Econ Exam 3

Which of the following expenditures would not be included in GDP?

a. Purchase of a silver cup previously sold new in 1950

In the portion of the circular flow model containing factor markets, households provide:

land, labor, and capital

National income (NI) is calculated by adjusting GDP for:

depreciation

Exhibit 15-8

GDP data	Billions of dollars
Personal consumption expenditures	$850
Interest	90
Corporate profits	150
Government spending	400
Depreciation	100
Rental income	70
Gross private domestic investment	120
Compensation of employees	830
Exports	120
Imports	70
Indirect business taxes	80
Proprietors' income	120
Personal income taxes	110
Social Security taxes	50
Transfer payments	160

In Exhibit 15-8, personal income (PI) equals:

$1,280 billion

Gross domestic product (GDP) includes:

only final goods and services

Gross private domestic investment most precisely includes business:

purchases of capital goods, all new construction, and inventory investment

Which national income account should be examined to discover trends in the after-tax income that people have to save and spend?

Disposable personal income (DI)

If exports rise and imports fall, then:

GDP will increase

Exhibit 15-6

Year	Nominal GDP (billions)	GDP deflator
Year 1	600	100.0
Year 2	1,000	133.3

Refer to Exhibit 15-6. Measured in terms of Year 1 prices, real GDP in Year 2 is approximately:

750

Dividends, retained earnings, and corporate income taxes sum to which of the categories used in the income approach to computing GDP?

corporate profits

Which of the following expenditures would be included in GDP for this year?

The purchase of a new car

Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?

The growth rate of real GDP will tend to understate the growth rate of total output

Exhibit 15-7

GDP data	Billions of dollars
Personal consumption expenditures	$5,207
Interest	425
Corporate profits	735
Government spending	1,406
Depreciation	830
Rental income	146
Gross private domestic investment	1,116
Compensation of employees	4,426
Exports	870
Imports	965
Indirect business taxes	553
Proprietors' income	520
Personal taxes	886
Social Security taxes	432
Transfer payments	376

In Exhibit 15-7, and using the expenditure approach, gross domestic product (GDP) is:

$7,634 billion

Depreciation or consumption of fixed capital measures:

the value of existing capital stock used up in the production process

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms

Which of the following is a shortcoming of GDP?

GDP does not make an allowance for leisure time

If you buy a book of U.S. postage stamps to mail love letters to your sweetheart, the purchase is considered part of:

C

Gross private domestic investment does not include:

spending on employee salaries

Exhibit 15-8

GDP data	Billions of dollars
Personal consumption expenditures	$850
Interest	90
Corporate profits	150
Government spending	400
Depreciation	100
Rental income	70
Gross private domestic investment	120
Compensation of employees	830
Exports	120
Imports	70
Indirect business taxes	80
Proprietors' income	120
Personal income taxes	110
Social Security taxes	50
Transfer payments	160

In Exhibit 15-8, disposable personal income (DI) is:

$1,170 billion

Suppose in a given year, nominal GDP was $7,242 billion and the GDP chain price index for that year is 117.5. Real GDP is approximately:

$6,163 billion