AP Ch 7 Test

  1. In product markets:
  2. households sell products to business firms
  3. households sell resources to business firms
  4. business firms sell resources to households
  5. business firms sell goods and services to households
  6. households buy resources from business firms
  1. In resource or factor markets:
  2. households sell products to business firms
  3. households sell resources to business firms
  4. business firms sell resources to households
  5. business firms sell goods and services to households
  6. households buy resources from business firms
  1. Which of the following economic indicators is the best measure of production or output of an economy?
  2. Consumer Price Index
  3. Unemployment rate
  4. Gross Domestic Product
  5. Prime rate
  6. Index of leading Indicators
  1. The market value of all final goods and services produced in the economy in a given year is the:
  2. Net National Product
  3. National Income
  4. Personal Income
  5. Gross Domestic Product
  6. Producer Price Index
  1. The largest item in the expenditure approach to GDP is:
  2. consumer spending
  3. Gross Domestic Investment
  4. net exports of goods and services
  5. government purchases of goods and services
  6. rental payments
  1. The largest item in the income approach to GDP is:
  2. rental payments
  3. government expenditures on goods and services
  4. consumer spending
  5. wages or compensation of employees
  6. net interest
  1. Which of the following is included in the calculation of GDP?

I.  The cost of cleaning up air and water pollution

II.  The cost of investing in a share of McDonald’s stock

III.  The cost of catfish sold to a supermarket

a.  I only

b.  II only

c.  III only

d.  I and II only

e.  I, II, and III

8.  Which of the following would be included in the calculation of GDP?

I.  The sale of a used car

II.  Social Security payments to a retired steelworker

III.  The purchase of a new home from a builder

a.  I only

b.  II only

c.  III only

d.  I and II only

e.  II and III only

9.  Which of the following would be counted as Investment when calculating GDP?

I.  The purchase of a computer by an auto manufacturer

II.  The purchase of a share of IBM stock by a secretary

III.  The construction of a new house

a.  I only

b.  II only

c.  I and II only

d.  I and III only

e.  II and III only

Questions 10-14 are based on the following National Income data. All numbers are in billions of dollars.

Net private domestic investment $275

Government purchases $315

US imports $260

Personal taxes $45

Transfer payments $247

US exports $249

Personal consumption expenditures $475

Net receipts from factor income

from the rest of the world $10

Gross private domestic investment $300

Indirect business taxes $245

Undistributed corporate profits $60

Social Security taxes $240

Corporate income taxes $65

10.  Gross Domestic Product is:

a.  $1,059

b.  $1,069

c.  $1,079

d.  $1,101

e.  $1,190

11.  Net Domestic Product is:

  1. $1,049
  2. $1,054
  3. $1,064
  4. $1,086
  5. $1,120

12.  National Income is:

  1. $799
  2. $841
  3. $925
  4. $960
  5. $1,060

13.  Personal Income is:

  1. $681
  2. $723
  3. $766
  4. $826
  5. $856

14.  Disposable Income is:

  1. $549
  2. $636
  3. $678
  4. $781
  5. $811

15.  Which of the following would be an example of an intermediate good or service?

  1. a calculator purchased by a college student for taking exams
  2. gasoline purchased by an insurance agent in order to visit clients at their homes
  3. a house purchased by a family with four children
  4. a car purchased by a student’s parents and given to the student
  5. tuition paid by a student at a state university

16.  If the price index in a country is 100 for 1990 and 120 for 1999 and nominal GDP in 1999 is $480 billion, real GDP in 1999 in 1990 dollars is about:

  1. $384 billion
  2. $400 billion
  3. $424 billion
  4. $460 billion
  5. $480 billion

Use the following information for a hypothetical economy to answer 17 and 18.

Year Current GDP GDP Price GDP Price

Index Index

1970=100 1980=100

1970 $500 100 ____

1980 $1,200 200 100

17.  The value of the 1980 GDP in terms of 1970 prices is:

  1. $600
  2. $700
  3. $1,000
  4. $1,200
  5. $1,300

18.  If 1980 is made the base year for the GDP price index, the value of the index number for 1970 (rounded to the nearest whole number) would be:

  1. zero
  2. 42
  3. 142
  4. 212
  5. 256