Econ Chapter 7

The growth of GDP may understate changes in the economy's economic well-being over time if the: a) distribution of income becomes increasingly unequal. b) quality of products and services improves. c) environment deteriorates because of pollution. d) amount of leisure decreases.

Personal Taxes 23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 US Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietor's Income 45 Net Foreign Factors Income 0 Statistical Discrepancy 0 Refer to the above data. The gross domestic product is: a) $328. b) $301. c) $382. d) $333.

In 1933, net private domestic investment was a minus $6.0 billion. This means that: a) gross private domestic investment exceeded depreciation by $6.0 billion. b) the economy was expanding in that year. c) the production of 1933's GDP used up more capital goods than were produced in that year. d) the economy produced no capital goods at all in 1933.

Gross Investment 18 National Income 100 Net Exports 2 Personal income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 Refer to the above data. Disposable income is: a) $83. b) $73. c) $75. d) $77.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the above information. Positive net investment is occurring in: a) economy A only. b) economy B only. c) economy C only. d) economies A and B only.

Alejandro Scoobertini owns a store specializing in soccer jerseys. In 2008, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro's store in 2008? a) $70,000 b) $110,000 c) $280,000 d) $490,000

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. In determining real GDP, the nominal GDP for: a) each year must be multiplied by the relevant price index. b) years 1 and 2 must be inflated. c) years 4 and 5 must be inflated. d) years 1 and 2 must be deflated.

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that: a) GDP in 2010 is $450 billion. b) NDP in 2010 is $450 billion. c) GDP in 2010 is $500 billion. d) inventories in 2010 fell by $50 billion.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1200 to kids attending the prom. The total contribution to GDP of this series of transactions is: a) $1200 b) $500 c) $2300 d) $1100

In an economy experiencing a persistently falling price level: a)potential GDP will necessarily exceed actual GDP. b) changes in nominal GDP may either overstate or understate changes in real GDP. c) changes in nominal GDP understate changes in real GDP. d)changes in nominal GDP overstate changes in real GDP.

Answer the question on the basis of the following data. All figures are in billions of dollars. Gross Private Domestic Investment 46 Exports of the US 9 Disposable Income 190 Personal Saving 10 Government Purchases 84 Net Foreign Factors Income 10 Consumption of Fixed Capital 52 Dividends 13 Imports of the US 12 Taxes on Production and Imports 22 Personal Taxes 38 Social Security Contributions 23 Statistical Discrepancy 0 Refer to the above data. Personal income is: a) $184. b) $221. c) $149. d) $228.

Which of the following is a final good or service? a) a haircut purchased by a father for his 12 year-old son b) fertilizer purchased by a farm supplier c) diesel fuel bought for a delivery truck d) Chevrolet windows purchased by a General Motors assembly plant

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 20 4 2 25 4 3 30 6 Refer to the above data. If year 2 is chosen as the base year, in years 1 and 3 the price index values, respectively, are: a) 4 and 6. b)6 and 4. c)120 and 100. d) 100 and 150.

Answer the question on the basis of the following data. All figures are in billions of dollars. Gross Investment 18 National Income 100 Net Exports 2 Personal income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 Refer to the above data. Consumption of fixed capital is: a) $5. b) $10. c) $20. d)$30.

Answer the question on the basis of the following data. All figures are in billions of dollars: Government Purchases 15 Consumption 90 Gross Investment 20 Consumption of Fixed Capital 5 Exports 8 Imports 12 Refer to the above data. NDP is: a) $116. b) $121. c) $125. d) $150.

Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is: a) $110. b) $30. c) $40. d) $70.

Answer the question on the basis of the following national income data. All figures are in billions of dollars. Personal Taxes 23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 US Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietor's Income 45 Net Foreign Factors Income 0 Statistical Discrepancy 0 Refer to the above data. Consumption of fixed capital (private sector) is: a) $23. b) $14. c) $32. d) $26.

Answer the question on the basis of the following information: year nominal GDP price index 1 550 140 2 560 135 3 576 125 4 586 117 5 604 108 The economy above has experienced a: a) declining nominal GDP. b) rising price level. c) declining real GDP. d) rising real GDP.

