61) In a circular low diagram,
i. the value of production = income.
ii. the value of production = expenditure.
iii. expenditure = income.
A) i, ii and iii are true statements.
B) Only iii is a true statement.
C) i and ii are true statements.
D) i and iii are true statements.
E) Only i is a true statement.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
62) The abbreviation “GDP” stands for
A) Gross Domestic Product.
B) Gross Domestic Prices.
C) General Domestic Prices.
D) Great Domestic Prices.
E) Government’s Domestic Politics.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
63) GDP is equal to the ________ value of all the inal goods and services produced within a
country in a given period of time.
A) production
B) market
C) wholesale
D) retail
E) typical
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
21
64) The following are all inal goods EXCEPT
A) lour used by the baker to make cupcakes.
B) bread eaten by a family for lunch.
C) pencils used by a 6th grader in class.
D) Nike shoes used by a basketball player.
E) a computer used by Intel to design new computer chips.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
65) Which of the following is directly included in the U.S. GDP for 2013?
i. a 2013 Cadillac Escalade produced and sold as a new car in the United States in 2031
ii. tires produced in the United States, purchased by General Motors, and installed on a
new Cadillac Escalade sold in 2013
iii. General Motors cars produced in Canada because General Motors is an American
corporation
A) i only
B) ii only
C) i and iii
D) ii and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
66) Production by Honda, a Japanese irm, in the United States is included in ________ GDP
and production by Nike Corporation, a U.S. irm, in Vietnam is included in ________ GDP.
A) Japanese; U.S.
B) U.S.; Vietnamese
C) U.S.; U.S.
D) Japanese; Vietnamese
E) U.S. and Japanese; U.S. and Vietnamese
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
22
67) Investment is deined as
A) the purchase of a stock or bond.
B) inancial capital.
C) what consumers do with their savings.
D) the purchase of new capital goods by irms.
E) spending on capital goods by governments.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
68) In one year, a irm increases its production by $9 million and increases sales by $8
million. All other things in the economy remaining the same, which of the following is true?
A) GDP increases by $8 million and inventory investment decreases by $1 million.
B) GDP increases by $9 million and inventory investment increases by $1 million.
C) Inventory investment decreases by $1 million.
D) GDP increases by $8 million and investment increases by $1 million.
E) GDP increases by $17 million.
Skill: Level 3: Using models
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
69) Net exports of goods and services increase when
A) exports of goods and services decrease and imports of goods and services do not
change.
B) consumption expenditure increases.
C) exports of goods and services increase and imports of goods and services do not change.
D) consumption expenditure decreases.
E) imports of goods and services increase and exports of goods and services do not change.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
23
70) Total expenditure equals
A) C + I + G + NX.
B) C + I + G – NX.
C) C + I – G + NX.
D) C – I + G + NX.
E) C – I – G – NX.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
71) Total income in a country in 2012 is $780 billion. Total expenditure in the country
A) cannot be determined.
B) is greater than $780 billion.
C) is $780 billion.
D) is less than $780 billion.
E) is either less than or equal to $780 billion.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
72) Total expenditure in the United States is equal to consumption expenditure plus
investment
A) plus government expenditure on goods and services plus imports of goods and services.
B) minus government expenditure on goods and services minus imports of goods and
services.
C) plus government expenditure on goods and services plus exports of goods and services.
D) plus government expenditure on goods and services plus exports of goods and services
minus imports of goods and services.
E) plus government expenditure on goods and services plus exports of goods and services
plus imports of goods and services.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
24
5.2 Measuring U.S. GDP
1) In order to measure gross domestic product, we can follow
A) only one approach: the circular low approach.
B) only one approach: the national accounts approach.
C) two approaches: the expenditure approach and the income approach.
D) three approaches: the expenditure approach, the income approach, and the production
approach.
E) three approaches: the expenditure approach, the income approach, and the market-
based approach.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
2) In 2011, U.S. GDP was
A) $15 trillion using the expenditure approach.
B) $15 trillion using the income approach.
C) $15 trillion using the expenditure approach and $14 trillion using the income approach.
D) $16 trillion using the income approach and $14 trillion using the expenditure approach.
E) both A and B are correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
3) The expenditure approach to measuring GDP is done by using data on only
A) consumption expenditure.
