Exam Name___________________________________ MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswers thequestion. 1) rossdomesticproductisthetotal________producedwithinacountry 1)_______ G inagiventimeperiod. A) arketvalueofallfinalgoodsandservices m B) arketvalueofallgoodsandservices m C) mountoffinalandintermediategoodsandservices a D) arketvalueofallfinalandintermediategoodsandservices m 2) hecircularflowdiagramshows T 2)_______ A) heeffectsofinflationinasimpleeconomy. t B) ownominalGDPisdistinctfromrealGDP.

P. h C) owthepricesoffactorsaredetermined. h D) heflowsbetweendifferentsectorsoftheeconomy. t 3) nthecircularflowmodelofaneconomywithnogovernmentsector I 3)_______ andnointernationaltrade,households A) eceiveincomefromproducersfortheuseoffactorsinthefactor r markets. B) ayfirmsfortheuseoftheirfactors. p C) eceiveincomefrombuyersofgoodsandservices. r D) eceiveincomefromthesaleoffactorsinthegoodsmarkets. r 4) nthecircularflowdiagram,aggregateexpenditureincludesthesumof 4)_______ I A) onsumption,investment,andsaving. c B) avingandinvestment. s C) ncomeandsaving. i D) onsumptionandinvestment. c 5) nthecircularflowofeconomicactivity I 5)_______ A) ggregateexpendituremeasuresthedollarvalueofpurchasesof a finalgoodsandservices. B) ggregateincomemeasuresthedollarvalueoflaborresources a only. C) ggregateexpendituremeasuresthedollarvalueofpurchasesof a factors. D) ggregateexpenditureismeasuredasitmovesthroughthe a financialmarkets. 6) hegovernmentsbudgetdeficitistheexcessofgovernment T 6)_______ A) ettaxesoveritspurchasesofgoodsandservices. n B) urchasesofgoodsandservicesoveritsnettaxes. p C) urchasesofgoodsandservicesoveritsinterestpaymentsonthe p governmentdebt. D) nterestpaymentsonthegovernmentdebtoveritsnettaxes. i 7) hichofthefollowingareequaltooneanother? W III. gregate I. aggregateproduction income II. aggregateexpenditure ag

7)

_______ A) equalsIII,butnotII. I B) equalsIIequalsIII. I C) equalsII,butnotIII. I D) IequalsIII,butnotI. I 8) fnationalsaving(S)is$100,000,nettaxes(T)equal$100,000and I governmentpurchasesofgoodsandservices(G)are$25,000,howmuch arehouseholdsandbusinessessaving? A) 25,000. $ B) $25,000. C) 225,000. $ D) oneoftheabove n 9) fourexportsare$2.2billionandourimportsare$2.7billion, I A) .S.nationalsavingistoohigh. U B) heUnitedStatesislendingtotherestoftheworld. t C) .S.investmentmustdecrease. U D) heUnitedStatesisborrowingfromtherestoftheworld. t 10) featureofastockvariableandaflowvariableisthat A A) stockisaquantitythatexistsatapointintimeandaflowisa a quantityperunitoftime. B) stockisaquantityperunitoftimeandaflowisaquantitythat a existsatapointintime. C) stockonlymeasuresthevalueofgoodsandservicesproducedin a acountryduringagiventimeperiod. D) nexampleofastockvariableisrealGDPandanexampleofa a flowvariableisconsumptionexpenditure. 11) hichofthefollowingisastockvariable? W A) nvestment i B) ealth w C) ncome i D) aving s 12) nexampleofaflowvariableis A A) hecashheldbyhouseholds. t B) apital. c C) onsumptionexpenditurebyhouseholds. c D) hemachineryownedbyafirm. t 13) hetermcapital,asusedinmacroeconomics,refersto T A) inancialwealth. f B) hesumofinvestmentandgovernmentpurchasesofgoods. t C) nvestment. i D) heplant,equipment,buildings,andinventoriesofrawmaterials t andsemi-finishedgoods. 14) epreciation D A) oesnotchangetheamountofcapitalintheeconomy. d B) sthedecreaseinthecapitalstockbecauseofwearandtear. i C) salsoknownascapitalconsumption. i D) othanswersBandCarecorrect. B 15) nvestment,asdefinedinthetext,referstothepurchaseof I A) ewcapital. n B) urablegoodsbyconsumers. d

