Economics
252 – Review Questions Chapter 7
Measuring
Domestic Output and National Income
(1) Gross
Domestic Product (GDP) is the:
(a) monetary value of
all final goods and services produced within a nation in a particular year.
(b) national income minus
all nonincome charges against output.
(c) monetary value of
all economic resources used in producing a year's output.
(d) monetary value of
all goods and services, final and intermediate, produced in a specific year.
(2) Which of the following is a final
good or service?
(a) diesel fuel bought
for a delivery truck
(b) fertilizer purchased
by a farm supplier
(c) a haircut
(d) Chevrolet windows purchased by a General
Motors assembly plant
(3) Which of the following is an
intermediate good?
(a) the purchase of
gasoline for a ski trip to
(b) the purchase of a
pizza by a college student.
(c) the purchase of
baseball uniforms by a professional baseball team.
(d) the purchase of
jogging shoes by a recreational runner.
(4) Gross investment refers to:
(a) private investment
minus public investment.
(b) net investment plus
replacement investment.
(c) net investment after
it has been "inflated" for changes in the price level.
(d) net investment plus
net exports.
(5) The ZZZ Corporation issued $25
million in new common stock in 2004. It used $18 million of the proceeds to buy
new equipment for its new factory and $7 million to repay bank loans. As a
result, investment:
(a) of $7 million has occurred. (c) of $18 million has
occurred.
(b) of $25 million has occurred. (d) has not occurred.
(6) In 1933 net private domestic
investment was a minus $6.0 billion. This means that:
(a) gross private
domestic investment exceeded depreciation by $6.0 billion.
(b) the economy was
expanding in that year.
(c) the production of
1933's GDP used up more capital goods than were produced in that year.
(d) the economy produced
no capital goods at all in 1933.
(7)
Nominal GDP is:
(a) the sum of all
monetary transactions that occur in the economy in a year.
(b) the sum of all
monetary transactions involving final goods and services that occur in the
economy in a year.
(c) the amount of
production that occurs when the economy is operating at full employment.
(d) money GDP adjusted
for inflation.
(8) Real GDP refers to:
(a) the value of the
domestic output after adjustments have been made for environmental pollution
and changes in the distribution of income.
(b) GDP data that embody changes in the price
level, but not changes in physical output.
(c) GDP data that reflect changes in both
physical output and the price level.
(d) GDP data that have been adjusted for changes
in the price level.
Use Table 1 to
answer Questions (9) and (10). Table 1.
(9) . In Table 1, Gross Domestic Product (GDP) is:
(a) $116. (b) $121.
(c) $125. (d) $150.
(10) In Table 1, Net Domestic Product (NDP) is:
(a) $116. (b) $121.
(c) $125. (d) $150.
Use Table 2 to
answer Questions (11) to (14). Table 2
(11) In Table 2,
Gross Domestic Product (GDP) is:
(a) $390. (b) $417. (c)
$422. (d) $492.
(12) In Table 2, Net Domestic Product (NDP)
is:
(a) $370. (b) $402. (c)
$392. (d) $467.
(13) In Table 2, Personal Income (PI) is:
(a) $294. (b) $346. (c)
$408. (d) $437.
(14) In Table 2, Personal Disposable Income (PDI) is:
(a)
$254. (b) $334
(c) $290 (d)
$ 279.
Consider Table
3 to answer Questions (15) and (16). Table
3
(15) In Table 3, Nominal Gross Domestic
Product in year 3 is:
(a) $100. (b) $450.
(c) $225. (d) $150.
(16) In Table 3, Real
Gross Domestic Product in year 3 is:
(a) $100. (b) $450.
(c) $225. (d) $150.
Consider Figure
4 to answer Questions (17) to (21) Table
4
(17) In Table 4, consumption of fixed capital
(private sector) is:
(a) $23. (b) $14.
(c) $32. (d) $26.
(18) In Table 4,
(a) $26. (b) $16.
(c) $24. (d) $14.
(19) In Table 4, personal consumption expenditures:
(a) cannot be
calculated. (b) are $231. (c) are $225. (d) are $205.
(20) In Table 4, Gross Domestic Product is:
(a) $328. (b) $402. (c)
$382. (d) $333.
(21) In Table 4, personal income is:
(a) $229. (b) $253. (c)
$274. (d) $243.
Utilize Table 5 in answering
Questions (22) and (23).
Assume an
economy that is producing only one product and that year 3 is the base year.
Output and price data for a five-year period are as follows. Answer the next question(s) on the basis of
these data.
Table 5
(22) In Table 5, if year 3 is chosen as the base
year, the price index for year 1 is:
(a) 140.
(b) 40. (c)
167. (d) 60.
(23) In Table 5, nominal GDP for year 4 is:
(a) $49. (b) $55.
(c) $40. (d) $35.
(24) Which of the following activities is
excluded from GDP, causing GDP to understate a nation's well-being?
(a) the services of
used-car dealers
(b) the child-care
services provided by stay-at-home parents
(c) the construction of
new houses
(d) government
expenditures on military equipment
Utilize Table 6
to answer Questions (25) to (27).
Table 6
(25) The economy in
Table 6 has experienced a:
(a) a declining nominal
GDP. (b) a
rising price level. (c) a declining real
GDP. (d) deflation.
(26) The economy in Table 6 can described as
follows:
(a) the price level is
rising faster than nominal GDP.
(b) nominal and real GDP
are growing at the same rate.
(c) the growth of
nominal GDP understates the growth of real GDP.
(d) the growth of
nominal GDP overstates the growth of real GDP.
(27) For the economy in Table 6, real GDP for year 3
is:
(a) $512. (b) $428. (c)
$480. (d) $691.
(28) Suppose
nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate
price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000
real GDP:
(a) increased by $60 billion. (c) increased by $100
billion.
(b) decreased by $32 billion. (d) increased by $117
billion.
(29) The growth of GDP may understate changes
in the economy's economic well-being over time if the:
(a) distribution of
income becomes increasingly unequal.
(b) quality of products
and services improves.
(c) environment
deteriorates because of pollution.
(d) amount of leisure
decreases.
(30) A large underground economy results in
an:
(a) understated GDP. (c) understated GDP
price index.
(b) overstated GDP. (d) overstated GDP
price index.