ECO 372T Wk 1 - Practice: Measuring Output and Income Quiz

Which of the following ly describes GDP using the income approach?

GDP = Consumption + Gross Investment + Net Exports + Government Purchases

GDP = Wages + Rents + Interest + Profits and Losses

GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income 

GDP = Wages + Rents + Interest + Profits and Losses + National Income

Which of the following statements ly explains exports versus net exports?

Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to exports minus imports. 

Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to imports minus exports.

Exports are goods, services, or resources produced abroad and sold domestically, while net exports are equal to exports minus imports.

Exports are goods, services, or resources produced abroad and sold domestically, while net exports are equal to imports minus exports.

The major difference between nominal GDP and real GDP is:

nominal GDP measures the value of output with current-year output levels, while real GDP measures output using constant output levels.

nominal GDP measures the value of output with constant output levels, while real GDP measures output using current-year output levels.

nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices. 

nominal GDP measures the value of output in constant prices, while real GDP measures output using current-year prices.

Determine whether each of the following examples would be included in Gross Domestic Product (GDP).

a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes. 

     Judy's purchase of potatoes 

b. Ford Motor Company buys four tires to put on a new Ford Mustang.

     The purchase of the tires  

c. The U.S. Air Force purchases two new fighter jets from Boeing.

     The purchase of the two fighter jets  

d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend. 

     Joey's birthday gift of $100  

Henry and his girlfriend ate dinner at the new Thai restaurant that recently opened in his neighborhood. This expenditure would be included in:

consumer durables.

services. 

government purchases.

consumer nondurables.

The equation for net investment is written as:

Net Investment = Nominal GDP - Gross Investment

Net Investment = Gross Investment - Depreciation 

Net Investment = Depreciation - Gross Investment

Net Investment = Consumption - Gross Investment

Which of the following measures is most often used to compare the standards of living in different countries?

Multiple Choice

daily per capita calorie supply

per capita income

life expectancy at birth

per capita energy consumption

GDP tends to overstate economic well-being because it takes into account _____.

Multiple Choice

expenditures undertaken to  pollution

illegal activities of individuals and businesses

nonmarket activities, such as the productive work of homemakers

improvements in product quality over time

One common measure of the "standard of living" in a nation is _____.

Multiple Choice

real GDP per capita

population size

real GDP

the unemployment rate

What are net exports?

Multiple Choice

That portion of consumption and investment goods sent to other countries

Exports minus imports

Exports plus imports

Imports minus exports

The U.S. produces and sells millions of different products. To aggregate them together into a single measure of domestic output, the quantity of each good produced is weighted by its _____.

Multiple Choice

cost of production

contribution to corporate profits

utility to consumers

market price

"Net foreign factor income" in the national income accounts refers to the difference between the _____.

Multiple Choice

income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.

income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.

value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.

value of products sold by Americans to other nations and the value of products bought by Americans from other nations.

A nation’s nominal gross domestic product (GDP) _____.

Multiple Choice

is the dollar value of all final output produced by its citizens, regardless of where they are living

is always some amount less than C + I + G + NX

can be found by summing C + I + S + NX

is the dollar value of all final output produced within the borders of the nation during a specific period of time

The value of corporate stocks and bonds traded in a given year is _____.

Multiple Choice

excluded from the calculation of GDP because it does not represent new production

included in the calculation of GDP because it is a component of gross investment

included in the calculation of net private domestic investment

included in the calculation of gross private domestic investment

Government purchases include spending on _____.

Multiple Choice

government purchases of final goods and government salaries

government salaries only

government purchases of final goods only

government purchases of final goods, government salaries, and transfer payments

Which of the following is included in GDP?

Multiple Choice

The value of an existing house sold during a year

The value of a haircut

The value of the steel and aluminum used to produce a new car

The value of a homemaker’s services

In the treatment of U.S. exports and imports, national income accountants _____.

Multiple Choice

subtract both exports and imports in calculating GDP

subtract exports but add imports in calculating GDP

add exports but subtract imports in calculating GDP

add both exports and imports in calculating GDP

Which of the following is not included in the sum of national income?

Multiple Choice

Rent

Profits and losses

Depreciation or consumption of fixed capital

Interest

The sale of a used automobile would not be included in GDP of the current year because it is _____.

Multiple Choice

not a market transaction

a private transfer payment

not current production

a purely financial transaction

GDP measured using current prices is called _____.

Multiple Choice

real GDP

deflated GDP

nominal GDP

constant GDP

Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.

Year Units of Output Price per Unit

1 8 $2

2 10 3

3 15 4

4 18 5

5 20 6

In year 4, nominal GDP would be _____.

Multiple Choice

$90

$120

$316

$60

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are _____.

Multiple Choice

counted as investment spending.

counted as consumption spending.

not counted.

counted as government spending.

If real GDP declines in a given year, nominal GDP _____.

Multiple Choice

may either rise or fall

is likely to remain constant

must also be declining

must also be increasing

The broadest measure to adjust Nominal GDP for price changes is _____.

Multiple Choice

the Consumer Price Index (CPI)

the Producer Price Index (PPI)

the GDP price index

exchange rates

Which of the following is included in the expenditures approach to GDP?

