1. Chapter 24 / 8
Measuring Economic Performance and Growth
1) AM24 B Stocks and Flows 2
An example of a stock variable, as opposed to a flow variable, is:
(a) consumption expenditure.
(b) economic capital.
(c) investment.
(d) depreciation.
2) AM24 A Stocks and Flows 2
Gross Domestic Product and National Income must be measured per unit of time so they are:
(a) flow variables.
(b) stock variables.
(c) resource variables.
(d) perpetuities.
3) AM24 A Conceptual GDP and the GDP Accounts 2
Not included in measured GDP but clearly a part of our economic GDP would be the value of:
(a) housewives’ services and other do-it-yourself projects.
(b) food consumed on the farm where it was grown.
(c) sales of medically-prescribed marijuana at non-profit cannabis clubs in California.
(d) profits realized by street muggers in Manhattan.
4) AM24 C GDP and NI 1
Gross Domestic Product is the total market value of all:
(a) commodities sold in a year.
(b) services produced in a year.
(c) production during a year.
(d) consumer goods sold during a year.
5) AM24 B GDP Accounts 2
The Gross Domestic Product [GDP] accounts are most useful as:
(a) extremely accurate measures of economic welfare.
(b) rough gauges of economic activity over time.
(c) precise measures of inflation.
(d) proxies for unemployment rates.
(e) indicators of underground activities.
Ralph T. Byrns Chapter 24 / 8: Economic Performance and Growth Test Bank Six 1

2. 6) AM24 C Conceptual GDP and NI 2
Neither real GDP nor National Income would include:
(a) a sales commission for the sale of a used car.
(b) payments for oil to heat one's home.
(c) steel produced in Pittsburg and used to make Toyotas produced in Georgia.
(d) purchase of 62 acres of vacant land for building new tract homes.
(e) tuition for college education.
7) AM24 A Measured GDP 2
GDP for the United States would increase as a consequence of:
(a) USX selling 50,000 tons of steel to General Motors for its new cars.
(b) IBM importing 60,000 hard disk drives from Malaysia.
(c) Dale and Jody building a home entertainment center for their family from scrap lumber.
(d) Sony producing its televisions and DVD players for the American market in China.
8) AM24 A Measured GDP 2
Measured GDP for the United States for 1939 would not properly include the value of:
(a) used cars and old industrial machinery sold as “scrap iron” to a Japanese steel maker.
(b) tickets sold on opening night for the film, The Wizard of Oz.
(c) investment in a new assembly line for Ford pickup trucks.
(d) oil produced in Louisiana and shipped to Jamaica.
(e) new military hardware sold to Great Britain on credit under a “lend-lease” program.
9) AM24 D GDP and NI 2
If, after a lot of agonizing over the decision, a previously full-time housewife takes a full-time
job outside the home at a salary of $28,000, measured GDP will probably rise by roughly
$28,000, while a more purely conceptual GDP:
(a) also grows by $28,000.
(b) falls by roughly $28,000.
(c) does not change.
(d) grows by significantly less than $28,000.
10) AM24 B Per Capita GDP and NI 1
Dividing Gross Domestic Product by population yields a country’s per capita:
(a) Measure of Economic Welfare.
(b) Gross Domestic Product.
(c) value added.
(d) Net Domestic Product.
(e) disposable income.
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3. 11) AM24 D GDP and NI 2
Per capita GDP is LEAST often used by economists to:
(a) analyze past economic performance.
(b) roughly measure the standard of living.
(c) compare economic performance between economies.
(d) estimate the exploitation of labor.
12) AM24 D GDP Accounts 2
Activities that would not be officially proper to count as part of gross domestic product (GDP)
include:
(a) a $120 purchase of marijuana from a hemp club in California by Madison, a cancer patient
with a doctor’s prescription.
(b) tomatoes worth $19 that Jesse, a vegetarian college student, cultivates in a dorm room.
(c) Lynn’s $300 commission from selling a used Saab.
(d) SlamBam Builders’ $2,200,000 purchase of 62 acres of vacant land for a trailer park.
(e) the $24,500 that Rima, a foreign student, paid for spring semester tuition at Stanford.