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information we: a) cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003. b) can conclude that the economy was achieving real economic growth. c) can conclude that real GDP was higher in 2002 than in 2003. d) can conclude that real GDP was lower in 2002 than in 2003.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production? a) the services of health care workers b) the services of military personnel c) the construction of new buildings d) goods and services produced in the underground economy

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 20 4 2 25 4 3 30 6 Refer to the above data. The nominal GDP for year 3 is: a) 125 percent higher than the nominal GDP for year 1. b) 50 percent higher than the nominal GDP for year 1. c) $120. d) $30.

If real disposable income fell during a particular year, we can conclude that: a) personal taxes increased. b) inflation occurred. c) transfer payments declined. d) none of these necessarily occurred.

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately: a) 160 percent. b) 44 percent. c) 37 percent. d) 80 percent.

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP: a) increased by $60 billion. b) decreased by $32 billion. c) increased by $100 billion. d) increased by $117 billion.

Use the following table for a hypothetical single-product economy. year units of output price per unit price index (1=100) 1 10 10 100 2 12 20 200 3 15 30 300 4 20 40 400 Refer to the above data. Nominal GDP in year 3 is: a) $100. b) $450. c) $225. d) $150.

Answer the question on the basis of the following information: Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1. Refer to the above information. If the per unit prices of the three goods each were $1 in a base year used to construct a GDP price index, then real GDP in the current year is: a) $110. b) $115. c) $45. d) $160.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. The nominal GDP for year 4 is: a) $49. b) $55. c) $40. d) $35.

In an economy experiencing a persistently falling price level: a) potential GDP will necessarily exceed actual GDP. b) changes in nominal GDP may either overstate or understate changes in real GDP. c) changes in nominal GDP understate changes in real GDP. d) changes in nominal GDP overstate changes in real GDP.

Suppose Smith pays $100 to Jones. a) We can say with certainty that the GDP has increased by $100. b) We can say with certainty that the GDP has increased, but we cannot determine the amount. c) We can say with certainty that the nominal GDP has increased, but we can't say whether real GDP has increased or decreased. d) We need more information to determine whether GDP has changed.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 20 4 2 25 4 3 30 6 Refer to the above data. If year 2 is chosen as the base year, real GDP for year 1 is: a) $25. b) $100. c) $20. d) $80.

11. If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is: a) 100. b) 200. c) 240. d) 300.

Answer the question on the basis of the following data. All figures are in billions of dollars. Proprietor's Income 20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interests 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 Refer to the above data. Gross domestic product is: a) $395. b) $380. c) $375. d) $360.

Answer the question on the basis of the following national income data for the economy. All figures are in billions of dollars. Personal Consumption Expenditures 400 Government Purchases 128 Gross Private Domestic Investment 88 Net Exports 7 Net Foreign Factor Income 0 Consumption of Fixed Capital 43 Taxes on Production and Imports 50 Compensation of Employees 369 Rents 12 Interests 15 Proprietor's Income 52 Corporate Income Taxes 36 Dividends 24 Undistributed Corporate Profits 22 Statistical Discrepancy 0 Refer to the above data. Net domestic product is: a) $520. b) $580. c) $623. d) $573.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the above information. Positive net investment is occurring in: a) economy A only. b) economy B only. c) economy C only. d) economies A and B only.

Use the following table for a hypothetical single-product economy. year units of output price per unit price index (1=100) 1 10 10 100 2 12 20 200 3 15 30 300 4 20 40 400 Refer to the above data. Nominal GDP in year 4 is: a) $320. b) $450. c) $225. d) $800.

Answer the question on the basis of the following data. All figures are in billions of dollars. Gross Investment 18 National Income 100 Net Exports 2 Personal income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 Refer to the above data. Consumption of fixed capital is: a) $5. b) $10. c) $20. d) $30.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 20 4 2 25 4 3 30 6 Refer to the above data. If year 2 is chosen for the base year, in year 3 nominal GDP and real GDP, respectively, are: a) $180 and $30. b) $30 and $5. c) $180 and $120. d) $120 and $100.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1200 to kids attending the prom. The total contribution to GDP of this series of transactions is: a) $1200 b) $500 c) $2300 d) $1100

Answer the question on the basis of the following data. All figures are in billions of dollars. Picture Gross Private Domestic Investment 46 Exports of the US 9 Disposable Income 190 Personal Saving 10 Government Purchases 84 Net Foreign Factors Income 10 Consumption of Fixed Capital 52 Dividends 13 Imports of the US 12 Taxes on Production and Imports 22 Personal Taxes 38 Social Security Contributions 23 Statistical Discrepancy 0 The economy characterized by the above data is: a) experiencing inflation because disposable income exceeds personal income. b) experiencing declining production capacity because net investment is negative. c) in a depression because personal income exceeds disposable income. d) experiencing expanding production capacity because net private domestic investment is positive.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the above information suggests that the production capacity in economy: a) B is growing more rapidly than either A or C. b) A is growing more rapidly than either B or C. c) A is growing less rapidly than economy B. d) C is growing more rapidly than economy B.

