Chapters 3 & 7 Flashcards
A fall in the price of milk, used in the production of ice cream, will:
a) Increase the supply of ice cream
b) Cause a movement along the supply curve of ice cream
c) Have no effect on the supply of ice cream
d) Decrease the supply of ice cream
Increase the supply of ice cream
For most products, purchases tend to fall with decreases in buyers’ incomes. Such products are known as:
a) Normal goods
b) Average goods
c) Direct goods
d) Inferior goods
Normal goods
If product Y is an inferior good, a decrease in consumer incomes will:
a) Shift the demand curve for product Y to the right
b) Not affect the sales of product Y
c) Make buyers want to buy less of Product Y
d) Shift the demand curve for product Y to the left
Shift the demand curve for product Y to the right
A nation’s capital stock was valued at $300 billion at the start of the year and $350 billion at the end. Consumption of private fixed capital in the year was $25 billion. Assuming stable prices, gross investment was:
a) $25 billion
b) $90 billion
c) $50 billion
d) $75 billion
$75 billion
The service a homeowner performs when she mows her yard is not included in GDP because:
A) This is a nonproduction activity
B) Multiple counting would be involved
C) This is a nonmarket transaction
D) This is a noninvestment transaction
This is a nonmarket transaction
The consumption of fixed capital in each year’s production is called:
a) Net investment
b) Indirect business taxes
c) Depreciation
d) Inventory reduction
Depreciation
The total volume of business sales in our economy is several times larger than GDP because:
A) Total sales are in money terms and GDP is always stated in real terms
B) The GDP does not take taxes into account
C) The GDP excludes intermediate transactions
D) The GDP grossly understates the value of our annual output
The GDP excludes intermediate transactions
GDP does not include which of the following activities?
a) Couples remodeling their own homes
b) Businesses installing anti-pollution equipment
c) Families eating out in restaurants
d) Households spending to enhance security of their neighborhoods
Couples remodeling their own homes
GDP excludes most nonmarket transactions. Therefore, GDP tends to:
a) Overestimate the rate of inflation in the economy
b) Overestimate the amount of production of the economy
c) Underestimate the amount of production in the economy
d) Underestimate the rate of inflation in the economy
Underestimate the amount of production in the economy
The two ways of looking at GDP are the:
a) Output approach and consumption approach
b) Output approach and expenditures approach
c) Income approach and saving approach
d) Expenditures approach and income approach
Expenditures approach and income approach
Which of the following government agencies estimates and compiles the U.S. GDP accounts?
a) The Federal Reserve System
b) The American Economic Association
c) The Bureau of Economic Analysis
d) The Internal Revenue Service
The Bureau of Economic Analysis
Value added by a firm is the market value of the firm’s output minus the:
a) Profits that the firm’s owners earn
b) Value of inputs bought from other firms
c) Total costs of all inputs used
d) Total wages paid to its employees
Value of inputs bought from other firms
If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as:
a) Compounding GDP
b) Indexing GDP
c) Inflating GDP
D) Deflating GDP
Deflating GDP
Depreciation is all of the following, except:
A) The accumulation of capital stock
B) The difference between GDP and NDP
C) The consumption of fixed capital
D) The difference between gross investment and net investment
The accumulation of capital stock
In understanding and analyzing “demand,” we focus on how much of a product the buyers are:
a) Actually buying now and in the recent past
b) Willing and wanting to buy
c) Able to buy with their given income
d) Willing and able to buy
Willing and able to buy
