Chapter 22 Measuring a Nations Income
Test A
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Macroeconomics is the study of a. market regulation. b. money and financial markets. c. economy-wide phenomena. d. how households and firms make decisions and how they interact. ANSWE ! c. economy-wide phenomena. "#$E! M SE%"&'N! &N" '()E%"&*E! AN+'M! #
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-or the economy as a whole a. [Link] [Link] income because of [Link]. b. income must e/ual [Link]. c. income [Link] [Link] because of sa0ing. d. [Link] [Link] income because of the go0ernment budget deficit. ANSWE ! b. income must e/ual [Link]. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
1
A circular-flow diagram is used to describe a. how banks create money. b. how weather patterns affect the economy. c. the most efficient organi2ation of the work process. d. the flow of income and [Link] in an economy. ANSWE ! d. the flow of income and [Link] in an economy. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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4ross +omestic $roduct is defined as the market 0alue of a. all final goods and ser0ices produced by a country5s citi2ens in a gi0en period of time. b. e0ery good and ser0ice produced within a country in a gi0en period of time. c. all final goods and ser0ices produced within a country in a gi0en period of time. d. all goods and ser0ices produced by a country5s citi2ens in a gi0en period of time. ANSWE ! c. all final goods and ser0ices produced within a country in a gi0en period of time. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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4oods and ser0ices produced and sold illegally are a. [Link] from 4+$. b. included in 4+$. c. included in 4+$ only if income from the sales is reported on income ta. returns. d. included in 4+$ to the [Link] that they can be measured. ANSWE ! a. [Link] from 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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,3:
,3; %hapter ,,<Measuring a Nation5s &ncome
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>atrell decides to hire %ynthia to mow his lawn9 instead of mowing it himself9 as he is accustomed to doing. As a result of this transaction9 4+$ a. will decrease. b. will increase. c. will be unaffected because the same ser0ice would be performed in either case. d. could increase or decrease9 depending on whether %ynthia mows >atrell5s lawn as well as >atrell could mow it himself. ANSWE ! b. will increase. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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"he 0alue of intermediate goods that are sold is a. not added to 4+$. b. added to 4+$ if they were produced in a pre0ious year. c. added to 4+$ if they were produced and sold in the current year. d. added to 4+$ unless they are sold at a loss. ANSWE ! a. not added to 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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An American company owns a fast-food store in >ima9 $eru. "he 0alue of the goods and ser0ices produced in the store are included a. in both $eru0ian 4+$ and ?.S. 4+$. b. in $eru0ian 4+$9 but not ?.S. 4+$. c. in ?.S. 4+$9 but not $eru0ian 4+$. d. partly in $eru0ian 4+$ and partly in ?.S. 4+$. ANSWE ! b. in $eru0ian 4+$9 but not ?.S. 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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National income is defined as a. all income produced within a country. b. the income recei0ed by the national go0ernment. c. the total income earned by a nation5s residents from the production of goods and ser0ices within the borders of the country. d. the total income earned by a nation5s residents in the production of goods and ser0ices. ANSWE ! d. the total income earned by a nation5s residents in the production of goods and ser0ices. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
1A
"he go0ernment reports that 4+$ Bincreased by , percent in the last /uarter.C a. 4+$ increased by 1A percent for the year. b. 4+$ increased at an annual rate of , percent during the last /uarter. c. 4+$ increased at an annual rate of ; percent during the last /uarter. d. 4+$ increased at an annual rate of .6 percent during the last /uarter. ANSWE ! c. 4+$ increased at an annual rate of ; percent during the last /uarter. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
11
"he four components of 4+$ are consumption9 a. money supply9 go0ernment purchases9 and [Link]. b. in0estment9 transfer payments9 and imports. c. in0estment9 go0ernment purchases9 and net [Link]. d. in0estment9 go0ernment purchases9 and foreign [Link]. ANSWE ! c. in0estment9 go0ernment purchases9 and net [Link]. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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%hapter ,,<Measuring a Nation5s &ncome ,3@
1,
&n macroeconomics9 in0estment is spending on a. real estate and financial assets. b. capital e/uipment9 in0entories9 and structures9 including new housing. c. stocks9 bonds9 and other financial assets. d. capital e/uipment9 in0entories9 and structures9 [Link] household purchases of new housing. ANSWE ! b. capital e/uipment9 in0entories9 and structures9 including new housing. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
11
4o0ernment purchases include spending on goods and ser0ices by a. local9 state and federal go0ernments. b. the federal go0ernment only. c. local and state go0ernments9 but not the federal go0ernment. d. state and federal go0ernments only. ANSWE ! a. local9 state9 and federal go0ernments. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
13
&f [Link] are smaller than imports9 net [Link] a. are positi0e. b. are negati0e. c. will increase 4+$. d. are larger than imports. ANSWE ! b. are negati0e. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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"ransfer payments are a. included in 4+$ because they represent income to indi0iduals. b. not included in 4+$ unless they represent unemployment compensation. c. included in 4+$ because the income will be spent for consumption. d. not included in 4+$ because they do not represent payments for currently produced goods or ser0ices. ANSWE ! d. not included in 4+$ because they do not represent payments for currently produced goods or ser0ices. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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&n 1@@;9 ?.S. 4+$ was about a. D;6 trillion. b. D;.6 trillion. c. D;6A billion. d. D;6 billion. ANSWE ! b. D;.6 trillion. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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&f total spending rises from one year to the ne.t9 then a. net [Link] must be falling. b. prices at which goods and ser0ices are sold must be higher. c. the economy must be producing a larger output of goods and ser0ices. d. either the economy must be producing a larger output of goods and ser0ices9 or the prices at which goods and ser0ices are sold must be higher9 or both. ANSWE ! d. either the economy must be producing a larger output of goods and ser0ices9 or the prices at which goods and ser0ices are sold must be higher9 or both. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
