Chapter 15 test bank assessment: Macroeconomic

issues and measurement

Due No due date Points 36 Questions 36
Time Limit 120 Minutes

A!empt History
Attempt Time Score
LATEST Attempt 1 3 minutes 11 out of 36

Score for this quiz: 11 out of 36

Submitted Oct 26 at 6:11pm
This attempt took 3 minutes.

Question 1 0 / 1 pts

Macroeconomics is largely concerned with:

You Answered the behaviour of individual markets.

Incorrect. See page 364.

the behaviour of individual agents.

the detailed behaviour of firms.

Correct Answer economic aggregates such as total national output.

Correct. See page 364.

 Question 2 0 / 1 pts

The key determinant of living standards and of society's material

constraints from one generation to the next is:

You Answered current unemployment.

Incorrect. See page 366.

current inflation.

Correct Answer long-term growth.

the exchange rate.

Incorrect. See page 366.

Question 3 0 / 1 pts

Changes in the retail price index (RPI) measure:

changes in the goods that are commonly bought by typical

households.

Correct Answer changes in the average household's cost of living.

You Answered changes in the cost of luxury goods.

Incorrect. See page 385.

 changes in consumer income.

Incorrect. See page 385.

Question 4 0 / 1 pts

By convention, GDP does not measure:

Correct Answer

unreported activities, non-marketed activities, and economic bads.

You Answered reported activities and economic goods.

Incorrect. See page 383-5.

the value of goods and services produced in an economy in a given

period, usually taken to be a year.

none of the above is measured by GDP.

Incorrect. See page 383-5.

Question 5 0 / 1 pts

Attempts by the government to control high inflation have tended to:

Correct Answer bring about recession.

You Answered result in an economic boom.

Incorrect. See page 367.

have no impact on the economy.

prevent recession.

Incorrect. See page 367.

Question 6 0 / 1 pts

An increase in inflation during boom times often leads policy-makers

to:

loosen their policies in order to bring inflation under control.

You Answered loosen fiscal policy in order to bring inflation under control.

Incorrect. See page 367.

loosen monetary policy in order to bring inflation under control.

Correct Answer
tighten their policies in order to bring inflation under control.

Correct. See page 367.

 Question 7 1 / 1 pts

A downturn in economic activity causes:

no change in consumption.

a decrease in unemployment.

Correct!
an increase in unemployment.

Correct. See page 367.

an increase in consumption.

Incorrect. See page 367.

Question 8 0 / 1 pts

Changes in government spending and taxation to influence the level

of unemployment in the economy are changes in:

interest rate policy.

Correct Answer fiscal policy.

You Answered monetary policy.

Incorrect. See page 367.

marginal policy.
 Incorrect. See page 367.

Question 9 0 / 1 pts

If a government spends more than the revenue it raises from

taxation, it is said to have:

You Answered a positive budget imbalance.

Incorrect. See page 368.

a budget surplus.

a balanced budget.

Correct Answer a budget deficit.

Correct. See page 368.

Question 10 0 / 1 pts

Final demand does not include:

Correct Answer
goods and services purchased by firms and used as inputs for
producing other goods and services.
You Answered goods and services purchased for consumption in the home.

Incorrect. See page 371.

goods and services purchased for investment.

government purchases of goods and services.

Incorrect. See page 371.

Question 11 0 / 1 pts

Gross Domestic Product:

Correct Answer is the nation's output before allowing for depreciation.

You Answered is the nation's input before allowing for depreciation.

Incorrect. See page 371.

is the nation's output after allowing for depreciation.

is the nation's output after allowing for taxation.

Incorrect. See page 371.

Question 12 1 / 1 pts
 An economy's total output is measured by:

the sum value of all exports from that economy.

Correct! the sum of all values added in that economy.

Correct. See page 371.

the sum of all values imported into that economy.

the sum of all valuables traded in that economy.

Incorrect. See page 371.

Question 13 1 / 1 pts

Domestic production creates an income claim on the value of

production. When all claims are aggregated:

Correct! they must equal the value of all the production.

Correct. See page 377.

they must be larger than the value of all the production.

they must be greater than the value of all the spending.

they must equal the value of all the consumption.

 Incorrect. See page 377.

Question 14 0 / 1 pts

In the circular flow of income, the total income generated by domestic

producers is:

paid directly to the financial system.

You Answered received by domestic producers for their output.

Incorrect. See page 373.

invested in productive capacity.

Correct Answer
divided between domestic households as payment for factor services
and the government in the form of taxes.