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C) tocksandbonds. s D) lloftheaboveanswersarecorrect. A 16) hetotalamountspentonaddingtothestockofcapitalandon T replacingdepreciatedcapitalis A) apitalconsumption. c B) rossinvestment. g C) henetstockofinvestment. t D) epreciation. d 17) hecapitalstockincreaseswhenever T A) rossinvestmentisnegative. g B) etinvestmentispositive. n C) rossinvestmentisexceedsnetinvestment. g D) etinvestmentexceedsgrossinvestment. n 18) etinvestmentequals N A) rossinvestmentminusdepreciation. g B) apitalstockminusdepreciation. c C) hetotalquantityofplant,equipmentandbuildings. t D) rossinvestment/depreciation. g 19) DPequals G A) hevalueoftheaggregateproductioninacountryduringagiven t timeperiod. B) ggregateincome. a C) ggregateexpenditure. a D) lloftheabove a 20) hichofthefollowingisNOTafinalgood? W A) pursesoldtoaforeignvisitor a B) newcarsoldtoAvisforuseintheirfleetofrentalcars a C) newcomputersoldtoanNYUstudent a D) hotdogsoldtoaspectatorataChicagoBearsfootballgame a 21) nationsinvestmentmustbefinancedby A A) orrowingfromtherestoftheworldonly. b B) hegovernmentsbudgetdeficit. t C) ationalsavingonly. n D) ationalsavingplusborrowingfromtherestoftheworld. n 22) hen________isgreaterthan________,savingincreases________. W A) overnmentpurchases;consumptionexpenditure;taxes g B) onsumptionexpenditure;governmentpurchases;wealth c C) fter-taxincome;consumptionexpenditure;wealth a D) fter-taxincome;governmentpurchases;wealth a 23) fthegovernmentbudgetisbalancedandinvestmentisequaltosaving, I then________. A) hecountrydoesnottradeinternationally t B) xportsequalimports e C) etexportsarepositive n D) etexportsarenegative n 16)______

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24) DPusingtheexpenditureapproachequalsthesumofpersonal G consumptionexpendituresplus A) rossprivateinvestmentplusgovernmentexpenditureongoods g andservicesplusnetexportsofgoodsandservices. B) rossprivateinvestmentplusgovernmentexpenditureongoods g andservices. C) rossprivateinvestmentplusgovernmentexpenditureongoods g andservicesminusimportsofgoodsandservices. D) rossprivateinvestment. g 25) ntheexpenditureapproachtoGDP,thelargestcomponentis I A) ersonalconsumptionexpenditures. p B) rossprivatedomesticinvestment. g C) overnmentexpenditureongoodsandservices. g D) etexports. n 26) etCrepresentconsumptionexpenditure,Ssaving,Igrossprivate L domesticinvestment,Ggovernmentexpenditureongoodsandservices, andNXnetexportsofgoodsandservices.ThenGDPequals A) +I+G+NX. C B) +S+G+NX. C C) +I+G-NX. C D) +S+G-NX. C 27) onsumptionexpenditureisthepaymentbyhouseholdsfor C consumptionof A) ervicesbutnotgoods. s B) ervicesandforsaving. s C) oodsandservices. g D) oodsbutnotservices. g 28) rossprivatedomesticinvestmentisallpurchasesofnewlyproduced G businesscapitalgoodsandbuildings A) lusthechangeinbusinessinventoriesplusresidential p construction. B) lusfixedinvestmentminusinventoryinvestment. p C) inusthechangeinbusinessinventories. m D) luspurchasesofcapitalgoodsproducedinpreviousyearsto p replaceanydepreciatedcapitalgoods. 29) hedifferencebetweengrossinvestmentandnetinvestmentis T A) onsumption. c B) nflation. i C) epreciation. d D) nitialcapital. i 30) oodsthatareproducedthisyear,storedininventories,andthensold G toconsumersnextyear A) ountinboththisyearsandnextyearsGDP. c B) renotcountedasapartofGDP. a C) ountinnextyearsGDP. c D) ountinthisyearsGDP. c 31) nthenationalincomeaccounts,thepurchaseofanewhousecountsas I A) onsumptionexpenditure. c B) nvestment. i C) nadditiontoinventory. a D) transfer. a 32) nthenationalincomeaccounts,governmentexpenditureongoodsand I

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services

exclude 32) A) pendingonnationaldefense. s B) tateandlocalgovernmentpurchases. s C) ransferpayments. t D) ocalgovernmentpurchasesbutincludestategovernment l purchases.

