Question 1

Each month, the Bureau of Labor Statistics calculates the

Accepted Answer

A)  CPI
B)  number of births in the U.S.
C)  nominal GDP
D)  cost of going to college
E)  All of the answers are correctF) C) and E)
G) A) and B)

Question 2

Which of the following is not considered a component of investment when calculating GDP?

Accepted Answer

A)  new residential construction
B)  construction of new factories
C)  net increases in inventory
D)  purchases of corporate stock
E)  production of new equipmentF) A) and B)
G) C) and E)

Question 3

The GDP price index

Accepted Answer

A)  involves all final goods and services produced in the economy
B)  is derived from looking at quantities of goods sold rather than at prices
C)  is derived using the prices of only imported and exported goods and services
D)  is derived using the implicit prices of goods and services produced by the government
E)  involves all goods and services sold in the economyF) A) and D)
G) D) and E)

Question 4

Which of the following is an injection into the circular flow?

Accepted Answer

A)  government spending
B)  imports
C)  disposable income
D)  taxes
E)  savingF) A) and B)
G) A) and E)

Question 5

An imputed payment

Accepted Answer

A)  is a payment that is due but not made
B)  is a payment not made through the market and therefore not counted in GDP
C)  refers to nonmarket goods and services being valued as if they were sold on a market
D)  refers to governmental services being valued at the cost of production
E)  refers to consumers imputing a value to the paymentF) B) and C)
G) None of the above

Question 6

Which of the following would not be an expenditure on a final good or service?

Accepted Answer

A)  a farmer's purchase of a pound of hamburger
B)  a medical clinic's purchase of flu vaccine
C)  a factory's purchase of a spot welding machine
D)  the purchase of a cup of coffee at a restaurant
E)  a college student's purchase of a textbook for a medieval history classF) A) and B)
G) A) and C)

Question 7

Problems with a fixed-weight price index include all of the following except one. Which is the exception?

Accepted Answer

A)  the index utilizes prices from the base year only
B)  the index does not account for relative price changes over time
C)  price distortions only decrease when there is a long time period covered
D)  base year does not include new products which came into existence later
E)  the price index does not take into consideration quality changesF) C) and D)
G) None of the above

Question 8

Which is true of leakages and injections in the circular flow?

Accepted Answer

A)  Leakages minus injections equal GDP.
B)  Injections minus leakages equal GDP.
C)  Leakages minus injections equal zero in equilibrium.
D)  Domestic leakages must equal domestic injections.
E)  Leakages must be greater than injections for the economy to be growing.F) A) and E)
G) B) and D)

Question 9

Exhibit 6-2
 
-Use the information in Exhibit 6-2 to calculate the consumer price index in the current year.

Accepted Answer

A)  CPI = 2
B)  CPI = 50
C)  CPI = 55
D)  CPI = 182
E)  CPI = 200F) D) and E)
G) B) and C)

Question 10

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A)  exports
B)  investment
C)  imports
D)  transfer payments
E)  government purchasesF) B) and D)
G) A) and D)

Question 11

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

Accepted Answer

A)  9 percent per year
B)  3 percent per year
C)  5 percent per year
D)  7 percent per year
E)  1 percent per yearF) B) and D)
G) B) and E)

Question 12

Which of the actions below will not increase GDP?

Accepted Answer

A)  Bears prowl suburban areas, overturning garbage cans so that the town must hire more sanitation workers to clean up.
B)  Vandals spray paint all over brick buildings, increasing business for paint removal services.
C)  An installer of automobile tires takes a knife to the tires of cars parked in his neighborhood.
D)  A homemaker spends $20 taking the family to lunch at Burger King instead of spending the $20 to buy food to prepare at home.
E)  A consumer has a tune-up done on his pick-up truck at the local garage.F) B) and D)
G) All of the above

Question 13

The immediate effect on GDP of Ibrahim's purchase of a government bond is

Accepted Answer

A)  a decrease in consumption because Ibrahim has less money to spend
B)  an increase in government spending
C)  an increase in investment
D)  a decrease in investment because less money is available to him for further investment
E)  nonexistent, since no real goods and services have been producedF) A) and E)
G) A) and C)

Question 14

GDP figures tend to understate the quantity of goods and services available because

Accepted Answer

A)  they ignore most household production
B)  many items are counted twice or more in intermediate stages of production
C)  more women are entering the labor force
D)  firms often add less to inventories than they planned to
E)  exports are subtracted from GDP but imports are not added back inF) B) and D)
G) None of the above

Question 15

If real GDP is $5 trillion for a particular year and the GDP price index is 140, then nominal GDP is $7 trillion.

Accepted Answer

A) True 
 B)False

Question 16

A chain-weighted index recognizes the fact that the composition of output changes over time.

Accepted Answer

A) True 
 B)False

Question 17

To determine the CPI, you would need to know the

Accepted Answer

A)  current market basket at current- and base-year prices
B)  base-year market basket at current- and base-year prices
C)  current market basket at current prices and base-year market basket at base-year prices
D)  current market basket at base-year prices only
E)  current market basket at current prices onlyF) A) and B)
G) B) and E)

Question 18

Which of the following is an injection into the spending stream?

Accepted Answer

A)  planned investment
B)  imports
C)  indirect business taxes
D)  disposable income
E)  interest on savingsF) A) and B)
G) All of the above

Question 19

Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A)  consumption expenditures
B)  investment
C)  imports
D)  rent
E)  government purchasesF) A) and D)
G) A) and B)

Exam 7: Tracking the Us Economy

A panel of economists concluded that the current Consumer Price Index overstates increases in the "cost of living" by about

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The GDP price index

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Exhibit 6-2 -Use the information in Exhibit 6-2 to calculate the consumer price index in the current year.

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Which of the following is an injection into the circular flow?

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A chain-weighted index recognizes the fact that the composition of output changes over time.

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Which of the following is not a component of aggregate expenditure?

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Which of the following is not a component of aggregate expenditure?

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Which of the actions below will not increase GDP?

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An imputed payment

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The immediate effect on GDP of Ibrahim's purchase of a government bond is

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Each month, the Bureau of Labor Statistics calculates the

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Recent estimates of the size of the underground economy are that it is equivalent of 7.5 percent of GDP.

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Which is true of leakages and injections in the circular flow?

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Which of the following is an injection into the spending stream?

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To determine the CPI, you would need to know the

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Problems with a fixed-weight price index include all of the following except one. Which is the exception?

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If real GDP is $5 trillion for a particular year and the GDP price index is 140, then nominal GDP is $7 trillion.

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GDP figures tend to understate the quantity of goods and services available because

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Which of the following is not considered a component of investment when calculating GDP?

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Which of the following would not be an expenditure on a final good or service?

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