Question 1

Increases in import spending
A) raise GDP.
B) lower GDP.
C) are always balanced off in GDP by changes in exports.
D) may raise or lower GDP.

Accepted Answer

Increases in import spending lower GDP because imports are subtracted from the total GDP calculation.

Question 2

Look at the following data: personal income = $4,900 billion; personal taxes = $900 billion; transfer payments = $980 billion.What is disposable income?
A) $3,200 billion
B) $4,000 billion
C) $4,980 billion
D) $1,880 billion
E) There is not enough information to answer the question.

Accepted Answer

Disposable income is calculated by subtracting personal taxes and transfer payments from personal income, so:
$4,900 billion - $900 billion - $980 billion = $4,000 billion. Therefore, the answer is B.

Question 3

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?
A) Per-capita GDP is necessarily higher in year 2 than year 1.
B) People are "better off" in year 2 than in year 1 because there are more goods and services in year 2 than year 1.
C) Government transfer payments were higher in year 2 than in year 1.
D) a and b
E) none of the above

Accepted Answer

The increase in GDP from year 1 to year 2 does not necessarily mean per-capita GDP is higher or that people are "better off," as it doesn't account for the increased hours worked or how the GDP is distributed among the population. Statement C about government transfer payments is unrelated to the information provided.

Question 4

An economy produces 10X,20Y,and 30Z in a year.Base-year prices for these goods are $1,$2,and $3,respectively.Current-year prices for these goods are $2,$3,and $4,respectively.What is Real GDP?
A) $180
B) $200
C) $140
D) $240
E) none of the above

Accepted Answer

Real GDP is calculated by valuing the quantities of goods produced in a given year using the prices from a base year. For this economy, the calculation is: (10X * $1) + (20Y * $2) + (30Z * $3) = $10 + $40 + $90 = $140.

Question 5

Which of the following statements is true?
A) Government purchases is the largest component of GDP.
B) Net exports are equal to exports plus imports.
C) U.S. imports refer to the physical quantity of foreign-produced goods that are purchased by residents of the United States.
D) Government purchases includes the spending on goods and services by all levels of government (federal, state, and local).
E) c and d

Accepted Answer

Government purchases includes the spending on goods and services by all levels of government (federal, state, and local). This statement is true. The other options are incorrect as:
A) Government purchases is a component of GDP but not the largest one.
B) Net exports are exports minus imports.
C) U.S. imports refer to the dollar value of foreign-produced goods that are purchased by residents of the United States, not the physical quantity. 
E) Option C is incorrect.

Question 6

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?
A) Yes, since the country with a relatively large GDP could have a relatively large population.
B) No, since countries with a relatively large GDP (such as the United States and Japan) also have relatively high per-capita GDP.
C) Yes, but only under the condition that the country "produces" relatively more "bads" than other countries.
D) Yes, since government transfer payments may be exorbitantly high in the country with the relatively high GDP.
E) There is not enough information to answer this question.

Accepted Answer

A country with a large GDP can have a large population, which can in turn lead to a smaller per-capita GDP. For example, China has a large GDP but a relatively low per-capita GDP due to its large population.

Question 7

Which of the following does GDP omit?
A) Jack purchases $2,300 worth of stock in company X.
B) Bob mows his lawn and washes and irons his shirts.
C) Helen receives $4,000 a year in Social Security payments.
D) a and b
E) a, b, and c

Accepted Answer

GDP only measures the market value of final goods and services produced in a country within a specific time period. It does not take into account transactions that do not involve the production of goods and services (such as stock purchases in option A) or non-market activities (such as household production in option B) or transfers of income (such as Social Security payments in option C).

Question 8

Suppose you have data on durable goods,nondurable goods,fixed investment,government purchases,exports,and imports.Can you compute GDP?
A) No, since data on services and prices are missing.
B) No, since data on inventory investment are missing.
C) No, since data on inventory investment and services are missing.
D) No, since data on services are missing.
E) Yes.

Accepted Answer

The answer of Suppose you have data on durable goods,nondurable...