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,6A %hapter ,,<Measuring a Nation5s &ncome
1;
"he best measure of a country5s production of goods and ser0ices is a. real 4+$. b. real NN$. c. nominal 4+$. d. nominal 4N$. ANSWE ! a. real 4+$. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
1@
eal 4+$ is the production of goods and ser0ices 0alued at a. current year prices. b. future year prices. c. constant prices. d. the ratio of current year prices to constant year prices. ANSWE ! c. constant prices. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,A
"he 4+$ deflator is the ratio of a. nominal 4+$ to real 4+$. b. real 4+$ to nominal 4+$. c. nominal 4+$ to real 4+$ multiplied by 1AA. d. real 4+$ to nominal 4+$ multiplied by 1AA. ANSWE ! c. nominal 4+$ to real 4+$ multiplied by 1AA. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,1
&f the 4+$ deflator is 16A and nominal 4+$ is D@9AAA billion9 then real 4+$ is a. D116 billion. b. D1916A billion. c. D=AA billion. d. D=9AAA billion. ANSWE ! d. D=9AAA billion. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,,
&f the 4+$ deflator was 1AA in the base year of ,AAA9 and was 1A6 in ,AA,9 we can say that a. the price le0el increased by 6 percent from ,AAA to ,AA,. b. the price le0el increased by 1A6 percent from ,AAA to ,AA,. c. the price le0el increased by ,A6 percent from ,AAA to ,AA,. d. we cannot Eudge price increases from changes in the 4+$ deflator. ANSWE ! a. the price le0el increased by 6 percent from ,AAA to ,AA,. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,1
4+$ is used as the basic measure of a society5s economic well-being. A better measure of the economic wellbeing of indi0iduals in society is a. the consumption component of 4+$. b. 4+$ per person. c. go0ernment [Link] per person. d. the le0el of business in0estment. ANSWE ! b. 4+$ per person. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #
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%hapter ,,<Measuring a Nation5s &ncome ,61
,3
4+$ per person is not a perfect measure of the well-being of indi0iduals in society because it [Link] a. the role of go0ernment. b. the 0alue of in0estment in real capital. c. the 0alue of money. d. things like leisure time9 the 0alue of goods and ser0ices produced at home9 and en0ironmental /uality. ANSWE ! d. things like leisure time9 the 0alue of goods and ser0ices produced at home9 and en0ironmental /uality. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #
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&nternational studies of the relationship between 4+$ per person and /uality of life measures9 such as life [Link] and literacy rates show that larger 4+$ per person is associated with a. longer life [Link] and higher le0els of illiteracy. b. shorter life [Link] and higher le0els of illiteracy. c. longer life [Link] and lower le0els of illiteracy. d. shorter life [Link] and lower le0els of illiteracy. ANSWE ! c. longer life [Link] and lower le0els of illiteracy. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #
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ANSWE ! c. economy-wide phenomena. "#$E! M SE%"&'N! &N" '()E%"&*E! AN+'M! #
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ANSWE ! b. income must e/ual [Link]. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
1
ANSWE ! d. the flow of income and [Link] in an economy. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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ANSWE ! c. all final goods and ser0ices produced within a country in a gi0en period of time. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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ANSWE ! a. [Link] from 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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ANSWE ! b. will increase. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
:
ANSWE ! a. not added to 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
;
ANSWE ! b. in $eru0ian 4+$9 but not ?.S. 4+$. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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ANSWE ! d. the total income earned by a nation5s residents in the production of goods and ser0ices. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
1A
ANSWE ! c. 4+$ increased at an annual rate of ; percent during the last /uarter. "#$E! M SE%"&'N! , '()E%"&*E! , AN+'M! #
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ANSWE ! c. in0estment9 go0ernment purchases9 and net [Link]. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
1,
ANSWE ! b. capital e/uipment9 in0entories9 and structures9 including new housing. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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ANSWE ! a. local9 state9 and federal go0ernments. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
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ANSWE ! b. are negati0e. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
16
ANSWE ! d. not included in 4+$ because they do not represent payments for currently produced goods or ser0ices. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
1=
ANSWE ! b. D;.6 trillion. "#$E! M SE%"&'N! 1 '()E%"&*E! 1 AN+'M! #
1:
ANSWE ! d. either the economy must be producing a larger output of goods and ser0ices9 or the prices at which goods and ser0ices are sold must be higher9 or both. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
1;
ANSWE ! a. real 4+$. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
1@
ANSWE ! c. constant prices. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,A
ANSWE ! c. nominal 4+$ to real 4+$ multiplied by 1AA. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,1
ANSWE ! d. D=9AAA billion. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
,,
ANSWE ! a. the price le0el increased by 6 percent from ,AAA to ,AA,. "#$E! M SE%"&'N! 3 '()E%"&*E! 3 AN+'M! #
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ANSWE ! b. 4+$ per person. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #
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ANSWE ! d. things like leisure time9 the 0alue of goods and ser0ices produced at home9 and en0ironmental /uality. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #
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ANSWE ! c. longer life [Link] and lower le0els of illiteracy. "#$E! M SE%"&'N! 6 '()E%"&*E! 6 AN+'M! #