53. Which of the following would not be included as part of personal income?
a.
Welfare benefits
b.
Food stamps distributed by the government
c.
Social security benefits
d.
Indirect business taxes
e.
Corporate dividend payments to stockholders
MACR.BOYE.16.23 – ch. 05, 4
United States – Reflective Thinking
Measures of Output and Income
54. Personal income is equal to:
a.
national income plus business profits.
b.
disposable personal income minus personal taxes.
c.
national income minus transfer payments.
d.
national income plus welfare benefits minus corporate retained earnings.
e.
disposable personal income plus transfer payments.
MACR.BOYE.16.23 – ch. 05, 4
United States – Measuring the Economy
Measures of Output and Income
55. Which of the following represents the amount of income that is actually available to people for consumption and
saving?
a.
Net national product
b.
National income
c.
Disposable personal income
d.
Gross national product
e.
Personal income
MACR.BOYE.16.23 – ch. 05, 4
Measures of Output and Income
The table given below reports the value of the different economic variables of a nation during a year.
Measures of Output and Income
Table 5.5
GNP Data
(Adjusted for net factor income from abroad)
$1,150
$320
$420
$60
$200
$365
$540
$225
56. Refer to Table 5.5. For the economy described in the table above, personal income is:
a.
$1,235.
b.
$1,375.
c.
$1,325.
d.
$1,600.
e.
$1,855.
57. Refer to Table 5.5. For the economy described in the table above, disposable personal income is:
a.
$1,440.
b.
$1,630.
c.
$1,550.
d.
$1,610.
e.
$1,870.
b
Moderate
MACR.BOYE.16.23 – ch. 05, 4
United States – Reflective Thinking
Measures of Output and Income
Application
58. Which of the following is true of nominal GDP?
a.
It acts as an indicator of the general price level in the economy.
b.
It measures the real level of output in the economy.
c.
It measures national output based on the current year’s prices.
d.
It tends to rise by a smaller amount than real GDP when the general price level increases.
e.
It measures changes in the output of intermediate goods and services.
Easy
MACR.BOYE.16.24 – ch. 05, 5
Moderate
MACR.BOYE.16.23 – ch. 05, 4
Measures of Output and Income
Application
59. Which of the following is true of real GDP?
a.
It measures a nation’s output in terms of current year prices.
b.
It measures a nation’s output in constant prices.
c.
It measures the degree of change in the general price level in an economy.
d.
It measures the change in the value of an economy’s output.
e.
It measures the value of both intermediate and final goods and services produced in an economy.
MACR.BOYE.16.24 – ch. 05, 5
United States – Measuring the Economy
Nominal and Real Measures
60. If nominal GDP of a country increased and real GDP remained unchanged in a particular year, which of the following
is most likely to have taken place?
a.
Output increased and the price level increased
b.
Output increased and the price level decreased
c.
Output remained constant and the price level increased
d.
Output decreased and the price level decreased
e.
Output increased and the price level remained constant
MACR.BOYE.16.24 – ch. 05, 5
United States – Reflective Thinking
Nominal and Real Measures
61. If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following
is most likely to have taken place?
a.
Output increased and the price level increased
b.
Output increased and the price level decreased
c.
Output decreased and the price level increased
d.
Output decreased and the price level decreased
e.
Output increased and the price level remained constant
MACR.BOYE.16.24 – ch. 05, 5
62. Consider a small country producing only two commodities (coffee beans and corn). Following are the price and output
of these two commodities in the year 2008:
Price
Quantity
$12
500 lbs. of coffee beans
$6
600 bushels of corn
Assuming the price level in the economy remains same while the output of both these products increase by 10 percent in
2009, calculate the value of real GDP in this country for the year 2009?
a.
$9,600
b.
$10,560
c.
$1,056
d.
$6,900
e.
$10, 960
b
Challenging
MACR.BOYE.16.24 – ch. 05, 5
United States – Reflective Thinking
Nominal and Real Measures
Application
63. Consider a small country producing only two commodities (coffee beans and corn). Following are the price and output
of these two commodities in the year 2008:
Price
Quantity
$12
500 lbs. of coffee beans
$6
600 bushels of corn
Assuming that the output of these two commodities remains constant, while the price of each rises by 10 percent in 2009,
compute the value of real GDP in 2009.
a.
$12,000
b.
$10,560
c.
$9,600
d.
$8,400
e.
$6,560
b
Challenging
Nominal and Real Measures
Comprehension
Revised
64. Which of the following industrial countries experienced a relatively slower growth of real GDP in the latter half of the
1990s?
a.
Canada
b.
United States
c.
Italy
Comprehension
d.
France
e.
Japan
The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a
nation) for the years 1995 and 2003.
Table 5.6
Production Data
Prices per Unit
Quantity
Production
1995
2003
1995
2003
Computers
Calculators
$2,000
$60
$1,600
$70
100
900
100
900
65. Refer to Table 5.6. Calculate the nominal GDP for 1995.
a.
$223,000
b.
$254,000
c.
$448,000
d.
$520,000
e.