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33) hichoneofthefollowingtransactionsinaparticularyearisincluded W 33)______ ingrossdomesticproductforthatyear? A) stay-at-homeparentperformshouseworkthatthefamilywould A otherwisehavepaidamaid$20,000ayeartoperform. B) ocialSecuritypaymentstoretirees S C) carisproducedinthepreviousyearandremainsininventory A fortheentireyearunderconsideration. D) hegovernmentpaysacomputerservicescompanythatassisted T inthedeliveryofSocialSecuritypaymentstoretirees. 34) nthecomputationofGDP,socialsecuritypaymentscountas I 34)______ A) ransferpaymentsandarenotincludedinGDP. t B) ransferpaymentsandareincludedinGDP. t C) overnmentexpenditureongoodsandservicesandareincluded g inGDP. D) overnmentexpenditureongoodsandservicesandarenot g includedinGDP. 35) etexportsofgoodsandservicesequalthe N 35)______ A) xportsofgoodsandservicesdividedbytheimportsofgoodsand e services. B) xportsofgoodsandservicesminustheimportsofgoodsand e services. C) mportsofgoodsandservicesminustheexportsofgoodsand i services. D) xportsofgoodsandservicesplustheimportsofgoodsand e services. Governmentpurchasesofgoodsand $24 services 0 Depreciation 240 Grossprivatedomesticinvestment 400 Personalincometaxes 140 Nettaxes 120 Netexportsofgoodsandservices 80 Personalconsumptionexpenditures 640 Netinterest 100 36) romthedataintheabovetable,GDPequals F A) 1,280. $ B) 1,290. $ C) 1,360. $ D) 1,120. $ 37) heincomeapproachtomeasuringGDPsumstogether T A) hesalesofeachfirmintheeconomy. t B) hecostsofeachfirmintheeconomyandthensubtractsindirect t

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businesstaxes anddepreciation. C) ompensationofemployees,rentalincome,corporateprofits,net c interest,proprietorsincome,indirecttaxespaid,anddepreciation andsubtractssubsidiespaidbythegovernment. D) ompensationofemployees,rentalincome,corporateprofits,net c interest,proprietorsincome,subsidiespaidbythegovernment, indirecttaxespaid,anddepreciation. 38) helargestcomponentofnationalincomeis T A) ompensationofemployees. c B) roprietorsincome. p C) entalincome. r D) orporateprofits. c 39) ntermediategoodsandservices________. I A) reincludedinGDP a B) reusedtoproducefinalgoodsandservices a C) redoublecountedinGDP a D) ncludeusedgoods i 40) hichofthefollowingitemsarecountedinGDP?Ataxicompanys W ________. A) aleof5oldcabs s B) urchaseofnewtripmetersforitscabs p C) aleofsomebondstofinanceitspurchases s D) urchaseof5newcabs p 41) ealGDPmeasuresthe R A) hangesinthepricesofoutputmeasuredindollars. c B) alueoftotalproductionlinkedtopricesofasingleyear. v C) eneralupwarddriftinprices. g D) otalprofitsearnedbyallbusinessesvaluedusingpricesfroma t singleyear. 42) ocalculaterealGDP,theGDPdeflatorcanusedtoadjustnominal T GDPforchangesin A) ationalincome. n B) heunemploymentrate. t C) hegeneralpricelevel. t D) hecostofthetypicalurbanworkersmarketbasket. t 43) hichofthefollowingrelationshipsiscorrect? W A) ominalGDP=(GDPDeflator/RealGDP)100 N B) ealGDP=NominalGDP100 R C) ealGDP=(NominalGDPGDPDeflator)/100 R D) DPDeflator=(NominalGDP/RealGDP)100 G 44) conomistsdistinguishrealGDPfromnominalGDPto E A) eterminewhetherthegovernmentsectorisgrowing. d B) eterminewhetherrealproductionhaschanged. d C) easurethechangeinnominalinterestrates. m D) eterminewhethereconomicwelfarehaschanged. d 45) nyearswithinflation,nominalGDPincreases________realGDP. I