Question 9

The sale of __________ goods is omitted from current GDP because __________.
A) intermediate goods; these goods do not constitute production
B) used goods; these goods were counted in an earlier year
C) illegal; these goods do not constitute economic value
D) b and c
E) a, b, and c

Accepted Answer

The answer of The sale of __________ goods is omitted...

Question 10

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?
A) Yes.
B) No, since data on indirect business taxes are missing.
C) No, since data on corporate profits is missing.
D) No, since data on the capital consumption allowance is missing.
E) No, since net interest has not been adjusted for profits.

Accepted Answer

National income calculation requires data on corporate profits, which is missing in the given data set.

Question 11

Country A has a higher GDP than country B.What does this mean?
A) It means that on a per-capita basis the residents of country A are relatively better off (in terms of the goods and services they have available to them) than the residents of country B.
B) It means that on a per-capita basis the residents of country A are richer than the residents of country B.
C) It means that more goods and services were produced in country A than country B.
D) It means that the total market value of the final goods and services produced in country A is greater than the total market value of the final goods and services produced in country B.
E) a and d

Accepted Answer

GDP measures the total market value of all final goods and services produced in a country. A higher GDP indicates that country A produced more value in goods and services than country B, not necessarily that its residents are better off on a per-capita basis.

Question 12

Which of the following goods is an intermediate good?
A) lettuce that a restaurant buys to put on sandwiches
B) tires that a car company buys to put on the cars it produces
C) a television set that Chi-Mai buys to put in her college dorm room
D) a and b
E) b and c

Accepted Answer

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

Question 13

Look at the following data: durable goods = $200 billion; nondurable goods = $350 billion; services = $600 billion; fixed investment + inventory investment = $200 billion; government purchases = $400 billion; exports = $30 billion; imports = $79 billion.GDP is equal to
A) $1,701 billion.
B) $1,201 billion.
C) $1,859 billion.
D) $1,010 billion.
E) There is not enough information to answer the question.

Accepted Answer

The answer of Look at the following data: durable goods...

Question 14

Look at the following data: consumption = $915 billion; exports = $40 billion; imports = $33 billion; inventory investment = $123 billion; fixed investment = $500 billion; government purchases = $300 billion. GDP is equal to
A) $1,632 billion.
B) $1,466 billion.
C) $1,911 billion.
D) $1,845 billion.
E) none of the above

Accepted Answer

The answer of Look at the following data: consumption =...

Question 15

Which of the following statements is false?
A) Domestic income is the total income earned by the people and businesses within a country's borders.
B) National income is the total income earned by U.S. citizens and businesses, no matter where they reside or are located.
C) Corporate profits is the largest component of national income.
D) National income = compensation of employees + proprietors' income + corporate profits + rental income + net interest.

Accepted Answer

The false statement is that corporate profits is the largest component of national income. In fact, compensation of employees is the largest component of national income.

Question 16

If GDP in year 1 is the same dollar amount as the GDP in year 2,does it follow that Real GDP in year 1 is the same as Real GDP in year 2?
A) Yes, since prices must necessarily be the same in the two years.
B) No, since equal GDP figures do not account for population.
C) No, since prices may not be the same in the two years.
D) Yes, since equal GDP figures do account for a change in the quality of goods produced in the two years.
E) none of the above

Accepted Answer

The statement "GDP in year 1 is the same dollar amount as the GDP in year 2" only tells us about nominal GDP, which is calculated using current year prices. Real GDP, on the other hand, accounts for changes in prices by using a base year price level, so it is not necessarily the same in both years even if nominal GDP is the same. Without information about the price level, we cannot conclude that real GDP is the same in both years. Therefore, option C is the correct answer. Option A is incorrect because we don't have any information about prices being the same. Option B is incorrect because population is not mentioned in the statement. Option D is incorrect because a change in the quality of goods produced may affect nominal GDP, but not necessarily real GDP.