$110,000
b
Moderate
MACR.BOYE.16.24 – ch. 05, 5
United States – Reflective Thinking
Nominal and Real Measures
Application
66. Refer to Table 5.6. What is the nominal GDP for 2003?
a.
$223,000
b.
$254,000
c.
$376,000
d.
$448,000
e.
$520,000
Moderate
MACR.BOYE.16.24 – ch. 05, 5
Application
67. Refer to Table 5.6. What is the constant-dollar real GDP growth from 1995 to 2003 using 1995 as the base year?
Moderate
MACR.BOYE.16.24 – ch. 05, 5
United States – Measuring the Economy
Nominal and Real Measures
Knowledge
a.
50 percent
b.
Zero percent
c.
-75 percent
d.
100 percent
e.
14 percent
68. Refer to Table 5.6. What is the constant-dollar real GDP growth from 1995 to 2003 using 2003 as the base year?
a.
50 percent
b.
Zero percent
c.
-75 percent
d.
100 percent
e.
14 percent
b
MACR.BOYE.16.24 – ch. 05, 5
Nominal and Real Measures
Application
69. The price index for the current year is 180. This means that, on average, prices in the current year are:
a.
80 percent of prices in the base year.
b.
$1.80 higher than prices in the base year.
c.
180 percent higher than prices in the base year.
d.
$0.80 higher than prices in the base year.
e.
80 percent higher than prices in the base year.
Moderate
MACR.BOYE.16.25 – ch. 05, 6
United States – Inflation
Nominal and Real Measures
Application
70. Suppose the price index is 100 in the base year and the price of a pound of oranges in that year is $1.96. Now, if the
price index changes to 105 in the following year, how much would a pound of oranges cost?
a.
$2.45
b.
$0.25
c.
$1.96
b
Challenging
MACR.BOYE.16.24 – ch. 05, 5
United States – Reflective Thinking
Nominal and Real Measures
Application
d.
$2.06
e.
$1.50
71. Suppose the current price of DVDs is $16, while its base-year price is $11.50. The value of the price index for the
current year is approximately:
a.
139
b.
39
c.
25
d.
160
e.
172
Moderate
MACR.BOYE.16.25 – ch. 05, 6
Nominal and Real Measures
Application
The table given below reports the price of soda over four consecutive years.
Table 5.7
Price Data
Year
Base-Year Soda Price
Current Soda Price
1 (base year)
$0.30
$0.30
2
$0.30
$0.45
3
$0.30
$0.55
4
$0.30
$0.65
72. Refer to Table 5.7. Compute the price index for the base year.
a.
130
b.
30
c.
80
d.
100
e.
120
d
Moderate
MACR.BOYE.16.25 – ch. 05, 6
Application
d
Challenging
MACR.BOYE.16.25 – ch. 05, 6
United States – Reflective Thinking
Nominal and Real Measures
Application
73. Refer to Table 5.7. Compute the price index for the third year.
a.
150
b.
183
c.
100
d.
118
e.
130
74. Refer to Table 5.7. By what percentage did the price of soda increase from the third to the fourth year?
a.
15 percent
b.
30 percent
c.
35 percent
d.
18 percent
e.
65 percent
d
Moderate
MACR.BOYE.16.25 – ch. 05, 6
United States – Reflective Thinking
Measures of Output and Income
Application
75. In terms of price indexes, what is a COLA?
a.
A measure of the quality of living
b.
A consumer price adjustment
c.
An increase in wages designed to match consumer price increases
d.
An estimate of gross domestic product
e.
A measure of producer surplus
Moderate
MACR.BOYE.16.25 – ch. 05, 6
Nominal and Real Measures
Knowledge
76. The consumer price index:
a.
tracks the value of output over time.
b.
is not tied to cost-of-living adjustments.
c.
doubles every five years in the economy.
b
Moderate
MACR.BOYE.16.25 – ch. 05, 6
Measures of Output and Income
Application
d.
is a weighted average of consumer prices.
e.
is a broader price index measure than the implicit GDP deflator.
77. The producer price index was earlier known as _____.
a.
the retail price index
b.
the commodity market index
c.
the Fischer index
d.
the wholesale price index
e.
the cost of living index
d
Easy
MACR.BOYE.16.25 – ch. 05, 6
United States – Measuring the Economy
Measures of Output and Income
Knowledge
78. National income accounting fills in the dollar values in the circular flow of income.
a.
True
b.
False
True
Easy
MACR.BOYE.16.20 – ch. 05, 1
Measures of Output and Income
Knowledge
79. The circular flow diagram validates the fact that the different sectors in the economy are independent.
a.
True
b.
False
False
Easy
MACR.BOYE.16.20 – ch. 05, 1
Measures of Output and Income
Comprehension
80. The circular flow diagram shows the flow of money and goods and services between households, firms, government,
d
Easy
MACR.BOYE.16.25 – ch. 05, 6
United States – Inflation
Nominal and Real Measures
Knowledge
and foreign countries.
a.
True
b.
False
81. GDP is based on the market value of goods and services produced in an economy and not on the value of only final
goods and services.
a.
