ECO121 Questions C23-28A

Chapter 23 Measuring the National’s Income
1. An economy’s gross domestic product is
a. the excess of spending over income.

b. the excess of income over spending.
c. total income and total spending.
d. total income times total spending.
2. Sam bakes a cake and sells it to carla for $10. Woody pays diane $30 to tutor him. in this economy, GDP is
a. $10.
b. $20.
c. $30.
d. $40.
3. if the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GdP as
hamburgers.
a. 5
b. 15
c. 30
d. 60
4. Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a
market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby’s store to be sold later.
What is GDP here?
a. $40
b. $60
c. $80
d. $100
5. After graduation, an American college student moves to Japan to teach english. her salary is included
a. only in U.S. GDP.

b. only in Japan’s GDP.
c. in both U.S. GDP and Japan’s GDP.
d. in neither U.S. GDP nor Japan’s GDP.
6. Which of the following does Not add to U.S. GDP?
a. Boeing manufactures and sells a plane to Air France.

b. General motors builds a new auto factory in North carolina.
c. the city of New york pays a salary to a policeman.
d. the federal government sends a Social Security check to your grandmother.
7. An American buys a pair of shoes made in italy. how do the U.S. national income accounts treat the transaction?
a. Net exports and GDP both rise.

b. Net exports and GDP both fall.
c. Net exports fall, while GdP does not change.
d. Net exports do not change, while GDP rises.
8. Which is the largest component of GDP?
a. consumption
b. investment
c. government purchases
d. net exports
9. An economy produces 10 cookies in year 1 at a price of $2 per cookie and 12 cookies in year 2 at a price of $3 per
cookie. From year 1 to year 2, real GDP increases by
a. 20 percent.
b. 50 percent.
c. 70 percent.
d. 80 percent.
10. if all quantities produced rise by 5 percent and all prices fall by 5 percent, which of the following best describes what
occurs?
a. real GdP rises by 5 percent, while nominal GDP falls by 5 percent.

b. real GdP rises by 5 percent, while nominal GDP is unchanged.
c. real GdP is unchanged, while nominal GDP rises by 5 percent.
d. real GdP is unchanged, while nominal GDP falls by 5 percent.
11. If Mr. Keating quits his job as a teacher to home school his own children, GdP
a. stays the same because he is engaged in the same activity

b. rises because he now pays lower income taxes.
c. falls because his market income decreases.
d. could rise or fall, depending on the value of home schooling.
12. GdP is an imperfect measure of well-being because it
a. includes physical goods produced but not intangible services.

b. excludes goods and services provided by the government.
c. ignores the environmental degradation from economic activity.
d. is not correlated with other measures of the quality of life.
Chapter 24 Measuring the Cost of living

Chapter 25 Production and Growth
Chapter 26 Saving, Investment and Financial Systems
Chapter 28 Unemployment
In a competitive labor market, an increase in the 6. Approximately what percent of U.S. workers are
minim um wage results in a(n) in the directly affected by the minim um wage?
quantity of labor supplied and a(n) in the a. I
quantity of labor demanded. b. 6
a. increase; increase c. 12
b. increase; decrease d. 25
c. decrease; i ncrease
d. decrease; decrease
In many European nations, unions
7. In the United States, unionized workers are a. are considered cartels in violation of antitrust
paid about percent more than similar laws.
nonunion workers.
a. 2 conspire with firms to keep wages below
8. b. 5 competitive levels.
b.
c. 15 c. are social clubs without any economic impact.
d. 40 d. play a much larger role than they do in the
United States.
9. According to the theory of efficiency wages, 10. When a firm pays an efficiency wage, it may
a. firms may find it profitable to pay above- a. have trouble attracting enough workers.
equilibrium wages. b. have to monitor its workers more closely.
b. an excess supply of labor puts downward pressure c. experience declines in worker quality.
on wages. d. find that its workers quit less frequently.
c. sectoral shifts are the main source of frictional
unemployment.
d. right-to-work laws reduce the bargaining power of
unions.

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Chapter 23 Measuring the National’s Income

1. An economy’s gross domestic product is

a. the excess of spending over income.

a. only in U.S. GDP.

6. Which of the following does Not add to U.S. GDP?

a. Boeing manufactures and sells a plane to Air France.

a. Net exports and GDP both rise.

a. real GdP rises by 5 percent, while nominal GDP falls by 5 percent.

a. stays the same because he is engaged in the same activity

12. GdP is an imperfect measure of well-being because it

a. includes physical goods produced but not intangible services.

Chapter 24 Measuring the Cost of living

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