Correct. See page 373.

Question 15 1 / 1 pts

Private consumption spending includes spending on:

Correct! fresh vegetables.

 Correct. See page 374.

street lighting.

inventories.

building hospitals.

Incorrect. See page 374.

Question 16 0 / 1 pts

Taxes attached to transactions are known as:

You Answered direct taxes.

Incorrect. See page 377.

lump sum taxes.

Correct Answer indirect taxes.

progressive taxes.

Incorrect. See page 377.

Question 17 1 / 1 pts
 The difference between the market price and the basic price of a
good:

gives rise to much confusion at sale time.

Correct!
lies in the net effect of indirect taxes and subsidies on the price of
that good.

Correct. See page 377.

is due to price regulation.

is zero, since the market price must be the same as the basic price.

Incorrect. See page 377.

Question 18 1 / 1 pts

In a closed economy, if consumption spending is 200, investment

spending and taxes are both 30, and government spending is 60,
then the spending-based measure of GDP at market prices is:

230.

Correct!
290.

Correct. See page 377.

260.
 320.

Incorrect. See page 377.

Question 19 1 / 1 pts

A real measure of the volume of national output and national income

is:

GDP valued at current prices.

Correct! GDP valued at base-period prices.

Correct. See page 381.

money GDP.

none of the above.

Incorrect. See page 381.

Question 20 0 / 1 pts

The difference between GDP and GNI is that GNI:

 includes net income from domestic taxation which is not included in
the measure of GDP.

You Answered
excludes net income from abroad which is included in the measure
of GDP.

Incorrect. See page 380.

Correct Answer
includes net income from abroad which is not included in the
measure of GDP.

excludes net transfers between producers which is not included in the

measure of GDP.

Incorrect. See page 380.

Question 21 0 / 1 pts

Personal disposable income is:

Correct Answer
GNI minus any part that is not paid to people, minus personal income
taxes, plus transfer payments received by individuals.

You Answered
GNI minus any part that is paid to people, plus personal income
taxes, less transfer payments received by individuals.
 Incorrect. See page 380.

GNI minus any part that is paid to people.

GNI plus any part that is not paid to people, minus personal income
taxes, plus transfer payments received by individuals.

Incorrect. See page 380.

Question 22 1 / 1 pts

If consumption is 100, investment 50, government expenditure 30,

imports 20, and exports 10, GDP is:

180.

Correct! 170.

Correct. See page 377.

190.

210.

Incorrect. See page 377.

 Question 23 0 / 1 pts

If the general level of prices changed over ten years, then:

nominal and real GDP changed by the same amount over that time-
period.

You Answered
there would have been no change in either nominal or real GDP over
the ten-year period.

Incorrect. See page 382.

any calculation of the implicit price deflator would be incorrect.

Correct Answer
nominal and real GDP changed by different amounts over those ten
years.

Correct. See page 382.

Question 24 1 / 1 pts

The spending-based measure of GDP is valued at:

basic prices.

Correct! market prices.

 Correct. See page 377.

the prices that producers receive.

the prices that producers pay.

Incorrect. See page 377.

Question 25 0 / 1 pts

The output gap is:

the difference between what households want to buy and what firms
want to produce.

You Answered
the difference between net national product and gross national
product.

Incorrect. See page 369.

the difference between imports and exports.

Correct Answer
the difference between an economy's potential output and its actual
output.
 Correct. See page 369.

Question 26 0 / 1 pts

If GDP at current prices is 240, and GDP at base-period prices is

200, the implicit deflator is:

You Answered 40.

Incorrect. See page 382.

80.

Correct Answer 120.

200.

Incorrect. See page 382.

Question 27 0 / 1 pts

Actual GDP:

You Answered shows the impact of unemployment.

Incorrect. See page 369.

 must be below potential GDP.

Correct Answer
fluctuates around potential GDP.

usually shows why the economy is in trouble.

Incorrect. See page 369.

Question 28 0 / 1 pts

In 2012, Country X's potential GDP was $1.2 trillion per year. Its
actual GDP was $1 trillion per year. The difference between potential
and actual GDP was:

You Answered the nominal national income gap.

Incorrect. See page 369.

Correct Answer the recessionary gap.

$2 per capita.

the inflationary gap.

Incorrect. See page 369.

Question 29 1 / 1 pts
 After publication, most National Accounts statistics:

Correct! are frequently revised, with the exception of inflation data.

