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a.
a transfer payment.
b.
consumption.
c.
investment.
d.
None of the above is correct.
50. A transfer payment is
a.
a payment for moving expenses a worker receives when he or she is transferred by an employer to a new
location.
b.
a payment that is automatically transferred from your bank account to pay a bill or some other obligation.
c.
a form of government spending that is not made in exchange for a currently produced good or service.
d.
the benefit that a person receives from an expenditure by government minus the taxes that were collected by
government to fund that expenditure.
51. Transfer payments
a.
are payments that flow from government to households.
b.
are not made in exchange for currently produced goods or services.
c.
alter household income, but they do not reflect the economy’s production.
d.
All of the above are correct.
52. A transfer payment is a payment made by
a.
consumers, but not in exchange for a tangible product.
b.
firms, but not in exchange for capital equipment.
c.
foreigners, but not in exchange for a domestically-produced good or service.
d.
government, but not in exchange for a currently produced good or service.
53. Transfer payments are
a.
included in GDP because they represent income to individuals.
b.
included in GDP because they eventually will be spent on consumption.
c.
not included in GDP because they are not payments for currently produced goods or services.
d.
not included in GDP because taxes will have to be raised to pay for them.
54. Which of the following represents a transfer payment?
a.
You transfer $1,000 from your bank account to a mutual fund.
b.
The government sends your grandfather his Social Security check.
c.
You make a payment to get legal documents showing you purchased a previously owned home.
d.
Your employer automatically transfers $100 each month from your wages to a non-taxable medical spending
account.
55. Social Security payments are
a.
included in GDP because they represent current income.
b.
included in GDP because they represent potential consumption.
c.
excluded from GDP because they are not private pensions.
d.
excluded from GDP because they do not reflect the economy’s production.
56. Unemployment compensation is
a.
part of GDP because it represents income.
b.
part of GDP because the recipients must have worked in the past to qualify.
c.
not part of GDP because it is a transfer payment.
d.
not part of GDP because the payments reduce business profits.
57. To encourage formation of small businesses, the government could provide subsidies; these subsidies
a.
would be included in GDP because they are part of government purchases.
b.
would be included in GDP because they are part of investment expenditures.
c.
would not be included in GDP because they are transfer payments.
d.
would not be included in GDP because the government raises taxes to pay for them.
58. After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to
increase security at airports. These purchases of goods and services are
a.
not included in GDP since they do not represent production.
b.
not included in GDP since the government collects taxes to pay for them.
c.
included in GDP since government expenditures on goods and services are included in GDP.
d.
included in GDP only to the extent that the federal government, rather than state or local governments, paid for
them.
59. Which of the following items is counted as part of government purchases?
a.
The federal government pays $2,000 in Social Security benefits to a retired person.
b.
The city of Athens, Ohio pays $10,000 to a tree-trimming firm to trim trees along city boulevards.
c.
The state of Nebraska pays $1,000 to help a low-income family pay its medical bills.
d.
All of the above are correct.
60. The U.S. government pays an economist at the U.S. Department of Commerce $100,000 in salary in 2013. The
economist then retires. In 2014, the government pays him $60,000 in Social Security benefits. Which of the following is
correct?
a.
The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in
2014 GDP as government purchases.
b.
The 2013 payment is included in 2013 GDP as government purchases, but the 2014 payment is not included in
2014 GDP.
c.
The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in
2014 GDP as government transfer payments.
d.
The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is allocated to
previous years' GDP according to the amount of work performed by the economist each year.
61. Consider the following three items of spending by the government: (i) the federal government pays a $500
unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy
lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in
Bozeman. Which of these payments contributes directly to government purchases in the national income accounts?
a.
only item (i)
b.
only item (ii)
c.
only items (i) and (ii)
d.
only items (ii) and (iii)
62. Which of the following subcomponents of GDP can be either positive or negative?
a.
inventory investment
b.
exports
c.
government purchases
d.
All of the above are correct.
63. Net exports equal
a.
exports plus imports.
b.
exports minus imports.
c.
imports minus exports.
d.
GDP minus imports.
64. Net exports equal
a.
exports plus imports.
b.
imports minus exports.
c.
Y - (C + I + G).
d.
Y - (C - I - G).
65. If net exports is a negative number for a particular year, then
a.
the value of firms’ inventories declined over the course of the year.
b.
consumption exceeded the sum of investment and government purchases during the year.
c.
the value of goods sold to foreigners exceeded the value of foreign goods purchased during the year.
d.
the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.
66. If a U.S. citizen buys a television made in Korea by a Korean firm, then
a.
U.S. net exports decrease and U.S. GDP decreases.
b.
U.S. net exports are unaffected and U.S. GDP decreases.
c.
U.S. net exports are unaffected and U.S. GDP is unaffected.
d.
U.S. net exports decrease and U.S. GDP is unaffected.
67. A U.S. grocery chain purchases olive oil from Tunisia and sells it to U.S. consumers. In which of the following is this
transaction included?
a.
U.S. consumption and U.S. imports
b.
U.S. consumption but not U.S. imports
c.
U.S. imports but not U.S. consumption
d.
neither U.S. consumption nor U.S. imports
68. When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,
a.
U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000.
b.
U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500.
c.
U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500.
d.
U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.