Question 17

Which of the following is a macroeconomic measurement used to gauge macroeconomic activity?
A) Net domestic product
B) National income
C) Personal income
D) Disposable income
E) all of the above

Accepted Answer

All of the options listed are macroeconomic measurements used to gauge macroeconomic activity. Net domestic product measures the total value of goods and services produced within a country's borders. National income measures the total income earned by a country's residents, including wages, profits, and taxes. Personal income measures the income received by individuals from all sources. Disposable income is the amount of income an individual has after taxes and other deductions.

Question 18

Which of the following statements is true?
A) National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received.
B) Net domestic product (NDP) is a smaller dollar amount than GDP.
C) Personal income includes transfer payments.
D) b and c
E) a, b, and c

Accepted Answer

A) is true because national income accountants view corporate profits taxes as part of households' income, even though these funds are not directly received by households. B) is correct because NDP is GDP minus depreciation, making it a smaller amount. C) is accurate as personal income encompasses all income received by individuals, including transfer payments like social security or unemployment benefits.

Question 19

Look at the following data: GDP = $11,920 billion; investment = $2,100 billion; exports = $500 billion; government purchases = $1,450 billion; consumption = $8,500 billion.What does import spending equal?
A) $630 billion
B) $370 billion
C) $1,320 billion
D) $430 billion
E) $474 billion

Accepted Answer

The answer of Look at the following data: GDP =...

Question 20

Which of the following is the correct equation for computing personal income?
A) Personal income = National income + undistributed profits - social insurance taxes - corporate profits taxes + transfer payments.
B) Personal income = National income - undistributed profits - social insurance taxes + corporate profits taxes + transfer payments
C) Personal income = National income - taxes
D) Personal income = National income - undistributed corporate profits - social insurance taxes - corporate profits taxes + transfer payments
E) none of the above

Accepted Answer

Personal income is calculated by adjusting the national income for items that do not go directly to individuals. This includes subtracting undistributed corporate profits and taxes (such as social insurance and corporate profits taxes) and adding transfer payments, which are forms of income like social security or unemployment benefits that individuals receive directly.

Quiz 7: Macroeconomic Measurements: GDP and Real GDP

Increases in import spending

Look at the following data: personal income = $4,900 billion; personal taxes = $900 billion; transfer payments = $980 billion.What is disposable income?

Suppose that in year 1 every adult in the country works 40 hours a week and GDP is $6.7 trillion.In year 2 every adult in the country works 45 hours a week and GDP is $7.5 trillion.Which of the following statements is true?

An economy produces 10X,20Y,and 30Z in a year.Base-year prices for these goods are $1,$2,and $3,respectively.Current-year prices for these goods are $2,$3,and $4,respectively.What is Real GDP?

Which of the following statements is true?

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

Which of the following does GDP omit?

Suppose you have data on durable goods,nondurable goods,fixed investment,government purchases,exports,and imports.Can you compute GDP?

The sale of goods is omitted from current GDP because .

You have data for compensation of employees,proprietors' income,rental income,and net interest.Can you compute national income?

Country A has a higher GDP than country B.What does this mean?

Which of the following goods is an intermediate good?

Look at the following data: durable goods = $200 billion; nondurable goods = $350 billion; services = $600 billion; fixed investment + inventory investment = $200 billion; government purchases = $400 billion; exports = $30 billion; imports = $79 billion.GDP is equal to

Look at the following data: consumption = $915 billion; exports = $40 billion; imports = $33 billion; inventory investment = $123 billion; fixed investment = $500 billion; government purchases = $300 billion. GDP is equal to

Which of the following statements is false?

If GDP in year 1 is the same dollar amount as the GDP in year 2,does it follow that Real GDP in year 1 is the same as Real GDP in year 2?

Which of the following is a macroeconomic measurement used to gauge macroeconomic activity?

Which of the following statements is true?

Look at the following data: GDP = $11,920 billion; investment = $2,100 billion; exports = $500 billion; government purchases = $1,450 billion; consumption = $8,500 billion.What does import spending equal?

Which of the following is the correct equation for computing personal income?