Correct. See page 388.

need no revision because they are collected much more carefully

nowadays.

are very rarely revised, with the exception of balance of payments

figures.

are never revised, with the exception of financial market data.

Incorrect. See page 388.

Question 30 0 / 1 pts

By 2014 Country X's economy has expanded. Its potential GDP is

now $1.3 trillion per year and its actual GDP is $1.4 trillion per year.
This is:

not possible because actual GDP cannot exceed an economy's

potential GDP.

explained because nominal GDP is greater than potential GDP.

You Answered the result of rapid technological change.

 Incorrect. See page 369.

Correct Answer the result of abnormally high rates of capacity utilization .

Correct. See page 369.

Question 31 0 / 1 pts

An economy is made up of three firms. Firm A grows asparagus, it

pays £5 million to its workers and it sells £4 million worth of output to
Firm B, £3 million worth to Firm C, and £1 million worth direct to
consumers (through its farm shop). Firm B makes processed food
and sells £9 million worth to households, paying £5 million to its
workers. Firm C makes quiches, selling £8 million worth to
consumers and paying its workers £5 million. There are no
transactions between Firms B and C. What is the value of GDP?

£27 million.

You Answered £17 million.

Incorrect. See page 370 onwards.

£40 million.

Correct Answer
£18 million.
 Correct. See page 370 onwards (total final sales are £1 million
+ £9 million + £8 million).

Question 32 1 / 1 pts

An economy is made up of three firms. Firm A grows an agricultural

product, it pays £4 million to its workers and it sells £5 million worth
of output to Firm B, £3 million worth to Firm C, and £1 million worth
direct to consumers (through its farm shop). Firm B makes processed
food and sells £8 million worth to households, paying £4 million to its
workers. Firm C makes pizzas, selling £7 million worth to consumers
and paying its workers £2.5 million. There are no transactions
between Firms B and C. What is the value of GDP?

£15 million.

Correct! £16 million.

Correct. See page 370 onwards (total final sales are £1 million +
£8 million + £7 million).

£34.5 million.

£20 million.

Incorrect. See page 370 onwards.

Question 33 0 / 1 pts
 An economy is made up of three firms. Firm 1 mines a raw material,
it pays £4,000 to its workers and it sells £5,000 worth of output to
Firm 2 and £3,000 worth to Firm 3 (it has no other sales or costs).
Firm 2 makes a consumer good and sells £8,000 worth, paying
£4,000 to its workers. Firm 3 also makes a consumer good, selling
£7,000 worth and paying its workers £2,500. There are no
transactions between Firms 2 and 3. What is the value of GDP?

Correct Answer £15,000.

You Answered £33,500.

Incorrect. See page 370 onwards.

£21,000.

£18,000.

Incorrect. See page 370 onwards.

Question 34 0 / 1 pts

An economy is made up of three firms. Firm A grows agricultural

products, it pays £6 million to its workers and it sells £5 million worth
of output to Firm B, £4 million worth to Firm C, and £2 million worth
direct to consumers (through its own shops). Firm B makes
processed food products and sells £10 million worth to households,
and pays £6 million in wages to its workers. Firm C makes ready-to-
eat pies and sandwiches, selling £11 million worth to consumers and
paying its workers £8 million in wages. There are no transactions
between Firms B and C and there are no other firms in the economy.
What is the value of GDP?
 £52 million.

You Answered £31 million.

Incorrect. See page 370 onwards.

Correct Answer £23 million.

£17 million.

Incorrect. See page 370 onwards.

Question 35 0 / 1 pts

An economy is made up of three firms. Firm A mines a raw material,

it pays £200 to its workers and it sells £600 worth of output to Firm B
and £800 worth to Firm C (it has no other sales or costs). Firm B
makes a consumer good and sells £1,400 worth, paying £400 to its
workers. Firm C also makes a consumer good, selling £2,200 worth
and paying its workers £800. There are no transactions between
Firms B and C, and there are no taxes or government spending, and
no imports and exports. What is the value of GDP?

£7,400.

You Answered £3,200.

Incorrect. See page 370.

£5,000.

Correct Answer £3,600.

 Correct. See page 339 onwards (total final sales are £1,400 +
£2,200).

Question 36 0 / 1 pts

A recessionary gap is:

Correct Answer

actual output minus potential output, when potential is above actual.

You Answered

actual output minus potential output, when actual is above potential.

Incorrect. See page 369.

the difference between actual output and where it was at the previous
business cycle peak.

an index of unsold inventories.

Incorrect. See page 369.

Quiz Score: 11 out of 36