13) AM24 B GDP Accounts and Economic Growth 3
National legalization of marijuana would cause the growth rate of measured real GDP to:
(a) more accurately reflect well-being.
(b) be overstated in the very short run.
(c) be understated in the long run.
(d) decline precipitously.
14) AM24 C GDP and NI 2
Growth of money GDP would tend to understate growth of real conceptual GDP during
periods when:
(a) inflation began to accelerate.
(b) a country is engaged in a war.
(c) consumers increasingly shifted to do-it-yourself projects.
(d) subsistence family farms shifted to market production.
(e) government provided more social goods.
15) AM24 E Measured GDP 2
The measured GDP of the United States excludes market values for such activities as:
(a) production of environmentally harmful goods.
(b) monetary costs incurred in cleaning up pollution.
(c) exports from the United States.
(d) unintended increases in business inventories during recessions.
(e) “do-it-yourself” projects.
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4. 16) AM24 A GDP Accounts: Expenditures 2
The expenditure approach to measuring gross domestic product entails summing:
(a) net exports, government purchases, investment, and consumption.
(b) corporate profits, proprietors’ income, interest, and rental income.
(c) employee wages and salaries, government outlays, and net foreign purchases of goods.
(d) values added by all business firms plus the value of do-it-yourself projects.
17) AM24 C GDP Accounts: Consumption Expenditures 1
Personal consumption expenditures include spending for:
(a) all commodities that business firms purchase.
(b) stocks and bonds by households.
(c) consumer durables, nondurables, and services.
(d) the construction of residential housing.
18) AM24 A GDP Accounts: Consumption Expenditures 2
In the GDP accounts, funds an individual spends on education are classified as:
(a) consumption spending.
(b) personal investment spending.
(c) government purchases if it is a public university.
(d) net investment if worker productivity increases.
19) AM24 D Investment 2
Investment spending includes all of the following EXCEPT:
(a) all final purchases of new capital equipment.
(b) residential construction.
(c) changes in inventories.
(d) all business construction in foreign countries by American firms.
(e) all investment in the United States by foreign firms.
20) AM24 B Investment 2
Gross private domestic investment in the GDP accounts would NOT include:
(a) growth of manufacturers' inventory.
(b) purchases of shares of Google stock.
(c) new machinery bought by firms.
(d) new residential housing and production facilities.
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5. 21) AM24 D Investment 2
Economic investment for the economy as a whole would least reasonably include:
(a) a bank’s purchase of new computers.
(b) a lumber company planting saplings to be cut and sold after a forest has matured.
(c) building a new science building for a community college.
(d) a purchase of a used tractor by a landscaping firm.
(e) a racing farm’s payment of a stud fee in hopes of breeding a Kentucky Derby winner.
22) AM24 A Depreciation 1
The decline in the value of economic capital caused by wear-and-tear and the passage of time
is referred to as:
(a) depreciation.
(b) amortization.
(c) deterioration.
(d) obsolescence.
(e) disinvestment.
23) AM24 C Capital Consumption Allowance 1
Accountants adjust business investment for tax purposes by subtracting an inaccurate measure
of the reduction in the value of a nation’s economic capital because of obsolescence and wear-
and-tear. In GDP calculations, this inaccurate measure of “depreciation” is called the:
(a) net private domestic investment.
(b) interest amortization schedule.
(c) capital consumption allowance.
(d) disinvestment premium.
(e) capital erosion estimate.
24) AM24 C Capital Consumption Allowance 2
Because depreciation schedules as calculated by accountants reflect tax considerations and not
changes in market value, the depreciation measure in the GDP accounts is called:
(a) investment erosion.
(b) value subtractions.
(c) the capital consumption allowance.
(d) planned obsolescence.
25) AM24 B Investment in Inventories 2
Gross Domestic Product in the United States this year would include the:
(a) funds spent by American tourists in the Bahamas.
(b) value of lumber produced in Oregon this year, but still in a warehouse at the end of the
year.
(c) cost of opening a Victoria’s Secret in Shanghai, China
(d) value of pickles produced last year but eaten in a hamburger this year.
(e) price you would be willing to pay in a store for cookies you made from scratch.