Multiple Choice

The value of stocks and bonds bought by businessmen

Spending on meals by consumers at restaurants

Spending on used clothing at garage sales

Government spending on welfare payments

GDP can be calculated by summing _____.

Multiple Choice

consumption, investment, government purchases, exports, and imports

consumption, investment, government purchases, and net exports

consumption, investment, wages, and rents

consumption, investment, government purchases, and imports

What are the two ways of looking at GDP?

Multiple Choice

Income approach and saving approach

Output approach and consumption approach

Expenditures approach and income approach

Output approach and expenditures approach

What do government purchases include in national income accounting?

Multiple Choice

Purchases by the federal government only

Government transfer payments

Purchases by federal, state, and local governments

Purchases of goods for consumption but not public capital goods

Net exports is a positive number when a nation _____.

Multiple Choice

simply exports goods and services to other nations

exports fewer goods and services than it imports

increases its exports of goods and services

exports more goods and services than it imports

Nominal GDP is _____.

Multiple Choice

money GDP adjusted for inflation

the sum of all monetary transactions that occur in the economy in a year

the sum of all monetary transactions involving final goods and services that occur in the economy in a year

the amount of production that occurs when the economy is operating at full employment

Which of the following statements about economic growth is accurate?

The world’s sustained economic growth has only been occurring over the last 300 to 400 years.

Countries in Africa and South America are responsible for most of the economic growth in the world since the 1600s.

Economic growth has been shared equally among all the countries in the world since the start of the most recent generation.

Sustained economic growth has been occurring since the start of the Roman Empire. 

Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?

Instructions: Enter your answer as a whole number.

years

Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1.

Using the graph, for each of the following situations, determine whether the PPF curve shifts.

a. Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy.  

     Italy's PPF curve would 

b. A recession causes Italy's unemployment rate to increase above the natural rate of unemployment.

     Italy's PPF curve would  

c. Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase.

     Italy's PPF curve would 

Which of the following is a measure of economic growth that is most useful for measuring changes in the overall size of an economy?

Multiple Choice

increases in real GDP per capita

decreases in the rate of unemployment

increases in real GDP

growth in nominal GDP

Human capital refers to the

Multiple Choice

amount of financing available to start-up firms.

number of workers available in the economy.

tools and equipment available to workers.

education, training, and skills of workers.

The number of years required for real GDP to double can be found by

Multiple Choice

dividing the annual growth rate by .072.

multiplying the annual growth rate by 72.

dividing 72 by the annual growth rate.

adding 72 to annual growth rate.

Before the Industrial Revolution, living standards in the world

Multiple Choice

were declining because of rapid increases in population.

are not known, for lack of reliable records from that period.

were already rising significantly for many decades.

were relatively stagnant for long periods of time.

Which of the following will not increase a nation’s real GDP?

Multiple Choice

technological progress

average price level

number of workers

labor productivity

If labor becomes more productive, the production possibilities frontier will

Multiple Choice

remain constant, but output will increase as unemployment falls.

shift to inward, toward the origin.

shift to outward away from the origin.

remain constant, but output will fall as less labor is needed to produce the same level of output.

Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will ______ in Alpha compared to Beta, holding other factors constant.

Multiple Choice

increase output by the same amount

have no effect on output

increase output more

increase output less

Use the following diagram to answer the next question.

The most likely cause for a shift in the production possibilities frontier from AB to CD is

Multiple Choice

the use of the economy's resources in a less efficient way.

an increase in government purchase of the economy's output.

an increase in the quantity and quality of labor resources.

an increase in the spending of business and consumers.

Human capital is

Multiple Choice

the talents, training, and education of workers.

the factories and machinery made by workers.

the financial resources available to humans for investment.

the factories and machinery used by humans in the production process.

The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the

Multiple Choice

less is produced.

less production is wasted.

the more an additional unit of capital adds to production.

the less an additional unit of capital adds to production.

Real GDP per capita is found by

Multiple Choice

subtracting population from real GDP.

adding real GDP and population.

dividing real GDP by population.

dividing population by real GDP.

Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause

Multiple Choice

Nepal's production possibilities frontier to shift inward faster than the U.S's.

the U.S.'s production possibilities frontier to shift outward faster than Nepal's.

the U.S.'s production possibilities frontier to shift inward faster than Nepal's.

Nepal's production possibilities frontier to shift outward faster than the U.S.'s.

Most economists agree that ______ are the single most important source of economic growth.

Multiple Choice

technological advances

increases in physical capital

increases in human capital

discoveries of natural resources

Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.

Multiple Choice

increase; increasing

decrease; decreasing

increase; constant

increase; decreasing

The cost of a higher living standard in the future is giving up

Multiple Choice

current investment.

future consumption.

future investment.

current consumption.

Use the following diagram to answer the next question.

If CD is the economy’s current production possibilities frontier, what is the most likely reason for operating at point X?

Multiple Choice

increases in the quantity and the quality of resources

unemployment and inefficient allocation of resources

technological progress and industrial change

improvement in labor productivity and the number of work-hours

Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ labor productivity.

Multiple Choice

increase; not changing

decrease; increasing

increase; decreasing

increase; increasing