Chapter.6 Measuring Economic Activity Complete Test Bank 1e

c06; Chapter 6: Measuring Economic Activity

Learning Objectives:

LO-1: Explain the circular flow model

LO-2: Define gross domestic product

LO-3: Describe differences in GDP across countries and time

LO-4: Describe what business cycles are and how they occur

LO-5: Illustrate the workings of the aggregate demand/aggregate supply model

1. A general model of an aggregate economy that gives an overview of the main sectors of the economy and shows the flows of income and output between them is
   1. The circular flow diagram
   2. Total revenue diagram
   3. Marginal cost diagram
   4. Gross Domestic Product

LO-1

Level: Moderate

1. This illustrates the exchange of resources and output between producers and consumers.
   1. Gross Domestic Product
   2. Total revenue diagram
   3. Marginal cost diagram
   4. The circular flow diagram

LO-1

Level: Easy

1. These are the primary demander of goods and services in the economy.
   1. Businesses
   2. Households
   3. Government
   4. Foreign investors

LO-1

Level: Easy

1. These are the primary suppliers of output and the primary demanders of labor and other economic resources
   1. Businesses
   2. Households
   3. Government
   4. Foreign investors

LO-1

Level: Easy

1. This determines the quantity of goods and services sold in the economy and the prices at which the goods and services are traded.
   1. The economic system
   2. The interaction of domestic and foreign trade
   3. The interaction of demand and supply
   4. The amount of returns on trade

LO-1

Level: Easy

1. This provides a measure of all of the income that is being earned in the economy.
   1. Spending in output markets
   2. Spending in input markets
   3. Spending in foreign markets
   4. Spending in domestic markets

LO-1

Level: Easy

1. This provides a measure of all the production occurring in the economy.
   1. Spending in output markets
   2. Spending in input markets
   3. Spending in foreign markets
   4. Spending in domestic markets

LO-1

Level: Easy

1. Gross Domestic Product is the dollar value of
   1. All goods and services produced in an economy during a specific period of time.
   2. All domestic goods produced in an economy during a specific period of time
   3. All final goods and services produced in an economy during a specific period of time
   4. All spending on the resources of labor and capital

LO-2

Level: Easy

1. Each of the following is counted in Gross Domestic Product except
   1. A bottle of wine produced in California
   2. A new building for a manufacturing plant
   3. Salaries for government workers
   4. Windows to be used in the building of a new office building

LO-2

Level: Moderate

1. Which of the following is correct?
   1. GDP = C + I + G –M
   2. GDP = C + I + G +M
   3. GDP = C + I + G +(X-M)
   4. GDP = C + I + G

LO-2

Level: Easy

1. Refer to the table below. GDP in this economy is equal to

• 1. $10,375
  2. $10,175
  3. $10,025
  4. $6,925

LO-2

Level: Moderate

1. This approach in measuring GDP uses incomes earned by producers.
   1. Income
   2. Expenditure
   3. Value-added
   4. Total revenue

LO-2

Level: Easy

1. This approach in measuring GDP uses total sales minus the value of inputs.
   1. Income
   2. Expenditure
   3. Value-added
   4. Total revenue

LO-2

Level: Easy

1. This approach in measuring GDP uses total expenditures on final goods and services to measure GDP
   1. Income
   2. Expenditure
   3. Value-added
   4. Total revenue

LO-2

Level: Easy

1. The value added approach in measuring GDP is the value of a firm’s output minus
   1. The expenditures on personal consumption
   2. The change of inventories
   3. The value of inputs used to make those sales
   4. The value of foreign investment

LO-2

Level: Easy

1. You own a business. You purchase $6,500 in land, labor and capital to produce widgets. Your business produced 150 units of widgets and sold them for $25 each. The value added is
   1. $6,500
   2. $5,520
   3. $3,750
   4. $1,500

LO-2

Level: Moderate

1. Jacob decides to sell a used car. He buys a $25 ad in the local paper and lists the car for $3,000. It sold the next day! Because of this sale
   1. Gross Domestic Product increased $3,025.
   2. Gross Domestic Product increased $3,000.
   3. Gross Domestic Product increased $25.
   4. Gross Domestic Product did not change.