Answer the question on the basis of the following national income data for the economy. All figures are in billions of dollars. Personal Consumption Expenditures 400 Government Purchases 128 Gross Private Domestic Investment 88 Net Exports 7 Net Foreign Factor Income 0 Consumption of Fixed Capital 43 Taxes on Production and Imports 50 Compensation of Employees 369 Rents 12 Interests 15 Proprietor's Income 52 Corporate Income Taxes 36 Dividends 24 Undistributed Corporate Profits 22 Statistical Discrepancy 0 Refer to the above data. The national income is: a) $561. b) $573. c) $580. d) $530.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 20 4 2 25 4 3 30 6 Refer to the above data. If year 2 is chosen as the base year, in years 1 and 3 the price index values, respectively, are: a) 4 and 6. b) 6 and 4. c) 120 and 100. d) 100 and 150.

Answer the question on the basis of the following information: year nominal GDP price index 1 550 140 2 560 135 3 576 125 4 586 117 5 604 108 In the economy above: a) the price level is rising faster than nominal GDP. b) nominal and real GDP are growing at the same rate. c) the growth of nominal GDP understates the growth of real GDP. d) the growth of nominal GDP overstates the growth of real GDP.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. In determining real GDP, the nominal GDP for: a) each year must be multiplied by the relevant price index. b) years 1 and 2 must be inflated. c) years 4 and 5 must be inflated. d) years 1 and 2 must be deflated.

Which of the following is a final good or service? a) a haircut purchased by a father for his 12 year-old son b) fertilizer purchased by a farm supplier c) diesel fuel bought for a delivery truck d) Chevrolet windows purchased by a General Motors assembly plant

Answer the question on the basis of the following information: Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1. Refer to the above information. If the per unit prices of the three goods each were $1 in a base year used to construct a GDP price index, then the GDP price index in the current year is: a) 205.5. b) 255.5. c) 39.3. d) 100.

Answer the question on the basis of the following data. All figures are in billions of dollars. Personal Taxes 40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 US Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 US Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factors Income 10 Statistical Discrepancy 0 Refer to the above data. NDP is: a) $370. b) $402. c) $392. d) $467.

Answer the question on the basis of the following national income data. All figures are in billions of dollars. Personal Taxes 23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 US Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietor's Income 45 Net Foreign Factors Income 0 Statistical Discrepancy 0 Refer to the above data. Consumption of fixed capital (private sector) is: a) $23. b) $14. c) $32. d) $26.

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that: a) GDP in 2010 is $450 billion. b) NDP in 2010 is $450 billion. c) GDP in 2010 is $500 billion. d) inventories in 2010 fell by $50 billion.

Use the following table for a hypothetical single-product economy. year units of output price per unit price index (1=100) 1 10 10 100 2 12 20 200 3 15 30 300 4 20 40 400 Refer to the above data. Nominal GDP in year 3 is: a) $100. b) $450. c) $225. d) $150.

Answer the question on the basis of the following data. All figures are in billions of dollars. Proprietor's Income 20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interests 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 Refer to the above data. Gross domestic product is: a) $395. b) $380. c) $375. d) $360.

Tom Atoe grows fruits and vegetables for home consumption. This activity is: a) excluded from GDP in order to avoid double counting. B) excluded from GDP because an intermediate good is involved. c) productive but is excluded from GDP because no market transaction occurs. d) included in GDP because it reflects production.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1200 to kids attending the prom. The total contribution to GDP of this series of transactions is: a) $1200 b) $500 c) $2300 d) $1100

Answer the question on the basis of the following information: year nominal GDP price index 1 550 140 2 560 135 3 576 125 4 586 117 5 604 108 In the economy above, real GDP for year 3 is: a) $512. b) $428. c) $480. d) $691.

