Purdue University North Central

Economics 251 - Review Questions Chapter 2

(1) The GDP is equal to the sum of consumption, investment, government purchases and:

(a) net exports.

(b) the factors of production.

(c) per capita GDP.

(d) population.

(2) Which of the following is part of the GDP?

(a) Transfer payments.

(b) Government purchases.

(c) Imports minus exports.

(d) Output produced by US firms in foreign countries.

(3) Suppose that during a year an economy produces $9 trillion of consumer goods, $3 trillion of investment goods, $5 trillion of government services, and has $2 trillion of exports, and $1 trillion of imports. For that economy, GDP would be:

(a) $20 trillion.

(b) $18 trillion.

(c) $16 trillion.

(d) $19 trillion.

(4) Per capita GDP is:

(a) the sum of consumer goods, investment goods, government services, and net exports.

(b) the growth rate of GDP.

(c) the value of the factors of production used to produce output in a country.

(d) GDP divided by the total population.

(5) If the population growth exceeds output (GDP) growth for a country, then:

(a) per capita GDP will increase.

(b) average living standards will decrease.

(c) GDP must have grown faster than population.

(d) all of the above.

(6) Which of the following has been a century-long trend in the United States?

(a) Relative decline in manufacturing.

(b) Relative increase in agriculture.

(c) Relative decline in services.

(d) None of the abovc.

(7) Which of the following expenditures is most important in expanding a country’s production possibilities?

(a) Consumer goods.

(b) Government services.

(c) Net exports.

(d) Investment goods.

(8) Income transfers include:

(a) wages and salaries paid to workers.

(b) food stamps.

(c) the salary of the President of the United States.

(d) private pension payments to a retiree.

(9) Which of the following is likely to be the most capital-intensive?

(a) Farming in third world countries.

(b) Oil refining in the United States.

(c) Clothing production in India.

(d) None of the above are capital-intensive.

(10) Which of the following would not be a legitimate government activity in the US economy?

(a) The distribution of goods and services.

(b) The regulation of water pollution.

(c) Enforcing child labor laws.

(d) Requiring producers to label the contents of baby food.