Ralph T. Byrns Chapter 24 / 8: Economic Performance and Growth Test Bank Six 5

6. 26) AM24 D Investment 2
When calculating the United States’ GDP, investment spending does not include:
(a) all final purchases of new capital equipment.
(b) residential construction.
(c) changes in inventories.
(d) all business construction in foreign countries by American firms.
(e) all investment in the United States by foreign firms.
27) AM24 C Investment 2
The buying and selling of financial securities (stocks and bonds):
(a) involves net additions to the nation's productive capacity.
(b) is the major form of U.S. economic investment.
(c) transfers ownership from the seller of the security to the buyer, but does not directly
influence the size of a country’s stock of economic capital.
(d) enhances the productive capabilities of all firms involved.
28) AM24 C Government Purchases 2
According to GDP accounting, government services:
(a) are sold in markets.
(b) for the most part, generate profits for the government.
(c) are assigned values equal to the costs of the inputs used.
(d) cannot be assigned values.
(e) include transfer payments.
29) AM24 A Government Purchases: Interest on Government Debt 3
The calculation of GDP using the expenditure approach would not include the checks the
government writes for:
(a) interest on national debt, because these payments are considered to be transfer payments.
(b) wages paid to the aides of senators and congressional representatives.
(c) national defense contracts.
(d) school lunch programs.
30) AM24 E Expenditure Approach: Government 2
The calculation of U.S. GDP would include the dollar values of checks the US Treasury writes
to pay for:
(a) Social Security benefits to disabled workers and retirees.
(b) interest on the US Treasury bonds that represent our national debt.
(c) refunds due to taxpayers from the Internal Revenue Service.
(d) the services of a US Marine stationed in Iraq.
(e) wages earned by Transportation Safety Administration employees.
Ralph T. Byrns Chapter 24 / 8: Economic Performance and Growth Test Bank Six 6

7. 31) AM24 C Government in the GDP Accounts 2
Of the following components of U.S. GDP, the largest on average from 1929 until now was:
(a) net exports.
(b) net private domestic investment.
(c) government purchases.
(d) net taxes.
(e) the black market economy.
32) AM24 B Transfer Payments 3
Transfer payments are included in the definition of:
(a) Net Domestic Product, but not GDP.
(b) Personal Income, but not National Income.
(c) National Income, but not Personal Income.
(d) National Income and Personal Income.
33) AM24 D Net Exports 2
Net exports will increase if:
(a) exports of goods decline.
(b) imports of goods rise.
(c) Russia has a bumper crop of wheat.
(d) imports fall.
(e) African demands for agricultural equipment fall.
34) AM24 A Net Exports 2
During the past six decades, net exports from the United States have been:
(a) negative, on average.
(b) increasing steadily.
(c) decreasingly significant as a proportion of Aggregate Supply.
(d) consistently positive.
35) AM24 A Imports 2
The purchase of a foreign-made commodity is NOT:
(a) added as a value in our GDP.
(b) included in the GDP of the exporting country.
(c) included in the personal expenditures category of GDP, which then is adjusted by
subtracting imports.
(d) value-added for the exporting country.
(e) a source of income for foreign workers.
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8. Figure A2436
36) AM24 D A2436 Capital Consumption Allowance 3
The annual capital consumption allowance in Atlantis is:
(a) 100 billion cubits.
(b) 200 billion cubits.
(c) 300 billion cubits.
(d) 400 billion cubits.
37) AM24 A A2436 Gross Private Domestic Investment 3
Gross Private Domestic Investment annually in Atlantis is:
(a) 1200 billion cubits.
(b) 1300 billion cubits.
(c) 1400 billion cubits.
(d) 1500 billion cubits.
38) AM24 B A2436 Indirect Business Taxes 3
Atlantans annually pay indirect business taxes of:
(a) 100 billion cubits.
(b) 200 billion cubits.
(c) 300 billion cubits.
(d) 400 billion cubits.
39) AM24 C A2436 Disposable Personal Income 3
Disposable Personal Income annually in Atlantis is:
(a) 3800 billion cubits.
(b) 3500 billion cubits.
(c) 2600 billion cubits.
(d) 2300 billion cubits.
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9. 40) AM24 C A2436 Consumption Expenditures 3
Personal consumption annually in Atlantis is:
(a) 2100 billion cubits.
