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    Take Test: chapter 11 quiz

    Question 1

    1.  Which of the following would be classified as a personal consumption expenditure?


    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
    Corporate profits735
    Government spending1,406
    Rental income146
    Gross private domestic investment1,116
    Compensation of employees4,426
    Indirect business taxes553
    Proprietors’ income520
    Personal taxes886
    Social Security taxes432
    Transfer payments376

    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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