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Which of the following is a primary use for national income accounts?
A. To analyze the environmental cost of economic growth
B. To assess the economic efficiency of specific industries in the economy
C. To measure changes in the value of production and income in the economy
D. To determine whether there is a fair and equitable distribution of income in the economy
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C
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The National Income and Product Accounts (NIPA) for the U.S. are compiled by the:
A. National Bureau of Economic Research
B. Bureau of Economic Analysis
C. National Census Bureau
D. Council of Economic Advisers
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B
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GDP is the market value of:
A. Resources (land, labor, capital, and entrepreneurship) in an economy in a given year
B. All final goods and services produced in an economy in a given year
C. Consumption and investment spending in an economy in a given year
D. All output produced and accumulated over the years
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B
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The gross domestic product (GDP) concept accounts for society’s valuation of the relative worth of goods and services by using:
A. A measure of physical weight
B. A measure of volume
C. A utility measure
D. A monetary measure
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D
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To avoid multiple counting in national income accounts:
A. Only final goods and services should be counted
B. Intermediate goods and services should be counted
C. Both final and intermediate goods and services should be counted
D. Primary, intermediate, and final goods and services should be counted
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A
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Adding the market value of all final and intermediate goods and services in an economy in a given year would result in:
A. The calculation of GDP for that year
B. The calculation of NDP for that year
C. An amount less than GDP for that year
D. An amount greater than GDP for that year
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D
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An example of final goods in national income accounts would be:
A. New lawn mowers purchased by Cut-Rite Lawn Equipment & Supplies
B. Flowers and pots purchased by homeowner Joe Smith
C. Chemicals purchased by Green Grass Lawn Care Services
D. Seedlings and saplings purchased for resale by Wendy’s Garden Center
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B
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The following are examples of final goods in national income accounting, except:
A. Lumber and steel beams purchased by a construction company
B. Tractor purchased by a construction company
C. Laptop computer purchased by an executive for personal use
D. Desktop computer purchased by an executive for business use
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A
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An example of intermediate goods would be:
A. Bricks bought by a homeowner for constructing a patio
B. Sacks of groceries bought by a dentist for his family
C. Cars bought by a car-rental company
D. Paper and ink bought by a publishing company
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C
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The total volume of business sales in our economy is several times larger than GDP because:
A. The GDP does not take taxes into account
B. The GDP excludes intermediate transactions
C. The GDP grossly understates the value of our annual output
D. Total sales are in money terms and GDP is always stated in real terms
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B
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Value added by a firm is the market value of the firm’s output minus the:
A. Total wages paid to its employees
B. Value of inputs bought from other firms
C. Profits that the firm’s owners earn
D. Total costs of all inputs used
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B
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Subtracting the purchase of intermediate products and supplies from the value of the sales of final products determines the amount of:
A. Net investment for a business
B. Profit and cost
C. Value added from the economic activity
D. Surplus or deficit from the economic activity
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C
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Which of the following is included in GDP?
A. Welfare payments received by some households
B. Fees received by stockbrokers
C. Cash gifts from relatives during the holidays
D. Payments received from selling stocks in one’s portfolio
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B
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The sale of a used automobile would not be included in GDP of the current year because it is a:
A. Nonmarket transaction
B. Nonproduction transaction
C. Purely financial transaction
D. Private transfer payment
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B
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The two ways of looking at GDP are the:
A. Output approach and expenditures approach
B. Income approach and saving approach
C. Expenditures approach and income approach
D. Output approach and consumption approach
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C
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Which of the following is included in the expenditures approach to GDP?
A. Spending on meals by consumers at restaurants
B. Expenditures on used clothing at garage sales
C. Value of stocks and bonds bought by businessmen
D. Government spending on welfare payments
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…
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The largest expenditure component of GDP is:
A. Government purchases
B. Personal consumption expenditures
C. Gross private domestic investment
D. Net exports
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B
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Which of the following is not included in personal consumption expenditures?
