Question 1

The event that stimulated the U.S.government's commitment to tracking the economy's health through a national income accounting system was the:

Accepted Answer

A)   Civil War and Reconstruction.
B)   Panic of 1907.
C)   Great Depression.
D)   Oil embargo of 1973.E) All of the above
F) A) and B)

Question 2

Which of the following statements about environmental quality and economic activity is TRUE?

Accepted Answer

A)   Wealthier countries tend to value environmental quality more than developing countries.
B)   As countries develop,they spend on less resources to improve environmental quality.
C)   No measure of economic progress incorporates environmental quality.
D)   Developing countries generally prefer to keep their environments pristine,even at the cost of such necessities as food and health care.E) A) and B)
F) B) and C)

Question 3

In the simple circular flow model:

Accepted Answer

A)   income is equal to spending.
B)   saving is equal to consumer spending.
C)   factor payments are equal to goods and services.
D)   goods and services are equal to consumer spending.E) None of the above
F) A) and C)

Question 4

Which of the following is included in gross private domestic investment?

Accepted Answer

A)   highway construction by a government contractor
B)   the purchase of a new TV by a household
C)   purchases of common stock by investors
D)   an increase in business inventoriesE) B) and C)
F) A) and C)

Question 5

Which of the following is included in personal consumption expenditures?

Accepted Answer

A)   highway construction
B)   the purchase of a new TV by a household
C)   construction of residential housing
D)   purchases of common stock by an investorE) A) and B)
F) A) and C)

Question 6

Because GDP excludes nonmarket transactions,the level of economic activity in a country is understated.

Accepted Answer

A) True 
 B)False

Question 7

What event was a major influence on the development of macroeconomics?

Accepted Answer

A)   the Great Depression
B)   the Employment Act of 1946
C)   the establishment of the Federal Reserve System in the United States
D)   the U.S.entry into World War IIE) None of the above
F) A) and B)

Question 8

The value of the cars that the Ford Motor Company produces in a German plant:

Accepted Answer

A)   is a part of U.S.GDP.
B)   is a part of U.S.GNP.
C)   is a part of German GNP.
D)   is not a part of German GDP.E) B) and C)
F) B) and D)

Question 9

The largest component of GDP is:

Accepted Answer

A)   consumption expenditure.
B)   gross private domestic investment.
C)   government spending.
D)   net exports.E) A) and C)
F) B) and D)

Question 10

Changes in inventories are NOT included in the calculation of gross private domestic investment.

Accepted Answer

A) True 
 B)False

Question 11

A business cycle is:

Accepted Answer

A)   the periodic fluctuation of economic activity.
B)   the engine of economic growth.
C)   a period lasting about 50 years.
D)   identical to the consumption life cycle.E) A) and D)
F) B) and D)

Question 12

The capital consumption allowance:

Accepted Answer

A)   includes income payments to the rest of the world.
B)   includes income payments from the rest of the world.
C)   is not separated from the statistical discrepancy as an adjustment to national income.
D)   is an allowance for depreciation.E) A) and C)
F) A) and B)

Question 13

Gross private domestic investment is an important determinant of how severe recessions will be mitigated.

Accepted Answer

A) True 
 B)False

Question 14

Economists believe that changes in investment spending are important for forecasting the business cycle because:

Accepted Answer

A)   increases in investment spending raise tax revenues,which allows government to spend more.
B)   investment closely reflects consumer sentiment.
C)   changes in investment show where the economy has been.
D)   investment is a key determinant of economic growth.E) A) and B)
F) A) and C)

Question 15

The Leading Economic Index has successfully predicted the past seven recessions.

Accepted Answer

A) True 
 B)False

Question 16

The main reason the national income and product accounts were devised was to:

Accepted Answer

A)   provide businesses with data on the economy.
B)   help government manage the business cycle.
C)   provide employment for statisticians during the Great Depression.
D)   test out accounting theory developed during the early 20th century.E) A) and C)
F) A) and B)

Question 17

The Council of Economic Advisers is responsible for defining the turning points in the economy.

Accepted Answer

A) True 
 B)False

Question 18

Leisure time is included in the GDP accounts.

Accepted Answer

A) True 
 B)False

Question 19

The U.S.falls into recession about every 10 years on average.

Accepted Answer

A) True 
 B)False

Question 20

Company DEF produces gizmos.One particular batch cost $50,000 to produce.Because market conditions were bad at the time of sale,they were sold at a loss for $40,000.The value of the gizmos included in the GDP is:

Accepted Answer

A)   $10,000.
B)   $40,000.
C)   $50,000.
D)   impossible to compute because there is negative profit.E) B) and D)
F) All of the above

Exam 5: Introduction to Macroeconomics

The value of the cars that the Ford Motor Company produces in a German plant:

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Leisure time is included in the GDP accounts.

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A business cycle is:

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Economists believe that changes in investment spending are important for forecasting the business cycle because:

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What event was a major influence on the development of macroeconomics?

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The U.S.falls into recession about every 10 years on average.

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Which of the following is included in gross private domestic investment?

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The Leading Economic Index has successfully predicted the past seven recessions.

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Gross private domestic investment is an important determinant of how severe recessions will be mitigated.

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The largest component of GDP is:

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The capital consumption allowance:

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Which of the following is included in personal consumption expenditures?

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Company DEF produces gizmos.One particular batch cost $50,000 to produce.Because market conditions were bad at the time of sale,they were sold at a loss for $40,000.The value of the gizmos included in the GDP is:

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In the simple circular flow model:

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Changes in inventories are NOT included in the calculation of gross private domestic investment.

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The Council of Economic Advisers is responsible for defining the turning points in the economy.

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The main reason the national income and product accounts were devised was to:

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The event that stimulated the U.S.government's commitment to tracking the economy's health through a national income accounting system was the:

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Because GDP excludes nonmarket transactions,the level of economic activity in a country is understated.

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Which of the following statements about environmental quality and economic activity is TRUE?

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