69. If a U.S. company buys an electrical generator made in Japan by a Japanese firm, and the Japanese firm uses the
payment to buy stocks issued by a U.S. company then
a.
U.S. exports and U.S imports increase.
b.
U.S. exports but not U.S. imports increase.
c.
U.S. imports but not U.S. exports increase.
d.
neither U.S. exports nor U.S. imports increase.
70. A German citizen buys an automobile produced in the United States by a Japanese company. As a result,
a.
U.S. net exports increase, U.S. GDP is unaffected, Japanese GNP increases, German net exports decrease, and
German GNP and GDP are unaffected.
b.
U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, German GNP is
unaffected, and German GDP decreases.
c.
U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP
and GDP are unaffected.
d.
U.S. net exports and GDP are unaffected, Japanese GNP increases, and German net exports, GNP, and GDP
decrease.
71. A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In
which of the following components of U.S. GDP is this transaction accounted for?
a.
consumption and imports
b.
consumption but not imports
c.
imports but not consumption
d.
neither consumption nor imports
72. If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then
a.
U.S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases.
b.
U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected.
c.
U.S. consumption decreases, U.S. net exports increase, and U.S. GDP increases.
d.
U.S. consumption decreases, U.S. net exports increase, and U.S. GDP is unaffected.
73. When an American household purchases a bottle of Italian wine for $100,
a.
U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100.
b.
U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100.
c.
U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.
d.
U.S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP increases by $100.
74. An American retailer purchased 100 pairs of shoes from a company in Mexico in the second quarter of 2016 but does
not sell them to a consumer until the third quarter of 2016. In which quarter(s) does(do) the value of the shoes add to U.S.
GDP?
a.
the second and third quarters
b.
the second quarter but not the third quarter
c.
the third but not the second quarter
d.
neither the second nor the third quarter
75. An American retailer purchased 500 pairs of shoes from a company in Thailand in the second quarter of 2016 but does
not sell them to a consumer until the third quarter of 2016. Which of the following components of U.S. GDP is affected by
this transaction in the third quarter of 2016?
a.
consumption, investment and imports
b.
only consumption and investment
c.
only consumption and imports
d.
only investment and imports
76. The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is
included in
a.
in government expenditures and exports.
b.
government expenditures and imports.
c.
exports, but not government expenditures.
d.
imports, but not government expenditures.
77. When an Egyptian firm purchases a cement mixer from Slovakia,
a.
Egyptian investment does not change, Egyptian net exports decrease, Egyptian GDP decreases, Slovakian net
exports increase, and Slovakian GDP increases.
b.
Egyptian investment increases, Egyptian net exports decrease, Egyptian GDP is unaffected, Slovakian net
exports increase, and Slovakian GDP increases.
c.
Egyptian investment decreases, Egyptian net exports increase, Egyptian GDP is unaffected, Slovakian net
exports decrease, and Slovakian GDP decreases.
d.
Egyptian investment increases, Egyptian net exports do not change, Egyptian GDP increases, Slovakian net
exports do not change, and Slovakian GDP is unaffected.
78. The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result,
a.
U.S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is
unaffected.
b.
U.S. government purchases increase by $30,000; U.S. net exports are unaffected; and U.S. GDP increases by
$30,000.
c.
U.S. government purchases, net exports, and GDP are unaffected.
d.
U.S. government purchases are unaffected; U.S. net exports decrease by $30,000; and U.S. GDP decreases by
$30,000.
79. A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in
Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As
a result, U.S. GDP
a.
increases by $40.
b.
increases by $220.
c.
increases by $280.
d.
increases by $1500.
80. An American soldier stationed in North Carolina receives a paycheck from the federal government for $300, which
she uses to purchase a $100 MP3 player made in China by a Chinese firm and $200 for fruit and vegetables from a local
farmers market. As a result, U.S. GDP increases by
a.
$200.
b.
$300.
c.
$500.
d.
$600.
81. Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of
$2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals
a.
$24,450.
b.
$11,550.
c.
$15,300.
d.
$20,700.
82. In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300,
imports were $150, and investment was $400. What was Talikastan’s GDP in 2015?
a.
$1350
b.
$1450
c.
$1050
d.
$1750
83. In the economy of Talikastan in 2015, consumption was $5000, exports were $400, government purchases were
$1000, imports were $600, and investment was $1200. What was Talikastan’s GDP in 2015?
a.
$6200
b.
$6400
c.
$7000
d.
$8200
84. In the economy of Talikastan in 2015, exports were $200, GDP was $2000, government purchases were $200, imports
were $270, and investment was $500. What was Talikastan’s consumption in 2015?
a.
$830
b.
$1230
c.
$1370
d.
$1770
85. In the economy of Talikastan in 2015, exports were $500, GDP was $6400, government purchases were $1700,
imports were $400, and investment was $1800. What was Talikastan’s consumption in 2015?
a.
$2000
b.
$2800
c.
$3000
d.
$3800
86. In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government
purchases were $1800, and imports were $1200. What was Talikastan’s investment in 2015?
a.
$0
b.
$1200
c.
$2400
d.
$5600
87. In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government
purchases were $1200, and imports were $600. What was Talikastan’s investment in 2015?
a.
$3200
b.
$5600
c.
$2000