True
b.
False
False
Easy
MACR.BOYE.16.20 – ch. 05, 1
United States – Reflective Thinking
Measures of Output and Income
Knowledge
82. In-kind wages are not included in GDP.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.20 – ch. 05, 1
United States – Measuring the Economy
Measures of Output and Income
Knowledge
83. The services of a husband or wife as a homemaker and cash gains from a lottery are included in the calculation of
gross domestic product.
a.
True
b.
False
False
Challenging
MACR.BOYE.16.20 – ch. 05, 1
United States – Reflective Thinking
Measures of Output and Income
Application
84. The sale of live cattle to a slaughterhouse constitutes a final transaction that is counted as part of the gross domestic
True
Easy
MACR.BOYE.16.20 – ch. 05, 1
United States – Measuring the Economy
Nominal and Real Measures
Knowledge
product.
a.
True
b.
False
85. The value added approach involves adding up the value of the final product and the value of intermediate goods used
in the production process.
a.
True
b.
False
False
Moderate
United States – Measuring the Economy
Knowledge
86. According to the expenditures approach, gross domestic product represents the sum of consumption spending,
government spending, net exports, and net investment.
a.
True
b.
False
True
Easy
MACR.BOYE.16.22 – ch. 05, 3
Knowledge
87. Other things remaining unchanged, a decline in imports is associated with an increase in gross domestic product.
a.
True
b.
False
True
Moderate
Measures of Output and Income
Knowledge
88. Wheat produced in the U.S. but sold in Japan would not be included while calculating the U.S. GDP.
False
Moderate
MACR.BOYE.16.20 – ch. 05, 1
Measures of Output and Income
Comprehension
a.
True
b.
False
89. Depreciation must be subtracted from the calculation of gross domestic product.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.23 – ch. 05, 4
United States – Measuring the Economy
Measures of Output and Income
Knowledge
90. Personal income and property taxes paid by individuals are not included in the income approach of gross domestic
product calculation.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.23 – ch. 05, 4
United States – Analytic – BB-Legal
United States – Measuring the Economy
Measures of Output and Income
Knowledge
91. Gross national product in terms of the income method is equal to national income plus indirect business taxes minus
the capital consumption allowance.
a.
True
b.
False
False
Easy
MACR.BOYE.16.23 – ch. 05, 4
Measures of Output and Income
Knowledge
92. The output produced by domestically owned firms in foreign countries is included in the U.S. GDP but not in the U.S.
GNP.
False
Moderate
MACR.BOYE.16.22 – ch. 05, 3
United States – Measuring the Economy
United States – Reflective Thinking
Measures of Output and Income
Comprehension
a.
True
b.
False
93. When indirect business taxes are subtracted from GDP we get net national product of a nation.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.23 – ch. 05, 4
United States – Measuring the Economy
Measures of Output and Income
Knowledge
94. FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.23 – ch. 05, 4
Measures of Output and Income
Knowledge
95. The income that is available to individuals for consumption or investment is called disposable income.
a.
True
b.
False
False
Easy
MACR.BOYE.16.23 – ch. 05, 4
Measures of Output and Income
Knowledge
96. To arrive at a more accurate measure of real output changes in an economy, nominal GDP figures should be adjusted
for inflation.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.23 – ch. 05, 4
United States – Measuring the Economy
Measures of Output and Income
Knowledge
97. A price index is a measure of the average level of prices in an economy.
a.
True
b.
False
True
Easy
United States – Inflation
Knowledge
98. If the price level in any country increases by 15 percent during a year, then the price index for that year will be 85 as
compared to the base year.
a.
True
b.
False
False
MACR.BOYE.16.25 – ch. 05, 6
United States – Reflective Thinking
Application
99. The value of a price index in the base year will always be zero.
a.
True
b.
False
False
United States – Inflation
Knowledge
100. The market basket of goods and services used to calculate the consumer price index [CPI] by the Department of
Labor in the U.S. changes only every two years.
a.
True
b.
False
True
True
Easy
MACR.BOYE.16.24 – ch. 05, 5
United States – Inflation
Knowledge
101. The consumer price index [CPI] is considered the best measure of the cost of living of individuals in a country.
a.
True
b.
False
False
Easy
MACR.BOYE.16.25 – ch. 05, 6
United States – Inflation
Nominal and Real Measures
Application
102. The consumer price index [CPI] measures price changes at an earlier stage of production than the producer price
index [PPI], hence, increases in the CPI are usually followed by increases in the PPI.
a.
True
b.
False
False
Easy
Nominal and Real Measures
Knowledge
103. Since there are smaller fluctuations in the equilibrium prices of final goods than in the prices of intermediate goods,
the producer price index is more volatile than the consumer price index.
a.
True
b.
False
True
Easy
MACR.BOYE.16.25 – ch. 05, 6
United States – Inflation
Nominal and Real Measures
Knowledge
104. Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or
fall at the same time or by the same amount.
a.
True
b.
False
False
Easy
MACR.BOYE.16.25 – ch. 05, 6
Nominal and Real Measures
Knowledge