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Assignment 6

1. The difference between personal income (PI) and disposable personal income (DPI) is
a)
b)
c)
d)
e)

personal tax payments.
welfare benefits.
undistributed corporate income.
social security benefits.
social security taxes.

2. To avoid double counting in calculating GDP,
a)
b)
c)
d)
e)

business investment should be excluded.
the value of intermediate goods and services should be excluded.
net exports should be excluded.
the capital consumption allowance should be excluded.
government purchases should be excluded.

3. Refer to the table above. What is the chain-type real GDP growth rate from 1995 to 2003?
a)
b)
c)
d)
e)

–75%
125%
76%
100%
0 (zero)

4. Which of the following economic activities should not be counted as part of GDP?
a)
b)
c)
d)
e)

A housewife selling cherry pies in the corner store.
The government buying blackboards for public schools.
A student working part time.
The work of a social worker, for which she gets paid.
A gang member selling illegal drugs.

5. The concept of value added refers to
a)
b)
c)
d)
e)

the increase in the value of a product that occurs at each stage of production.
the amount paid in the final sale of a product or service.
the amount subtracted from the value of resources because of depreciation.
the amount subtracted from the value of goods because of inflation.
the total value of all intermediate goods used in the production of the final good.

In the United States. quantity times price of all intermediate goods.550.50. $13. $38. quantity times price of all final goods. price plus quantities of all intermediate goods. For the economy described in the table above. disposable personal income is a) b) c) d) e) $1.540. 9. consumption accounts for approximately ______ percent of GDP in terms of total expenditures.50. . a) b) c) d) e) 10 14 18 29 68 8.440. prices of all goods produced within a given year.75. the market price of an economics book is a) b) c) d) e) $71. $1. 7.870.50. $7. The market value of final goods and services is calculated as a) b) c) d) e) quantities of all final goods. $1.6. $1. $24. $1. According to the table above.610.

real GDP decrease. Furthermore. social security benefit checks equal $16 billion. . Refer to the table above. and corporate profit taxes amount to $40 billion. $259. National income accounting can best be characterized as a) b) c) d) e) a microeconomic model used by the Federal Reserve. Refer to Scenario 2. Scenario 2 Suppose that personal income is $250 billion. a decrease in COLAs. in the future we would expect to see a) b) c) d) e) no change in the CPI. 11. social security taxes are $15 billion. What is the price index for the third year? a) b) c) d) e) 118 155 183 100 181 12. an increase in the CPI. assume that retained corporate earnings are $2 billion. $322. a set of rules to summarize economic activity over a given period of time. a decrease in the CPI. $291. 13. the capital consumption allowance is $32 billion. a standardized economic report written by politicians. Gross national product equals a) b) c) d) e) $177. a system for comparing different political systems. a statistical measure of the income received by consumers as opposed to businesses. $323. If the PPI increases.10.

3% 11. 18.00. If the components in each six-pack cost the bottling company $1.6% 55. $1. the circular flow model. The producer price index a) b) c) d) e) is also referred to as the wholesale price index.4% 13.50. is a weighted average of producer price changes. national income accounting.5% 15. All of these 17. $1. In economics. the value added to each six-pack by the bottling company is a) b) c) d) e) $2. capital income accounting.50. Using the table above. .25.50.00. fluctuates more than the implicit GDP deflator. $0. $1.0% 73. national flow accounting. A soft-drink bottling company supplies six-packs of orange soda to retailers for a price of $2 each. the system of measurements applied to compare economic performance across countries is called a) b) c) d) e) the economic growth model. Which of the following national income accounts would be the smallest in any year? a) b) c) d) e) NNP GNP PI NI DPI 16. is published before the CPI is computed. what is the nominal GDP growth from 1995 to 2003? a) b) c) d) e) 11.14.

(c) An autoworker becomes unemployed and collects welfare payments. Indirect business taxes. If inventory levels increase for some year in the economy. this should be added in computing GDP. Food stamps distributed by the government.or upwardbiased. How is the official GDP statistic affected in the following situations: (a) An addict engages in illegal drug sales. then capital investment must have declined. State at least two reasons for the CPI to be downward.19. Welfare benefits. this should be ignored in calculating GDP. Economists would argue that the consumer price index is a quite imprecise measure of changes in the cost of living. this should be subtracted in computing GDP. Corporate dividend payments to stockholders. Which of the following would not be included as part of personal income? a) b) c) d) e) Social security benefits. (b) A college professor gets married and becomes a homemaker. a) b) c) d) e) then consumption spending must have decreased. . 20. Essay Questions 1. 2.