Question 1

Gross investment equals net investment plus

Accepted Answer

A)   capital.
B)   capital gains.
C)   depreciation.
D)   dividends paid to the owners of the company.

Question 2

Which of the following is TRUE regarding a trend?
I. A cross section graph shows trends.
II. A time-series graph shows trends.
III. A scatter plot shows trends over time.

Accepted Answer

A)   I
B)   II
C)   I and II
D)   II and III

Question 3

Intermediate goods are excluded from GDP because

Accepted Answer

A)   their inclusion would involve double counting.
B)   they represent goods that have never been purchased so they cannot be counted.
C)   their inclusion would understate GDP.
D)   the premise of the question is incorrect because intermediate goods are directly included in calculating GDP.

Question 4

An expansion ends when the economy

Accepted Answer

A)   hits a trough and then enters a recession.
B)   hits a peak and then enters a recession.
C)   begins to grow following a peak.
D)   has grown for two quarters in a row.

Question 5

A business cycle is

Accepted Answer

A)   the pattern of short-run upward and downward movements in total output.
B)   the increase in consumer spending that accompanies an increase in disposable income.
C)   the cyclical change in the nation's balance of trade.
D)   the cyclical movement in the interest rates.

Question 6

Investment, as included in GDP, consists of what?

Accepted Answer

Investment is the purchase of ...

Question 7

Which of the following is NOT included in real GDP?

Accepted Answer

A)   production of services, such as the services of doctors
B)   production of goods that last more than one year, such as television sets
C)   production of goods that do not last more than one year, such as gasoline
D)   production in the home

Question 8

-The figure above shows a time-series graph. The horizontal axis measures ________ and the vertical axis measures ________.

Accepted Answer

A)   time; x-values
B)   time; the variable of interest
C)   the variable of interest; time
D)   y-values; the variable of interest

Question 9

A recession is commonly defined as a period with

Accepted Answer

A)   negative growth rate in real GDP that lasts at least one quarter.
B)   positive growth rate in real GDP that lasts at least one quarter.
C)   positive growth rate in real GDP that lasts at least two quarters.
D)   negative growth rate in real GDP that lasts at least two quarters.

Question 10

Of the following, which is CORRECT?

Accepted Answer

A)   Nominal GDP does not change when the production of goods and services increases.
B)   Nominal GDP is not affected by changes in prices of goods and services.
C)   Nominal GDP increases when the prices of goods and services increase.
D)   Real GDP changes only when the prices of goods and services really change.

Question 11

By itself, an increase in exports

Accepted Answer

A)   increases GDP.
B)   decreases GDP.
C)   means imports decrease by the same amount.
D)   can either increase or decrease GDP, depending on whether the exports are durable or nondurable.

Question 12

Looking at the components of the income approach we see that

Accepted Answer

A)   compensation of employees is the largest category.
B)   consumption is the largest category.
C)   profits are the largest category.
D)   rental income is the largest category.

Question 13

Recessions are commonly defined to occur

Accepted Answer

A)   whenever unemployment increases.
B)   when growth in real GDP decreases for two consecutive quarters.
C)   when growth in real GDP is negative for two consecutive quarters.
D)   when the unemployment rate exceeds 6 percent.

Question 14

On a time-series graph, time is typically shown

Accepted Answer

A)   as an area.
B)   along the x-axis.
C)   along the y-axis.
D)   as an implicit variable held constant.

Question 15

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

Accepted Answer

A)   increases; does not change
B)   does not change; increases
C)   increases; decreases
D)   increases; increases

Question 16

You believe that the total amount of goods produced in the United States has generally increased over the years. In a time-series graph illustrating the total amount produced, you expect to find

Accepted Answer

A)   an upward trend.
B)   no relationship between time and the amount of goods produced.
C)   an inverse relationship between time and the amount of goods produced.
D)   a linear relationship.

Question 17

The chain-weighted output index method of measuring real GDP is based on

Accepted Answer

A)   using current prices rather than base year prices.
B)   averaging the market value of the expenditures over a two year period and then comparing with a base period.
C)   using the prices of two adjacent years to calculate the growth rate of real GDP.
D)   averaging the nominal and real measures of GDP to come up with a more accurate figure.

Question 18

The largest component of income is proprietors' income.

Accepted Answer

A) True 
 B)False

Question 19

In the national income accounts, the purchase of a new house counts as

Accepted Answer

A)   consumption expenditure.
B)   investment.
C)   a transfer.
D)   an addition to inventory.

Question 20

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE?
I. U.S. net exports decrease.
II. U.S. investment increases.

Accepted Answer

A)   only I
B)   only II
C)   both I and II
D)   neither I nor II

Exam 4: Measuring Gdp and Economic Growth

A business cycle is

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Investment, as included in GDP, consists of what?

Correct AnswerverifiedInvestment is the purchase of ...View AnswerShow Answer

By itself, an increase in exports

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The largest component of income is proprietors' income.

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If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

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You believe that the total amount of goods produced in the United States has generally increased over the years. In a time-series graph illustrating the total amount produced, you expect to find

Correct AnswerverifiedShow Answer

Looking at the components of the income approach we see that

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Intermediate goods are excluded from GDP because

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A recession is commonly defined as a period with

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An expansion ends when the economy

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-The figure above shows a time-series graph. The horizontal axis measures ________ and the vertical axis measures ________.

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Gross investment equals net investment plus

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An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.

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Of the following, which is CORRECT?

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On a time-series graph, time is typically shown

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In the national income accounts, the purchase of a new house counts as

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Which of the following is NOT included in real GDP?

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The chain-weighted output index method of measuring real GDP is based on

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Which of the following is TRUE regarding a trend? I. A cross section graph shows trends. II. A time-series graph shows trends. III. A scatter plot shows trends over time.

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Recessions are commonly defined to occur

Correct AnswerverifiedShow Answer

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Investment is the purchase of ...
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If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP and U.S. GDP .

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-The figure above shows a time-series graph. The horizontal axis measures and the vertical axis measures .

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