(b) 2200 billion cubits.
(c) 2300 billion cubits.
(d) 2400 billion cubits.
41) AM24 D Value-Added 2
Annual Gross Domestic Product is probably most accurately computed by summing the:
(a) total sales of all firms in the economy.
(b) values-added of all resource owners, and then subtracting depreciation and consumption.
(c) net incomes of all firms in the economy.
(d) values-added by all firms, and then adjusting for such things as imputed incomes.
42) AM24 D Value-Added 1
A method which corrects potential "double-counting" of some production in the GDP is the:
(a) intermediate good technique.
(b) expenditures approach.
(c) income approach.
(d) value-added technique.
(e) capital consumption allowance approach.
43) AM24 C Net Domestic Product 2
Net Domestic Product (NDP):
(a) in a sense, represents total salaries in an economy.
(b) equals C + I + G + (X - M).
(c) is the net value of economic goods produced in the economy after adjusting for
depreciation.
(d) equals GDP minus indirect business taxes.
44) AM24 C Net Domestic Product 1
Net Domestic Product equals:
(a) National Income minus the capital consumption allowances.
(b) total market values for all goods produced per annum.
(c) net values for commodities, capital resources, and services produced in a country, after
adjusting for depreciation.
(d) GDP minus indirect business taxes.
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10. Figure A2445
45) AM24 B A2445 GDP Computations 3
Nirvana’s annual Gross Domestic Product [GDP] is:
(a) 6000 billion baht.
(b) 7800 billion baht.
(c) 11,000 billion baht.
(d) 13,500 billion baht.
46) AM24 A A2445 Net Exports 3
Nirvana's annual net exports are valued at:
(a) 20 billion baht.
(b) 100 billion baht.
(c) -20 billion baht.
(d) 200 billion baht.
47) AM24 C A2445 Net Domestic Product 3
Nirvana’s annual Net Domestic Product [NDP] is:
(a) 5900 billion baht.
(b) 6600 billion baht.
(c) 7400 billion baht.
(d) 9800 billion baht.
48) AM24 B A2445 National Income 3
Nirvana’s annual National Income is:
(a) 5650 billion baht.
(b) 5900 billion baht.
(c) 6600 billion baht.
(d) 7400 billion baht.
(e) 9800 billion baht.
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11. 49) AM24 B A2445 Dividend Income 3
Total dividend income annually in Nirvana is:
(a) 100 billion baht.
(b) 250 billion baht.
(c) 500 billion baht.
(d) 350 billion baht.
50) AM24 A A2445 Personal Income 3
Nirvana citizens have total annual Personal Income of:
(a) 5540 billion baht.
(b) 5900 billion baht.
(c) 6600 billion baht.
(d) 7400 billion baht.
(e) 9800 billion baht.
51) AM24 A A2445 Disposable Personal Incomes 3
The annual Disposable Personal Income [DPI] of Nirvana citizens is:
(a) 4800 billion baht.
(b) 4940 billion baht.
(c) 5140 billion baht.
(d) 5540 billion baht.
(e) 5620 billion baht.
52) AM24 C A2445 Personal Saving 3
Nirvana citizens have annual Personal Saving of:
(a) 800 billion baht.
(b) 360 billion baht.
(c) 140 billion baht.
(d) 280 billion baht.
(e) -120 billion baht.
53) AM24 C A2445 Wages and Salaries 3
The differences between Wages and Salaries Paid in Nirvana and Total Labor Costs might best
be explained by:
(a) statistical discrepancy.
(b) depreciation.
(c) non-wage fringe benefits to employees.
(d) personal income taxes.
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12. 54) AM24 D A2445 Earned Income 3
The annual earned income actually received by Nirvana’s resource owners is:
(a) 5710 billion baht.
(b) 5200 billion baht.
(c) 6150 billion baht.
(d) 5490 billion baht.
55) AM24 C National Income 2
National Income (NI) can be computed by subtracting:
(a) personal income taxes from disposable income.
(b) transfer payments from personal income.
(c) depreciation and indirect business taxes from GDP.
(d) Net Domestic Product from depreciation.
56) AM24 C National Income 2
National Income:
(a) is a form of investment expenditure.
