over time.

Question 15

What is potential or full-employment output?

Accepted Answer

Potential or full-employment output is the GDP that would be produced if the economy's resources were fully employed at a normal intensity of use. It represents the productive capacity of an economy when all the resources are being used efficiently. It is often used as a benchmark for measuring economic performance and growth.

Question 16

Which of the following is the best description of the business cycle?

Accepted Answer

The business cycle refers to the short-run fluctuations of national income around its trend value, which includes periods of economic growth, recession, recovery, and expansion. It reflects the overall performance of the economy and is affected by various factors such as changes in consumer spending, government policies, and international trade. Therefore, choice B is the most accurate description of the business cycle.

Question 17

An upward trend in real national income over an extended period of time is called

Accepted Answer

An upward trend in real national income over an extended period of time is known as economic growth. This means that the country's production of goods and services is increasing, leading to an overall increase in the standard of living for its citizens.

Question 18

Suppose Honest Rob's Used Cars buys a used car for $2000 and resells it for $3000.The result of Honest Rob's transactions is to

Accepted Answer

The purchase and resale of the used car is considered a market transaction, and value is added to the product through the resale. The $1000 profit made by Honest Rob's is considered a part of the national income, therefore choosing option D is correct. Option A and B are incorrect because the value of national income is not decreased by the transaction. Option C is incorrect because the resale does increase the value of national income. Option E is incorrect because the resale only added $1000 of value to the product, not $3000.

Question 19

What does real GDP measure?

Accepted Answer

Real GDP measures the constant-dollar value of total output produced by the nation's economy over the period of one year. It is an important measure of economic activity and growth.

Question 20

In macroeconomics,the term "national income" refers to

Accepted Answer

National income refers to the value of income generated by the production of total output within a nation's borders. It includes the income earned by individuals, businesses, and the government from the production of goods and services. It is an important measure of a nation's economic activity and is used to assess the country's overall economic performance. Choices A, B, C, and E do not accurately define national income.

Quiz 19: What Macroeconomics Is All About