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Econ 210 Quiz 5 GDP, S&I, Growth Folland F02
1. Which of the following expenditure categories for 2002 Gross Domestic Product
would be the correct place to put the value of a personal computer produced in Detroit by
Indica, Inc. during 2002 but which was not purchased by a consumer until 2003?
A. Consumption
B. Investment
C. Government
D. X - M (Exports - Imports)
E. none of the above; it gets counted in the GDP for the year 2003 when it was sold to
the final user, the consumer
2. Which of these categories is not counted as part of GDP?
A. Consumption expenditures
B. Transfers
C. Investment in fixed plant and equipment
D. Investment in inventories
E. Government purchases
3. Which of the following categories of goods or services is logically part of the nation's
output but nevertheless is not counted itself?
A. a new car
B. flour sold to a housewife
C. housewife services (e.g. baking bread, child care, housecleaning...)
D. gasoline purchased for your car
E. police services
4. In the Savings=Investment model, an increase in taxes would cause which of the
following?
A. the level of planned investment will increase
B. the level of government expenditure would automatically increase
C. the level of consumption will decrease
D. the price level will double
5. In the Savings=Investment model
A. savings is zero at the breakeven point
B. the equilibrium occurs where consumption equals real income (Y)
C. a recession occurs if net exports increase
D. all of the above are true
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6. Each of the following is one of the causes of growth in GDP according economic
theory. But, which of these is also called the "unexplained residual?"
A. investment in physical capital
B. investment in human capital
C. increases in the quantity of labor
D. increases in the quality of the labor force
E. technological change
7. If the goal is to increase economic growth, which policies seem to work in real life?
That is, setting theory aside, which policies seem to be associated with higher economic
growth rates in practice?
A. increase human knowledge
B. encourage savings and investment
C. promote political stability
D. limit government consumption
E. all of the above
8. In the Savings=Investment model (excluding G and X-M for the moment), which of
the following is true?
A. savings is zero at the equilibrium point
B. at equilibrium, savings equals investment
C. the vertical distance between the 45 degree line and the consumption function is
always the level of investment
D. all of the above are true
9. Which of the following would best describe an investment in the Savings=Investment
model
A. buying a share in Intel Corporation
B. putting money in a savings account
C. buying plant or equipment
D. buying a lottery ticket
E. bribing a judge to avoid a fine
10. By definition, which of the following is the cause of a Keynesian recession?
A. increased government spending
B. reduced taxes
C. a decrease in aggregate demand
D. a decrease in aggregate supply
E. increased investor confidence
11. Which of the following defines labor productivity the best?
A. output per laborer
B. output per unit of capital
C. ingenuity of laborers
D. industriousness of the U.S. laborer
E. the quality of the U.S. laborer
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12. Which of the following would an economist most logically use during the calculation
of "Real GDP?"
A. the CPI
B. the GDP deflator
C. the PPI
D. the real interest rate
E. the nominal interest rate
13. Which of the following is not counted, at least not directly, in US GDP?
A. a Chevrolet produced in Mexico
B. an automobile waterpump installed in a new Chevrolet produced in California
C. a welfare check from the government given to an individual and cashed during the
period
D. all of the above, that is, none of these is counted, at least not directly, in US GDP
14. Which of the following "facts" (one or more might not actually be true) implies that
GDP overstates the true final product of a country?
A. pollution costs are not deducted from GDP
B. real GDP is not adjusted for inflation
C. exports are not counted in GDP
D. imports are not counted in GDP
15. Which of the following logically is an intermediate good?
A. flour sold to a housewife
B. gasoline sold to a traveler
C. computer chips sold to Gateway PC Manufacturing Company
D. a brand new BMW given to you as a graduation present
E. a new die-cutting machine sold to Whirlpool Refrigerator Manufacturing Company
16. Which is true of how we measure the value of any of these various government
services in GDP calculations?
A. police service are measured by the number of arrests and traffic tickets
B. judicial court services are measured by the percentage of convictions
C. government regulation services are measured by the number regulations promulgated
D. fire protection services (when provided by the government) are measured by the fire
department expenditures
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17. Which best describes the Purchasing Power Parity (PPP) method of adjusting for
exchange rate differences when comparing international levels of income and
expenditures by country?
