Directions:Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best in each case and write the correct letter of your anwer in the space provided for.

____1) Which of the following is a final expenditure ?

A) Vegetables purchased by a restaurantB) Car purchased by a household

C)Milk purchased by a tea-makerD) Sugar purchased by a confectionaire

E) All of the above

___2) The trade in exotic animals being illegally sold as pets is a multi-billion-dollar-a-year industry. Is this included in GDP?

A) Yes - Government SpendingB) No - Underground Economy

C)Yes - Consumer spendingD) Yes- InvestmentE) None of the above

___3) Tanks and roads belong in which part of the GDP formula? GDP = C+I+G+(X-M)

A) Consumption ExpendituresB) Investment Expenditures

C)Government ExpendituresD) All of the aboveE) None of the above

___4) Expectant parents buy supplies for the nursery. Would this be included in GDP?

A) Yes - Consumer SpendingB) No - Non-market activity

C)No - Intermediate goodsD) Yes- Investment Spending

E) None of the above

___5) This occurs when there is an increase in total output of goods and services over a one year period of time using the same or fewer resources.

A) National IncomeB) Economic GrowthC) Circular Flow of Income

D) Economic DevelopmentE) None of the above

___6) When a nation's exports exceed its imports and is calculated as exports - imports

A) Trade surplusB) Trade deficitC) Tade inventoryD) All of the above

E) None of the above

___7) National income accounting:

A) Provides a set of rules for determining macroeconomic policy.

B) Provides a set of rules and definitions for measuring economic activity in the aggregate economy.

C) Can be used to measure a nation's output but not its production or consumption.

D) All of the aboveE) None of the above

___8) Which one of the following is not included in NI?

A) Old age pension B) retirement pension C) wages D) bonus E) None of the above

___9) Which is an example of a final good or service

A) Coffee Beans at Starbucks B) T-Shirt at Polo Store C) Lumber at furniture store

E) Wheat at a bakeryE) All of the above

___10) The net value of GDP after deducting depreciation from GDP is

A) Net national productB) Net domestic productC) Gross national product

A) Disposable income E) None of the above

___11) Using the expenditure approach, GDP would include all the following except:

A) The production of watches in the U.S.

B) The production of steel used to construct skyscrapers.

C) The production of software by a foreign-owned firm located in the U.S.

D) The production of education services by a high school.

E) None of the above

___12) The main difference between GDP and GNP is that

A) GDP counts only production of goods while GNP counts production of services.

B) GDP counts only production of goods and services produced and sold in the US, while GNP counts production of goods and services in the US, regardless of where they are sold.

C) GDP counts production of final goods and services, while GNP counts production of all goods and services, including intermediate goods.

D) GDP counts production of final goods and services produced in the US, while GNP counts production of final goods and services by US citizens.

E) None of the above

____13) Which of the following is a measured component of GDP using any of the three methodologies to count GDP?

A) Joe adds on a room to his house and does all the work himself with donated materials from a friend.

B) Barbara spends a lot of time babysitting on the weekends but fails to report the income to the IRS.

C) Charles Schwab Inc. traded $2 billion is stocks last year, not counting the value of its brokerage services.

D) The glass industry produced $400 million in glass to go into new houses.

E) None of the above is a measured component of GDP.

___14) GDP is not a perfect measure of the health of the economy because

A) it fails to account for quality changes such as an improvement in air quality.

B) it fails to take into account the value of leisure time.

C) it fails to account for the non-production value of our stock of natural resources.

D) it fails to distinguish, for example, between production of televisions and production of bombs. Each is valued according to the market value of the production.

E) all of the above

___15) Business cycles seem to be recent phenomena that are probably caused by political interference in the economy.

A) TrueB) FalseC) Eiher A or BD) Neither A nor B

___16) GDP per capita is a good measure of the average standard of living in an economy.

B) TrueB) FalseC) Eiher A or BD) Neither A nor B

___17) Gross National Product equals:

A) Net National Product adjusted for inflation

B) Gross Domestic Product adjusted for inflation

C) Gross Domestic Product plus net property income from abroad

D) Net National Product plus net property income from abroad

___18) To adjust from Net National Product to Gross National Product:

A) Add depreciation B) Deduct indirect taxesC) Add subsidies

D) Add inflation E) None of the above

___19) In using the expenditure approach to GDP, consumption

A) includes houses and all purchases by business firms.

B) includes houses and services.

C) includes consumer durables, semidurables, nondurable goods, but excludes services.

D) includes consumers spending on durable goods, and nondurable goods, and service

E) None of the above

___20) Real GDP is obtained by

A) Nominal GDP multiplied by price level.B)Nominal GDP minus GDP deflator.

B) Nominal GDP divided by GDP deflator.D) Nominal GDP divided by CPI.