Questions:
Part 1
Question 1
Suppose that in Wentworth most residents supply factors of production to foreign firms, while producers in Wentworth never employ factors owned by residents of other countries. Which of the following statements is true for Wentworth?
GDP exceeds GNP by an amount equal to depreciation plus indirect business taxes.
GDP is greater than GNP.
GDP and GNP are about the same.
GDP is less than GNP.
Question 2
The purchases of U.S. products by citizens of Mexico are
considered Mexico's exports.
counted as U.S. imports.
counted as U.S. exports.
considered as an income transfer from the U.S. to Mexico.
Question 3
GDP includes __________ expenditures but does not include __________ expenditures.
education; national defense
national defense; transfer payment
Social Security payments to retired persons; education
Social Security payments to retired persons; national defense
Question 4
Suppose that in Croy, residents never supply factors of production to foreign firms, while producers in Croy regularly employ factors owned by residents of other countries. Which of the following statements is true for Croy?
GDP is less than GNP.
GDP and GNP are about the same.
GDP exceeds GNP by an amount equal to depreciation plus indirect business taxes.
GDP is greater than GNP.
Question 5
Private investment plays a crucial role in the macro economy because it is
an expenditure that adds to the economy's productive capacity.
the largest expenditure component of GDP.
the smallest expenditure component of GDP.
undertaken by the government and must be funded by tax revenue.
Question 6
Gross national product minus net factor earnings from abroad is equal to gross domestic product.
true
false
Question 7
Which of the following statements about gross national product is correct? It measures the market value of
all final goods and services produced by residents and firms of a nation regardless of the location of production.
all final goods and services produced by resources located within a nation regardless of who owns those resources.
all goods and services, both final and intermediate, produced by residents and firms regardless of the location of production.
all goods and services, both final and intermediate, produced by resources located within a nation regardless of who owns those resources.
Question 8
GDP increases if you purchase General Motors stock.
true
false
Question 9
In reality, the GDP-GDI gap
represents a small fraction of measured activity.
is due to different accounting standards among countries in the world.
is due to the presence of substantial black market activity.
represents a significant fraction of measured activity.
Question 10
The income earned by those who supply entrepreneurial talent is called
value of stock options.
profits.
net interest.
wages and salaries.
Part 2
Question 1
GNP equals GDP less depreciation.
true
false
Question 2
Gross domestic product
could be either a flow variable or a stock variable depending on the time period considered.
is neither a flow nor a stock variable; it is a statistic.
is a flow variable.
is a stock variable.
Question 3
Which of the following items is a stock variable?
I. consumption expenditure
II. gross private investment
III. a trade surplus
IV. government debt
II, III, and IV only
II and III only
III and IV only
All of the above items
Question 4
If exports are less than imports,
net exports is a negative number.
net exports is a positive number.
net imports equal zero.
net imports is a negative number.
Question 5
What is the difference between a flow variable and a stock variable?
A flow variable is a variable that is measured in units of current prices while a stock variable is measured using prices from a base period.
A stock variable is a variable that is measured in units of current prices while a flow variable is measured using prices from a base period.
A flow variable is a variable that is measured over a specific period of time while a stock variable is a variable that is independent of time.
A stock variable is a variable that is measured over a specific period of time while a flow variable is a variable that is independent of time.
Question 6
Nominal GDP uses current market prices and real GDP measures GDP using base-year prices.
true
false
Question 7
The value of income generated by the production of a given value of final goods and services is called
net factor output.
gross domestic income.
gross personal product.
net foreign factor income.
Question 8
In the circular flow model for an economy that produces only consumption goods,
expenditures on output flow from firms to households.
factor incomes flow from households to firms.
factors of production flow from households to firms.
factors of production flow from firms to households.
Question 9
Government purchases
are the sum of purchases of goods and services from firms by government and the value of transfer payments made to government to its citizens.
are the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government.
refer to the purchase of final goods and service from firms by government agencies and do not include the value of output produced by government agencies.
are the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies.
Question 10
Which of the following would not be included in the measurement of GDP?
employers' payments for employees' medical insurance
a purchase of California wine by a Canadian firm
transactions in the underground economy
federal government payments for Jeeps