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A) asterthan f B) tthesamerateas a C) lowerthan s D) ometimesfaster,sometimesslower,andsometimesatthesame s rateas 46) hechain-weightedoutputindexmethodofmeasuringrealGDPis T basedon A) singthepricesoftwoadjacentyearstocalculatethegrowthrate u ofrealGDP. B) singcurrentpricesratherthanbaseyearprices u C) veragingthemarketvalueoftheexpendituresoveratwoyear a periodandthencomparingwithabaseperiod. D) veragingthenominalandrealmeasuresofGDPtocomeupwith a amoreaccuratefigure. 47) upposethatnominalGDPperpersonis$18,000in2007,the1998GDP S deflatoris100,andthe2007GDPdeflatoris110.Theapproximatereal perpersonGDPin2007is A) 18,000. $ B) 19,800. $ C) 16,364. $ D) 16,634. $ Nomin Real alGDP GDP Yea GDP (billion (billion r deflator sof sof dollars) dollars) 2004 2500 ________ 105 2005 ________ 2400 117 48) singthedataintheabovetable,whatisrealGDPin2004? U A) 2520billion $ B) 2381billion $ C) 2137billion $ D) 2051billion $ 49) singthedataintheabovetable,whatisnominalGDPin2005? U A) 2520billion $ B) 2808billion $ C) 2400billion $ D) 2381billion $ 50) ftheGDPdeflatorisbiasedupwardbyqualitychanges,theresultis I that A) ealGDPisunderstated. r B) hereisnoeffectuponthecorrectlevelofrealGDP. t C) ominalGDPisunderstated. n D) ealGDPisoverstated. r 51) hichofthefollowingisNOTincludedinrealGDP? W A) roductionofgoodsthatlastmorethanoneyear,suchas p televisionsets B) roductionofgoodsthatdonotlastmorethanoneyear,suchas p gasoline C) roductionofservices,suchastheservicesofdoctors p D) roductioninthehome p 46)______

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52) hichofthefollowingisNOTincludedinrealGDP? W A) roductionthattakesplaceintheundergroundeconomy p B) roductionofservices,suchastheservicesofhairdressers p C) roductionofgoodsthatlastmorethanayear,suchasapairof p rollerblades D) roductionofgoodsthatlastlessthanayear,suchasproduction p ofhotdogs 53) hichofthefollowingstatementsaboutthecomparisonbetweenGDP W inChinaandintheUnitedStatesiscorrect? A) singpurchasingpowerparitypricestovalueChinasGDPin U dollarsshowsthatChinasGDPperpersonexceedstheGDPper personintheUnitedStates. B) hinasGDPperpersonishigherusingpurchasingpowerparity C pricesratherthantheexchangeratewhenvaluingChinasGDPin dollars. C) singtheexchangeratetovalueChinasGDPindollarsshows U thatChinasGDPperpersonexceedstheGDPperpersoninthe UnitedStates. D) oneoftheaboveanswersarecorrectbecausetheyareallfalse N statements. 54) hichofthefollowingisNOTareasonthatrealGDPisapoormeasure W ofanationseconomicwelfare? A) ealGDPdoesnotincludetheundergroundeconomy. R B) ealGDPovervalueshouseholdproduction. R C) ealGDPomitsmeasuresofpoliticalfreedom. R D) ealGDPdoesnottakeintoaccountthevalueofpeoplesleisure R time. 55) ealGDPisnotaperfectindicatorofeconomicwelfarebecause R ________. A) tincludestheundergroundeconomy i B) conomicwelfaredependsonmanyfactorsnotmeasuredornot e measuredaccuratelybyrealGDP C) tunderestimatesinflation i D) tincludesadirectmeasureofhealthandlifeexpectancy i

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 1) A 2) D 3) A 4) D 5) A 6) B 7) B 8) A 9) D 10) A 11) B 12) C 13) D 14) D 15) A 16) B 17) B 18) A 19) D 20) B 21) D 22) C 23) B 24) A 25) A 26) A 27) C 28) A 29) C 30) D 31) B 32) C 33) D 34) A 35) B 36) C 37) C 38) A 39) B 40) D 41) B 42) C 43) D 44) B 45) A 46) A 47) C 48) B 49) B 50) A 51) D

52) A 53) B 54) B 55) B