A. New furniture and appliances bought by homeowners
B. Payments for cable and Internet services to homes
C. Purchases of mutual funds by consumers
D. Food purchased at supermarkets
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C
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Money spent on the purchase of a new house is included in the GDP as a part of:
A. Household expenditures on durable goods
B. Personal consumption expenditures
C. Personal saving
D. Gross domestic private investment
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B
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The value of corporate stocks and bonds traded in a given year is:
A. Included in the calculation of GDP because they make a contribution to the current production of goods and services
B. Excluded from the calculation of GDP because they make no contribution to current production of goods and services
C. Included in the calculation of net private domestic investment
D. Included in the calculation of gross private domestic investment
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B
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Which would be considered an investment according to economists?
A. A fishing-company owner buys Google shares
B. A fishing-company buys a few boats from another fishing company that was closing out
C. A fishing-company owner buys new fishing gear
D. A fishing-company owner buys fuel to run the boats
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D
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Gross domestic private investment, as defined in national income accounts, would include the following, except:
A. Changes to business inventories
B. All domestic construction done by the private sector
C. Government construction of new highways and dams
D. The value of all capital goods bought by business firms
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B
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Business inventories increase when firms produce:
A. More than they sell, and the inventory increase is added to GDP
B. Less than they sell, and the inventory increase is added to GDP
C. More than they sell, and the inventory increase is subtracted from GDP
D. Less than they sell, and the inventory increase is subtracted from GDP
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C
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When gross private domestic investment exceeds depreciation, it can be concluded that:
A. Net investment is positive
B. Net investment is negative
C. The economy is exporting more than it imports
D. The economy is importing more than it exports
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…
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The consumption of fixed capital in each year’s production is called:
A. Indirect business taxes
B. Inventory reduction
C. Depreciation
D. Net investment
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C
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Disinvestment occurs when:
A. Businesses sell machinery and equipment to one another
B. The prices of investment goods rise faster than the prices of consumer goods
C. Businesses have larger inventories at the end of the year than they had at the start
D. The consumption of private fixed capital exceeds gross private domestic investment
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D
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Government purchases in national income accounts would include payments for:
A. Social Security checks to retirees
B. Salaries for current U.S. military officers
C. Public assistance for welfare recipients
D. Unemployment benefits
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B
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A distinguishing characteristic of public transfer payments is that:
A. They include wages to government workers
B. They are counted as part of government purchases in the calculation of the gross domestic product
C. They include the cost of maintaining public parks
D. They involve no contribution to current production in return
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…
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Net exports is a positive number when:
A. A nation’s exports of goods and services are increasing
B. A nation exports goods and services to other nations
C. A nation’s exports of goods and services exceed its imports
D. A nation’s exports of goods and services fall short of its imports
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C
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In the expenditures approach of national income accounting, C, Ig, and G include expenditures for:
A. Domestically produced goods and services only
B. Domestically produced as well as imported goods and services
C. Exported goods and services
D. The private sector of the economy only
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…
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Computation of GDP by the expenditures method would include the purchase of:
A. Fertilizer by a farmer
B. Cement by a construction company
C. Land by the U.S. Department of Interior
D. Government bonds by a commercial bank
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A
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The expenditures or output approach to GDP measures it by summing up:
A. Compensation of employees, rents, interest, dividends, undistributed corporate profits, proprietors’ income, indirect business taxes paid, consumption of fixed capital, and net foreign factor income earned in the United States
B. Compensation of employees, rents, interest, dividends, corporate profits, proprietors’ income, and indirect business taxes, and subtracting the consumption of fixed capital
C. The total spending for consumption, investment, net exports, and government purchases
D. The total spending for consumption and government purchases, but subtracting public and private transfer payments
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C
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National income is the sum of employee compensation, profits, and the following items, except:
A. Rent
B. Interest
C. Depreciation or consumption of fixed capital
D. Taxes on production and imports
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C
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Depreciation is all of the following, except:
A. The difference between GDP and NDP
B. The difference between gross investment and net investment
C. The accumulation of capital stock
D. The consumption of fixed capital
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…
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The following are incomes earned but not received by the nation’s households, except:
A. Corporate income taxes
B. Social security contribution
C. Transfer payments
D. Undistributed corporate profits
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C
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Which of the following represents an income flow in the circular flow of domestic output and national income?