(b) includes all construction.
(c) is the sum of all incomes earned by resource owners.
(d) is normally measured as C + I + G + (X - M).
(e) is the same as the total of all personal income.
Figure A2457
57) AM24 C A2457 CORPORATE INCOME 3
Dividends paid to corporate stockholders in Aurora this year totaled:
(a) 230 billion coronas.
(b) 260 billion coronas.
(c) 290 billion coronas.
(d) 490 billion coronas.
(e) impossible to calculate from these data.
58) AM24 A National Income 2
The largest share of national income as measured by the income approach is absorbed by:
(a) wages to labor.
(b) profits to entrepreneurs and corporations.
(c) rent to landlords.
(d) profits to financial investors.
(e) interest paid to capitalists.
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13. 59) AM24 B National Income 1
Calculating National Income does not require summing:
(a) wages.
(b) savings.
(c) interest.
(d) rent.
(e) profits.
Figure A2460
60) AM24 A A2460 Corporate Income 3
The retained earnings of corporations in Alexandria this year were:
(a) 100 million glyphs.
(b) 200 million glyphs.
(c) 400 million glyphs.
(d) 800 million glyphs.
(e) 1 billion glyphs.
61) AM24 D National Income: Rent 1
In calculating national product and income accounts, rental income:
(a) is the same as interest or profit income.
(b) is usually associated with the loaning of financial capital.
(c) is the largest category in the National Income Accounts.
(d) is the income derived from leasing nonhuman factors of production.
(e) includes only imputed rentals from owner-occupied housing.
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14. Figure A2462
62) AM24 D A2462 National Income 3
Sparta’s annual National Income is:
(a) 8000 million drachma.
(b) 7600 million drachma.
(c) 7400 million drachma.
(d) 7000 million drachma.
63) AM24 C A2462 Net Domestic Product 3
Sparta’s annual Net Domestic Product is:
(a) 8000 million drachma.
(b) 7600 million drachma.
(c) 7400 million drachma.
(d) 7000 million drachma.
64) AM24 A A2462 Gross Domestic Product 3
Sparta’s annual Gross Domestic Product is:
(a) 8000 million drachma.
(b) 7600 million drachma.
(c) 7400 million drachma.
(d) 7000 million drachma.
65) AM24 C A2462 Dividend Income 3
Spartan stockholders received dividends this year that totaled:
(a) 100 million drachma.
(b) 200 million drachma.
(c) 300 million drachma.
(d) 400 million drachma.
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15. 66) AM24 E A2462 Disposable Personal Income 3
Disposable Personal Income annually in Sparta is:
(a) 7400 million drachma.
(b) 7000 million drachma.
(c) 6500 million drachma.
(d) 6400 million drachma.
(e) 4600 million drachma.
67) AM24 E A2462 Consumption Expenditures 3
Personal consumption annually in Sparta is:
(a) 1625 million drachma.
(b) 1650 million drachma.
(c) 1725 million drachma.
(d) 1800 million drachma.
(e) 3600 million drachma.
68) AM24 C National Income: Entrepreneurs and Corporations 2
According to National Income accountants, the amounts that bookkeepers calculate as business
“profits”:
(a) are lumped with interest and rent.
(b) currently account for almost 80 percent of U.S. National Income.
(c) include proprietors' net income and corporate income.
(d) exclude the incomes received by members of partnerships.
69) AM24 D Personal Income 2
The aggregate income formally received by households is:
(a) Net National Income.
(b) Disposable Income.
(c) Discretionary Income.
(d) Personal Income.
(e) Net Domestic Product.
70) AM24 A Corporate Income and Retained Earnings 1
Retained earnings are:
(a) undistributed corporate profits.
(b) normally invested in the stocks of competing companies in order to merge.
(c) direct parts of the personal incomes of stockholders.
(d) used primarily for consumption expenditures.
(e) earnings kept by the firm to pay stockholder dividends.
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16. 71) AM24 D Disposable Income 2
Personal Consumption + Personal Saving in the national income accounts:
(a) may be greater or less than Disposable Income.
(b) must be less than Disposable Income.
(c) must be greater than Disposable Income.
(d) equals Disposable Income.