Answer the question on the basis of the following information: year nominal GDP price index 1 550 140 2 560 135 3 576 125 4 586 117 5 604 108 The economy above has experienced a: a) declining nominal GDP. b) rising price level. c) declining real GDP. d) rising real GDP.

Answer the question on the basis of the following national income data for the economy. All figures are in billions of dollars. Personal Consumption Expenditures 400 Government Purchases 128 Gross Private Domestic Investment 88 Net Exports 7 Net Foreign Factor Income 0 Consumption of Fixed Capital 43 Taxes on Production and Imports 50 Compensation of Employees 369 Rents 12 Interests 15 Proprietor's Income 52 Corporate Income Taxes 36 Dividends 24 Undistributed Corporate Profits 22 Statistical Discrepancy 0 Refer to the above data. Net domestic product is: a) $520. b) $580. c) $623. d) $573.

Answer the question on the basis of the following national income data. All figures are in billions of dollars. Personal Taxes 23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 US Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietor's Income 45 Net Foreign Factors Income 0 Statistical Discrepancy 0 Refer to the above data. Personal consumption expenditures: a) cannot be calculated. b) are $231. c) are $225. d) are $205.

In 2007, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November of 2007. The bicycle was sold to E.Z. Ryder in March of 2008. This bicycle is counted as: a) consumption in 2007 and as negative investment in 2008. b) negative investment in 2007 and as consumption in 2008. c) negative investment in 2007 and as investment in 2008. d) investment in 2007 and as negative investment in 2008.

Which of the following transactions would be included in GDP? a) Mary buys a used book for $5 at a garage sale. b) Nick buys $5000 worth of stock in Microsoft. c) Olivia receives a tax refund of $500. d) Peter buys a newly constructed house.

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock: a) may have either increased or decreased. b) increased by $65 billion. c) increased by $55 billion. d) decreased by $55 billion.

In the second quarter (3-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that: a) nominal income declined by more than personal income. b) the price level rose by more than nominal GDP. c) real wages declined by more than real GDP. d) the price level fell by more than real GDP.

Answer the question on the basis of the following data. All figures are in billions of dollars. Personal Taxes 40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 US Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 US Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factors Income 10 Statistical Discrepancy 0 Refer to the above data. DI is: a) $284. b) $329. c) $274. d) $402.

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be: a) deflated to $678 billion. b) deflated to $896 billion. c) inflated to $1080 billion. d) deflated to $1080 billion.

Answer the question on the basis of the following data. All figures are in billions of dollars. Proprietor's Income 20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interests 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 Refer to the above data. National income is: a) $395. b) $380. c) $375. d) $360.

Answer the question on the basis of the following data. All figures are in billions of dollars. Proprietor's Income 20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interests 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 Refer to the above data. Net domestic product is: a) $395. b) $380. c) $375. d) $360.

If real GDP rises and the GDP price index has increased: a) the percentage increase in nominal GDP must have been less than the percentage increase in the price level. b) nominal GDP may have either increased or decreased. c) nominal GDP must have increased. d) nominal GDP must have fallen.

Suppose that inventories were $40 billion in 2007 and $50 billion in 2008. In 2008, accountants would: a) add $10 billion to other elements of investment in calculating total investment. b) subtract $10 billion from other elements of investments in calculating total investment. c) add $45 billion (= $90/2) to other elements of investment in calculating total investment. d) subtract $45 billion (= $90/2) from other elements of investment in calculating total investment.

Real GDP refers to: a) the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income. b) GDP data that embody changes in the price level, but not changes in physical output. c) GDP data that reflect changes in both physical output and the price level. d) GDP data that have been adjusted for changes in the price level.

Final goods and services refer to: a) goods and services that are unsold and therefore added to inventories. b) goods and services whose value has been adjusted for changes in the price level. c) goods and services purchased by ultimate users, rather than for resale or further processing. d) the excess of U.S. exports over U.S. imports.

Which of the following do national income accountants consider to be investment? a) the purchase of an automobile for private, non-business use b) the purchase of a new house c) the purchase of corporate bonds d) the purchase of gold coins

Environmental pollution is accounted for in: a) GDP. b) PI. c) DI. d) none of these.