A. Net exports
B. Investment expenditures
C. Government purchases
D. Corporate profits
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D
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Personal income (PI) refers to all income:
A. Received
B. Earned
C. Earned but not received
D. Received but not earned
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A
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Personal income will equal disposable income when:
A. Corporate profits are zero
B. Personal taxes are zero
C. Transfer payments are zero
D. Social Security contributions are zero
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B
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If the price index in year A is 130, this means that:
A. Prices in year A are on average 130 percent higher than in the base year
B. Prices in year A are on average13 times that in the base year
C. Prices in year A are on average 30 percent higher than in the base year
D. Nominal GDP is 130 percent higher than real GDP in year A
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…
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"GDP price index" measures changes in the:
A. Value of final output produced in the nation
B. Prices of the output produced in the nation
C. Amount of resources available in the nation
D. Cost of resources employed in the nation
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A
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The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:
A. Output in 2005 was higher than in 2004
B. Prices in 2005 were higher than in 2004
C. Output in 2005 was lower than in 2004
D. Prices in 2005 were lower than in 2004
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B
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Nominal GDP differs from real GDP because:
A. Nominal GDP is based on constant prices
B. Real GDP is based on current prices
C. Real GDP results from adjusting for changes in the price level
D. Nominal GDP results from adjusting for changes in the price level
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B
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Nominal GDP has generally risen more rapidly than real GDP since World War II in the United States, suggesting that:
A. The general price level has declined
B. The general price level has increased
C. Productivity has increased substantially
D. World trade has increased
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B
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GDP understates the amount of economic production in the United States because it excludes:
A. Spending for the U.S. military
B. Transfer payments
C. Purchases of stocks and bonds
D. Work performed by people for their own benefit
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D
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GDP tends to overstate economic well-being because it takes into account:
A. All of the illegal activities conducted by organized crime in the economy
B. Spending on intermediate goods that are used to produce final goods
C. Total spending to deal with the adverse health effects of some products
D. The personal labor time that car owners spend working on car repairs and maintenance of their vehicles
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C
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GDP does not include which of the following activities?
A. Businesses installing anti-pollution equipment
B. Households spending to enhance security of their neighborhoods
C. Couples remodeling their own homes
D. Families eating out in restaurants
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C
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Improvements in product quality over time
B. Expenditures undertaken to correct pollution
C. Illegal activities of individuals and businesses
D. Nonmarket activities, such as the productive work of homemakers
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…
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GDP excludes most nonmarket transactions. Therefore, GDP tends to:
A. Underestimate the rate of inflation in the economy
B. Overestimate the rate of inflation in the economy
C. Overestimate the amount of production of the economy
D. Underestimate the amount of production in the economy
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D
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GDP estimates account for which of the following items?
A. Do-it-yourself activities
B. "Psychic income" people derive from their work
C. Household spending for health and home insurance
D. Improvements in product quality
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D
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GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:
A. Public transfer payments to households
B. The consumption of fixed capital
C. The underground economy
D. Intermediate goods
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C
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Gordon is a person who sells narcotics "on the street." This type of illegal activity:
A. Would be considered double counting in calculating GDP
B. Is estimated and included in GDP figures
C. Is excluded from GDP figures
D. Causes GDP to be overstated
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…
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The service a homeowner performs when she mows her yard is not included in GDP because:
A. This is a nonmarket transaction
B. This is a nonproduction activity
C. This is a noninvestment transaction
D. Multiple counting would be involved
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A
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The "underground economy" is mostly made up of:
A. Unpaid work
B. Illegal activities
C. Do-it-yourself activities
D. Tax-evasion activities
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B
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The gross domestic product is not a good measure of the standard of living in a nation because it:
A. Includes the cost of health insurance
B. Excludes payments for pollution control equipment
C. Does not account for the size of the population
D. Does not account for the cost of police protection
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…
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Which of the following government agencies estimates and compiles the U.S. GDP accounts?
A. The American Economic Association
B. The Federal Reserve System
C. The Bureau of Economic Analysis
D. The Internal Revenue Service
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D
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