B) consumption expenditure and investment.
C) consumption expenditure, investment, government expenditure on goods and services,
and net exports of goods and services.
D) consumption expenditure, investment, and government expenditures.
E) wages, rent, interest, and proit.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
25
4) In comparing the magnitudes of the components of GDP according to the expenditure
approach, we see that in the United States
A) government expenditure on goods and services is the largest category.
B) investment is the largest category.
C) investment is much larger than government expenditure on goods and services.
D) investment is less than government expenditure on goods and services.
E) investment, government expenditure on goods and services, and consumption
expenditure are all about the same size.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
5) The largest expenditure category in the United States is
A) consumption expenditure.
B) investment.
C) government expenditure on goods and services.
D) net exports of goods and services.
E) wages.
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
6) If consumption was 70 percent of GDP and investment and government expenditure
were both 18 percent each, then we see that
A) GDP can be over 100 percent because it is “gross” rather than “net.”
B) the error is due to rounding.
C) exports must be less than imports.
D) exports must be more than imports.
E) we must subtract depreciation from investment so that the components of GDP do not
exceed 100 percent.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
26
7) In recent years, which of the following has been negative?
A) consumption expenditure
B) investment
C) government expenditure on goods and services
D) net exports of goods and services
E) wages
Skill: Level 1: Deinition
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
8) In 2009 in the United States, consumption expenditure was $9,996 billion, investment
was $1,559 billion, government expenditures on goods and services were $2,927 billion,
and total exports were $1,492 billion. GDP equaled
A) $12,641 billion.
B) $10,120 billion.
C) $11,488 billion.
D) $14,415 billion.
E) some amount, but there is not enough information given to calculate GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
27
9) The following table reports transactions that occurred in Whoville. Nominal GDP in
Whoville is ________.
Item Price per Unit Quantity
Bottles of French Wine $20 10
Boxes of Cereal $4 20
Used Tires $15 5
Shares of Twitter Stock $10 15
Hours of Swimming
Lessons $5 8
A) $320
B) $545
C) $120
D) $395
E) $195
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: New
AACSB: Analytical thinking
10) Based on the data in the table above, what does GDP equal?
A) $10,200 billion
B) $10,400 billion
C) $10,000 billion
D) $9,800 billion
E) $8,900 billion
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
28
11) The table gives data for a nation. What is the amount of the country’s GDP?
A) $6,000 billion
B) $6,200 billion
C) $6,600 billion
D) $6,900 billion
E) $5,800 billion
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
12) The table gives data for a nation. The value of the country’s net exports of goods and
services shows that the country’s
A) value of its exports exceeded the value of its imports.
B) value of its imports are negative.
C) net exports of goods and services are decreasing.
D) value of its imports exceeded the value of its exports.
E) value of its imports must equal zero.
Skill: Level 3: Using models
Section: Checkpoint 5.2
Status: Old
AACSB: Analytical thinking
13) The value of used goods ________ counted as part of GDP ________.
A) are; as long as they are classiied as consumption goods
B) are; as long as they are classiied as investment goods
C) are not; because they were counted during the period when they were counted as new
goods
D) are not; because most fall in value and would cause a decrease in the value of GDP
E) may be; as long as their value has risen
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
29
14) If the purchase of used goods was to be incorporated into measuring GDP using the
expenditure approach, then
A) we also will have to account for spending on inancial assets.
B) it will be very diicult to assign a fair market value to a used good.
C) we will be counting the value of the used goods both at the time of their production and
at the time of their re-sale.
D) we will have to account for the natural depreciation that a used good experiences.
E) consumption spending would need to be adjusted for depreciation.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
15) When calculating GDP, purchases of used goods are
A) included at the original price.
B) included by taking the original price and subtracting the (current) used price.
C) included at the (current) used price.
D) not included.
E) included at the original price minus any depreciation.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
16) If you buy a ive-year-old TV from a friend, the amount you paid for the TV is
A) always added to consumption expenditures but not investment.
B) always added to investment but not consumption.
C) not included in this year’s GDP.
D) added to investment if the TV is expected to last more than 5 additional years and added
to consumption if the TV is expected to last less than 5 additional years.
E) included in this year’s GDP only if the TV set was manufactured in the United States.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.2
Status: Old
AACSB: Relective thinking
30