LO-2

Level: Moderate

1. Consistently, the largest component of GDP is
   1. Consumption
   2. Private investment
   3. Government spending
   4. Net exports

LO-3

Level: Easy

1. During the last decades, net exports have consistently been
   1. Negative
   2. Positive
   3. Equal to zero
   4. Changing due to changes in economic conditions in Europe

LO-3

Level: Easy

1. A measurement of relative productivity and output across countries is
   1. Gross Domestic Product
   2. Gross National Product
   3. Gross Domestic Product per capita
   4. Gross National Product per capita

LO-3

Level: Easy

1. A measurement of average standard of living across countries is
   1. Gross Domestic Product
   2. Gross National Product
   3. Gross Domestic Product per capita
   4. Gross National Product per capita

LO-3

Level: Easy

1. GDP for two hypothetical countries, Alpha and Beta, are $500 billion and $750 billion, respectively. Alpha has a population of 750 million while Beta’s population is 1.24 billion people. Which of the following statements is true?
   1. Alpha has greater productivity than Beta.
   2. Alpha and Beta both enjoy equal productivity.
   3. Alpha has a greater standard of living than Beta.
   4. Alpha both enjoy equal standards of living.

LO-3

Level: Difficult

1. A business cycle is
   1. Recurring fluctuations in the level of consumption expenditures
   2. Recurring fluctuations in the level of business investment
   3. Recurring expansions and contractions in the level of foreign involvement in aggregate economic activity
   4. Recurring expansions and contractions in the level of aggregate economic activity

LO-4

Level: Easy

1. Business cycles are officially tracked by
   1. The National Bureau of Economic Research
   2. The Whitehouse economists
   3. The Census Bureau
   4. The central bank

LO-4

Level: Moderate

1. The expansion phase of a business cycle can be characterized by all of the following except
   1. Decreasing output
   2. Increasing output
   3. Decreasing unemployment
   4. Increasing employment

LO-4

Level: Moderate

1. The contraction phase of a business cycle can be characterized by all of the following except
   1. Decreasing output
   2. Increasing output
   3. Increasing unemployment
   4. Increasing employment

LO-4

Level: Moderate

1. Periods of increasing economic activity, rising production, and increasing employment are
   1. Business cycle expansions
   2. Business cycle contractions
   3. Business cycle peaks
   4. Business cycle troughs

LO-4

Level: Easy

1. Periods of decreasing economic activity, falling production, and falling employment are
   1. Business cycle expansions
   2. Business cycle contractions
   3. Business cycle peaks
   4. Business cycle troughs

LO-4

Level: Easy

Reference: Use the graph to answer questions 29-30.

1. A business cycle contraction occurs
   1. between years 1 and 2.
   2. between years 1 and 3.
   3. between years 2 and 3.
   4. between years 2 and 4.

LO-4

Level: Easy

1. A business cycle expansion occurs
   1. between years 2 and 3.
   2. between years 1 and 3.
   3. between years 3 and 4.
   4. between years 2 and 4.

LO-4

Level: Easy

1. Aggregate demand is the demand
   1. by private consumers in an economy.
   2. for goods and services by business firms.
   3. for goods and services by the government.
   4. for goods and services in an economy.

LO-5

Level: Easy

1. Which of the following is not a component of aggregate demand?
   1. Consumption
   2. Investment
   3. Government purchases
   4. Government transfer payments

LO-5

Level: Easy

1. The aggregate demand curve is the relationship between
   1. the price level and consumption
   2. total revenue and consumption
   3. the price level and supply of all goods and services in an economy
   4. total revenue and the supply of all goods and services in an economy

LO-5

Level: Easy

1. Which of the following would represent a factor capable of shifting the aggregate demand curve?
   1. An increase in input costs
   2. A change in union contracts
   3. An increase in labor sources
   4. An increase in profit expectations for businesses

LO-5

Level: Moderate

Essay

1. Provide a circular flow diagram for households only, and describe the circular flow of income.

LO-1

Level: Moderate

1. Explain why the shape of the aggregate supply curve is important to the health of an economy.

LO-5

Level: Moderate