72) AM24 B GDP Accounts: Personal Consumption 2
In GDP accounting, disposable personal income minus personal saving equals:
(a) net borrowing.
(b) personal consumption.
(c) average bank account balances.
(d) personal financial investment.
(e) change in net wealth.
73) AM24 D GDP Measurement: Limitations 2
Major limitations of measured GDP as an estimate of economic performance do not include:
(a) inaccuracy.
(b) failure to include many unmarketed activities.
(c) mismeasurement of government output.
(d) omission of imputed rents for owner-occupied housing.
74) AM24 A GDP Accounts: Limitations 2
Measured Gross Domestic Product:
(a) does not consider changes in the quality of life such as increased or decreased leisure time.
(b) falls because of technological advances that generate pollution or cause congestion and so
decrease the quality of life.
(c) measures how equitably wealth is distributed.
(d) accurately measures changes in the qualities of goods.
(e) estimates all goods and services by the costs of inputs method.
75) AM24 A Underground Economy 1
Most researchers believe that the underground economy:
(a) results in a 3 % to 20 % underestimate of GDP for most industrialized countries.
(b) is composed largely of illegal activities, which if reported for tax purposes would result in
arrest.
(c) is growing 400% faster than GDP.
(d) is more important in the U.S. economy than in France or Italy.
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17. 76) AM24 C Underground Economy 2
Measured GDP would not include the value of:
(a) 4 million tons of concrete produced at a plant in Alabama.
(b) 300 pounds of apples picked by an illegal immigrant in Washington State.
(c) 20 kilos of marijuana sold on the streets of Chicago.
(d) a ticket on a US Air flight from Charlotte, NC to San Diego, CA.
77) AM24 E Underground Economy 2
The underground economy is a problem for GDP accounting primarily because:
(a) consumers purchase illegal commodities.
(b) taxes are avoided.
(c) people receive income to supplement their Social Security payments.
(d) only rich people use barter to avoid taxes.
(e) certain transactions are not recorded.
78) AM24 C GDP and Economic Welfare 2
Which of the following is probably least false?
(a) When per capita GDP increases by 2 percent, each person's quality of life increases by 2
percent.
(b) As GDP increases, leisure time increases.
(c) As per capita GDP increases, economic welfare probably increases.
(d) Per capita GDP estimates reliably assess individual well-being between countries.
79) AM24 D Measured GDP and the Law of One Price 2
If international markets are competitive and transactions costs are zero, only one set of relative
prices can exist at any given instant, which is the basis for a theory known as the law of:
(a) exchange rate equivalence.
(b) parsimony.
(c) Ricardian equivalence.
(d) one price.
(e) demand price appreciation.
80) AM24 B GDP and Economic Welfare 1
Attempts to measure economic welfare by correcting some flaws inherent in GDP accounts
resulted in the:
(a) value added technique.
(b) Human Development Indicator [HDI] Measure of Economic Welfare [MEW], General
Progress Indicator [GPI] and green GDP proposals.
(c) comprehensive expenditure approach.
(d) income approach.
(e) underground economy model.
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18. 81) AM24 C Nominal GDP and Real GDP 2
Inflation causes money GDP to:
(a) be less than real GDP.
(b) become more valuable.
(c) grow faster than real GDP.
(d) slow down relative to deflation.
82) AM24 B Deflating GDP 2
If nominal Gross Domestic Product is currently $18 trillion and the price index is 120 (2001 =
100), this year’s real GDP is:
(a) $12 trillion.
(b) $15 trillion.
(c) $18 trillion.
(d) $21 trillion.
Chapter 24
Economic Performance and Growth
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19. 1. consumption (a) Total purchases of goods by individual households.
2. GPDI (b) Total investment in an economy in a given period.
3. net exports (c) Exports minus imports.
4. depreciation (d) Declines in the value of capital stock over time.
5. value-added (e) Revenue minus intermediate good purchases.
6. Personal Income (f) Net income to households before personal taxes.
7. retained earnings (g) Corporate income minus dividends and taxes.
8. underground Income (h) Underreporting of barter income is an example.
9. National Income (i) Sum of all incomes earned by resource owners.
10. Net Domestic Product (j) Gross Domestic Product minus depreciation.
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Growth