Question 1
- Which of the following would be classified as a personal consumption expenditure?
Answer:
| a) All of the following. |
| b) Your purchase of a newly constructed house |
| c) Your purchase of a preowned house. |
| d) Your purchase of one share of Microsoft stock. |
| e)Your purchase of this economics course. |
Question 2:
Increased production, but not increased inflation, will result in higher:
| a) nominal GDP. |
| b) money GDP. |
| c) real GDP. |
| d) current dollar GDP. |
Question 3:
GDP includes:
| a) the negative attributes from erosion and deforested landscape. |
| b) all quality improvements resulting from higher quality goods replacing inferior goods. |
| c) the cleaning-up expenses associated with pollution. |
| d) the value of leisure time. |
| e) the illegal activities related to the underground economy. |
Question 4:
The GDP chain price index is designed to adjust nominal GDP for changes in:
| a)the level of transfer payments. |
| b) the quality of goods over time. |
| c) the costs of economic bads such as pollution and crime. |
| d) the general level of prices over time. |
Question 5:
The sum of payments made to resource owners for the use of their resources is:
| a) Gross Domestic Product. |
| b) Net Domestic Product. |
| c) National Income. |
| d) Personal Income. |
| e) Disposable personal income. |
Question 6:
Which of the following would count as an investment expenditure in the GDP expenditures approach?
| a) General Motors hires 10 electrical engineers. |
| b) Boeing purchases a new metal stretching machine used to produce airplane wings. |
| c) Ms. Quantum buys 100 shares of Microsoft stock. |
| d) A large corporation spends $10,000 per month on long-distance phone charges. |
Question 7:
Exhibit 11-5 GDP data (billions of dollars)
| Personal consumption expenditures | $5,207 |
| Interest | 425 |
| Corporate profits | 735 |
| Government spending | 1,406 |
| Depreciation | 830 |
| Rental income | 146 |
| Gross private domestic investment | 1,116 |
| Compensation of employees | 4,426 |
| Exports | 870 |
| Imports | 965 |
| Indirect business taxes | 553 |
| Proprietors’ income | 520 |
| Personal taxes | 886 |
| Social Security taxes | 432 |
| Transfer payments | 376 |
In Exhibit 11-5, personal income (PI) is:
| a) $6,254 billion. |
| b) $6,495 billion. |
| c) $6,013 billion. |
| d) $7,082 billion. |
| e) $7,637 billion. |
Question 8:
National income:
| a) represents total wages and salaries in an economy. |
| b) equals GDP minus indirect business taxes. |
| c) equals GDP minus depreciation. |
| d) equals C + I + G + (X – M). |
| e) is the value of existing capital stock used up in making goods. |
Question 9:
Which of the following is true?
| a) GDP is a “flow” concept. |
| b) The purchase prices of both intermediate goods and final goods are included in GDP. |
| c) GDP measures economic welfare. |
| d) GDP is a measure of changes in the general level of prices. |
Question 10:
Which one of the following statements is true in the four-sector circular model?
| a) Money flows from government to households for taxes. |
| b) Money flows from foreign economies to households for exports. |
| c) Money flows from government to firms for goods and services. |
| d) Money flows from firms to foreign economies for exports. |
| e) Money flows from households to foreign economies for resources. |
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