Download Name: Date: ______ 1. A nation`s gross domestic product (GDP): A

Name: __________________________ Date: _____________
1. A nation's gross domestic product (GDP):
A) is the dollar value of the total output produced within the borders of the nation.
B) is the dollar value of the total output produced by its citizens, regardless of where
they are living.
C) can be found by summing C + In + S + Xn.
D) is always some amount less than its C + Ig + G + Xn.
2. National income accountants can avoid multiple counting by:
A) including transfers in their calculations.
B) counting both intermediate and final goods.
C) only counting final goods.
D) only counting intermediate goods.
3. Which of the following is an intermediate good?
A) the purchase of gasoline for a ski trip to B.C.
B) the purchase of a pizza by a college or university student
C) the purchase of baseball bats by a professional baseball team
D) the purchase of jogging shoes by a professor
4. "Value added" refers to:
A) any increase in GDP which has been adjusted for adverse environmental effects.
B) the excess of gross investment over net investment.
C) the difference between the value of a firm's output and the value of the inputs it has
purchased from others.
D) the portion of any increase in GDP which is caused by inflation as opposed to an
increase in real output.
5. In calculating the GDP by income approach, we should sum up :
A) wages, consumption, investment and rent.
B) wages, rent, interest and profit income.
C) wages, interest, investment, and exports.
D) wages, profit income, investment, and consumption.
6. As defined in national income accounting, investment includes:
A) business expenditures on machinery and equipment.
B) all consumption.
C) imports, but not exports.
D) all nonfood items.
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7. Money spent on the purchase of a new house is included in the GDP as a part of:
A) the consumption of private fixed capital.
B) personal consumption expenditures.
C) personal saving.
D) investment.
8. The consumption schedule shows:
A) a direct relationship between aggregate consumption and accumulated wealth.
B) a direct relationship between aggregate consumption and aggregate income.
C) an inverse relationship between aggregate consumption and accumulated financial
wealth.
D) an inverse relationship between aggregate consumption and aggregate income.
Use the following to answer question 9:
9. Refer to the above diagrams. Curve A:
A) is an investment schedule and curve B is a consumption of fixed capital schedule.
B) is an investment demand curve and curve B is an investment schedule.
C) and B are totally unrelated.
D) shifts to the left when curve B shifts upward.
10. As disposable income increases, consumption:
A) and saving both increase.
B) and saving both decrease.
C) decreases and saving increases.
D) increases and saving decreases.
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11. Which of the following will cause the investment schedule to shift downward?
A) an increase in the real interest rate
B) a decline in wage rates
C) a significant decline in the real interest rate
D) a new technological advance which cuts the price of steel by one-half
12. The aggregate demand curve:
A) is upward sloping because a higher price level is necessary to make production
profitable as production costs rise.
B) is downward sloping because production costs decline as real output increases?
C) shows the amount of expenditures required to induce the production of each
possible level of real output.
D) shows the amount of real output which will be purchased at each possible price
level.
Use the following to answer question 13:
13. Refer to the above diagram. At income level F the volume of saving is:
A) BD.
B) AB.
C) CF - BF.
D) CD.
14. Other things equal, serious recession in the economies of Canada's trading partners will:
A) have no perceptible impact on the Canadian economy.
B) cause inflation in the Canadian economy.
C) depress real output and employment in the Canadian economy.
D) stimulate real output and employment in the Canadian economy.
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Use the following to answer questions 15-16:
15. Which of the above diagrams best portrays the effects of declines in the prices of
imported resources?
A) A
B) B
C) C
D) D
16. Which of the above diagrams best portrays the effects of a decrease in the availability of
key natural resources?
A) A
B) B
C) C
D) D
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17. Refer to the diagram below. Which of the following would shift the aggregate demand
curve from AD2 to AD1?
A)
B)
C)
D)
a decline in personal income tax rates
an increase in the international value of the dollar
an increase in government spending
an upward revision of profit expectations on investment projects
Use the following to answer question 18:
18. Refer to the above diagram. The break-even level of income is:
A) zero.
B) $150.
C) $60.
D) $120.
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19. Which of the following is correct?
A) MPC + MPS = APC + APS
B) APC + MPS = APS + MPC
C) APC + MPC = APS + MPS
D) APC - APS = MPC - MPS
Use the following to answer question 20:
20. Refer to the above diagram. If aggregate supply shifts from AS 1 to AS2 , then the price
level will:
A) increase and real domestic output will increase.
B) decrease and real domestic output will increase.
C) increase and real domestic output will decrease.
D) decrease and real domestic output will decrease.
21. An expected rise in the rate of inflation for consumer goods will:
A) decrease aggregate demand.
B) increase aggregate supply.
C) increase aggregate demand.
D) decrease aggregate supply.
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22. Suppose an economy's consumption schedule shifts from C 1 to C 2 as shown in the
diagram below. We can say that its:
A)
B)
C)
D)
MPC has increased but its APC at each income level is unchanged.
APC at each income level is increased but its MPC is unchanged.
MPC and APC at each income level have both increased.
MPC and APC at each income level have both decreased.
23. The simple multiplier is defined as:
A) 1 - MPS.
B) change in GDP × initial change in spending.
C) change in GDP/initial change in spending.
D) change in GDP - initial change in spending.
24. The multiplier effect means that:
A) consumption is typically several times as large as saving.
B) a small change in consumption demand can cause a much larger increase in
investment.
C) a small increase in investment can cause national income to change by a larger
amount.
D) a small decline in the MPC can cause equilibrium GDP to rise by several times that
amount.
25. The open economy multiplier is:
A) larger than the simple multiplier because the latter embodies fewer leakages.
B) larger than the simple multiplier because the latter embodies more leakages.
C) smaller than the simple multiplier because the latter embodies fewer leakages.
D) smaller than the simple multiplier because the latter embodies more leakages.
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26. An increase in taxes will cause a(n):
A) decrease in the quantity of real domestic output demanded.
B) increase in the quantity of real domestic output demanded.
C) decrease in aggregate demand.
D) increase in aggregate demand.
27. Which one of the following would increase per unit production cost and therefore shift
the aggregate supply curve to the left?
A) a reduction in business taxes
B) production bottlenecks occurring when producers are near full plant capacity
C) an increase in the price of imported resources
D) deregulation of industry
28. The equilibrium price level and level of real output occur where:
A) real output is at its highest possible level.
B) exports equal imports.
C) the price level is at its lowest level.
D) the aggregate demand and supply curves intersect.
29. Which of the following statements is incorrect?
A) Given the economy's MPS, a $15 billion reduction in government spending will
reduce the equilibrium GDP by more than would a $15 billion increase in taxes.
B) Other things unchanged, a tax reduction of $10 billion will increase the equilibrium
GDP by $25 billion when the MPS is 0.4.
C) If the MPC is 0.8 and GDP has declined by $40 billion, this was caused by a
decline in aggregate expenditures of $8 billion.
D) A government surplus is anti-inflationary; a government deficit is expansionary.
30. A decline in the real interest rate will:
A) increase the amount of investment spending.
B) shift the investment schedule downward.
C) shift the investment-demand curve to the right.
D) shift the investment-demand curve to the left.
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