Net exports are negative when: a) a nation's imports exceed its exports. b) the economy's stock of capital goods is declining. c) depreciation exceeds domestic investment. d) a nation's exports exceed its imports.

Transfer payments are: a) excluded when calculating GDP because they only reflect inflation. b) excluded when calculating GDP because they do not reflect current production. c) included when calculating GDP because they are a category of investment spending. d) included when calculating GDP because they increase the spending of recipients.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result: a) real GDP will rise more rapidly than nominal GDP. b) GDP will tend to increasingly understate the level of output through time. c) GDP will tend to increasingly overstate the level of output through time. d) the accuracy of GDP will be unaffected through time.

Consumption of fixed capital (depreciation) can be determined by: a) adding taxes on production and imports to NDP. b) subtracting NDP from GDP. c) subtracting net investment from GDP. d) adding net investment to gross investment.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. For the years shown, the growth of: a) real GDP has exceeded the growth of nominal GDP. b) nominal GDP accurately reflects changes in real output. c) nominal GDP overstates increases in real output. d) nominal GDP understates increases in real output.

The GDP tends to: a) overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives. b) understate economic welfare because it includes expenditures undertaken to offset or correct pollution. c) understate economic welfare because it does not take into account increases in leisure. d) overstate economic welfare because it does not reflect improvements in product quality.

National income accountants define investment to include: a) any increase in business inventories. b) the addition of cash to a savings account. c) the purchase of common or preferred stock. d) the purchase of any durable good, for example, an automobile or a refrigerator.

The amount of after-tax income received by households is measured by: a) discretionary income. b) national income. c) disposable income. d) personal income.

Nominal GDP is: a) the sum of all monetary transactions that occur in the economy in a year. b) the sum of all monetary transactions involving final goods and services that occur in the economy in a year. c) the amount of production that occurs when the economy is operating at full employment. d) money GDP adjusted for inflation.

In calculating the GDP national income accountants: a) treat inventory changes as an adjustment to personal consumption expenditures. b) ignore inventories because they do not represent final goods. c) subtract increases in inventories or add decreases in inventories. d) add increases in inventories or subtract decreases in inventories.

If there are no statistical discrepancies, NDP is: a) NI minus net foreign factor income. b) NI plus corporate income taxes. c) GDP deflated for increases in the price level. d) GDP minus taxes on production and imports.

The largest component of national income is: a) compensation of employees. b) rents. c) interest. d) corporate profits.

By summing the dollar value of all market transactions in the economy we would: a) determine the market value of all resources used in the production process. b) obtain a sum substantially larger than the GDP. c) determine value added for the economy. d) measure GDP.

The system that measures the economy's overall performance is formally known as: a) National income accounting b) Business cycle measurement c) GDP assessment d) Final output and income statistics

A price index is: a) a comparison of the current price of a market basket to a fixed point of reference. b) a comparison of real GDP in one period relative to another. c) the cost of a market basket of goods and services in a base period divided by the cost of the same market basket in another period. d) a ratio of real GDP to nominal GDP.

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by: a) gross domestic product. b) national income. c) personal income. d) disposable income.

Real GDP is: a) the nominal value of all goods and services produced in the economy. b) the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation. c) that aggregate output that is produced when the economy is operating at full employment. d) always greater than nominal GDP.

If the economy adds to its inventory of goods during some year: a) gross investment will exceed net investment by the amount of the inventory increase. b) this amount should be ignored in calculating that year's GDP. c) this amount should be subtracted in calculating that year's GDP. d) this amount should be included in calculating that year's GDP.

Which of the following best defines national income? a) income received by households less personal taxes b) the before-tax income received by households c) incomes earned by U.S. resource suppliers plus taxes on production and imports d) the market value of the annual output net of consumption of fixed capital

If personal income exceeds national income in a particular year, we can conclude that: a) transfer payments exceeded the sum of Social Security contributions, corporate income taxes, and taxes on production and imports. b) the sum of Social Security contributions, corporate income taxes, and undistributed corporate profits exceeded transfer payments. c) consumption of fixed capital and taxes on production and imports exceeded personal taxes. d) transfer payments exceeded the sum of Social Security contributions, corporate income taxes, and undistributed corporate profits.

National income accountants can avoid multiple counting by: a) including transfer payments in their calculations. b) only counting final goods. c) counting both intermediate and final goods. d) only counting intermediate goods.