A. the daily listed currency market exchange rate is applied
B. the currency comparison is made on the basis of what each currency can purchase
domestically
C. all currencies are equated nominally, that is, one English Pound = one US Dollar
D. only dollar currencies, such as Canada and US, are used in calculations
E. local currencies have pollution costs deducted from them in this method
18. Wealth and income are different, yet related, concepts. Which of the following best
represents a difference between them?
A. greater wealth generally implies higher consumption levels, which is not true of
greater income
B. greater income generally implies higher consumption levels, which is not true of
greater wealth
C. (income less expenditures) is an addition to wealth
D. income is generally two times the wealth level
19. It can be reasonably argued that all but one of the following is part of the nation's true
wealth? Which is the odd one out?
A. US Constitutional government
B. US political stability
C. the Statue of Liberty
D. American music traditions
E. none of the above, all are true wealth whether or not they have a "price tag"
20. Which of the following is the best example of unplanned investment?
A. Rochester Brewing Company puts in a new vat
B. you buy a house (soon after you get married and have two children)
C. Romeo Ford carries 21 new Fords on its books into the next year
D. you start a new business taking out a building lease and making a $200000 equipment
purchase
21. In the Savings=Investment model, to the right of the Breakeven Point, which of the
following statements is correct?
A. the distance between the Consumption function and the horizontal axis is
Consumption
B. the distance between the Consumption function and the 45 degree line is Savings
C. the Equilibrium point occurs where Savings = Investment
D. Consumption increases as Disposable Income rises
E. all of the above
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22. In the Savings and Investment model, if we set aside for the moment the categories of
Governement and Net Exports, which of the following are true in the model?
A. Aggregate Expenditiure curve is an upward shift from the Consumption function of
exactly the Investment
B. at GDP levels above the Equilibrium level, the goods and services produced exceed
the demand for them
C. at GDP levels above the Equilibrium level, Savings exceeds Investment
D. all of the above
E. none of the above
23. If we applied the Savings=Investment model, which of the following government
policies would logically get us out of recession?
A. increase government spending
B. increase taxes
C. stimulate the level of person savings
D. increase tariffs against imported
24. An economic theory that depicted people's consumption patterns as starting relatively
low when young, increasing into middle age and then tapering off is called which of the
following?
A. the permanent income hypothesis
B. the life cycle hypothesis
C. the theory of comparative advantage
D. the Savings=Investment model
E. the intermediate good hypothesis
25. Which of the following does theory suggest would cause the consumption plus
investment level (aggregate expenditure in the basic model) to fall?
A. a decline in wealth
B. a rise in the price level
C. higher taxes
D. a rise in the interest rate
E. all of the above
26. Which of the following is true?
A. Keynes thought investment to be volatile and unstable
B. Keynes thought investment to be ruled by "animal spirits"
C. the accelerator model suggests investment to be unstable
D. all of the above
27. Which of the following is true?
A. technological change causes a shift in the aggregate production function
B. increased education leads to greater growth in empirical data
C. Endogenous Growth theory describes a kind of economic growth caused from within
the economic system
D. all of the above
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28. According to the data presented in class (Barro's data), which of the following tends
to be associated with lower economic growth rates across countries studied?
A. increased education
B. increased capital investment
C. increased government expenditures
D. improved political stability
29. Studies of slavery in the antebellum South, as reported in class, tended to conclude
which of the following?
A. slave farms in the South were less productive than nonslave farms in the South
B. slave farms in the North were less productive that slave farms in the South
C. nonslave farms in the South were more productive that nonslave farms in the North
D. slave farms in the South were more productive than nonslave farms in the South
E. none of the above
30. According to the data presented in class on population, which of the following is not
true?
A. as far as we can tell going far back in human history prior to 1700, world population
rose and fell at low levels with only a minor upward trend
B. world population growth after 1700 was sharply and distinctively upward
C. post 1700 population grew geometrically
D. the modern, geometric rise of population came several centuries before the
Industrial Revolution
E. all of the above