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IE Chapter 13
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1A country's gross national product (GNP) is
- Athe value of all final goods and services produced by its factors of production and sold on the market in a given time period.
- Bthe value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period.
- Cthe value of all final goods produced by its factors of production and sold on the market in a given time period.
- Dthe value of all final goods and services produced by its factors of production and sold on the market.
- Ethe value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period.
2For most macroeconomists
- Anational income accounts and national output accounts are equal to each other.
- Bnational income accounts exceed national output accounts.
- Cnational output accounts exceed national income accounts.
- Dit is impossible to tell whether national income accounts equal to national output accounts.
- Enational income accounts is much more important than national output accounts.
3For most macroeconomists
- Agross national income and gross national product are the same.
- Bgross national income exceeds gross national product.
- Cgross national product exceeds gross national product.
- Dit is hard to tell whether gross national income equal gross national product.
- Egross national product is much more important than gross national income.
4The highest component of GNP is
- Athe current account.
- Binvestment.
- Cgovernment purchases.
- Dconsumption.
- Etrade.
5An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is
- Aearnings of a Spanish factory with British owners counts only in Spain's GDP.
- Bearnings of a Spanish factory with British owners counts only in Britain's GNP.
- Cearnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP.
- Dearnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP.
- Eearnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.
6The sale of
- Aa used textbook does enter GNP.
- Ba used textbook does not enter GNP, but the sale of a used house does.
- Cboth a used textbook and a used house do not enter GNP.
- Da used house does not enter GNP, but the sale of a used book does.
- Ethe GNP does not include sale of used items priced below $1000.
7Which one of the following statements is the MOST accurate?
- AThe sale of a used textbook does generate income for factors of production.
- BThe sale of a used textbook does not generate income for any factor of production.
- CThe sale of a used textbook sometimes does and sometimes does not generate income for factors of production.
- DIt is hard to tell whether a sale of a used textbook does or does not generate income for factors of production.
- EThe sale of a used textbook is a part of the GNP.
8Which one of the following statements is the MOST accurate?
- AGNP plus depreciation is called net national product (NNP).
- BGNP less depreciation is called net national product (NNP).
- CGNP less depreciation is called net factor product (NFP).
- DGDP plus depreciation is called net national product (NNP).
- EGDP less depreciation is called net national product (NNP).
9National income equals GNP
- Aless depreciation, less net unilateral transfers, less indirect business taxes.
- Bless depreciation, plus net unilateral transfers, plus indirect business taxes.
- Cless depreciation, less net unilateral transfers, plus indirect business taxes.
- Dplus depreciation, plus net unilateral transfers, less indirect business taxes.
- Eless depreciation, plus net unilateral transfers, less indirect business taxes.
10The United States began to report its gross domestic product (GDP) only since
- A1900.
- B1921.
- C1931.
- D1941.
- E1991.
11GDP is supposed to measure
- Athe volume of production within a country's borders.
- Bthe volume of services generated within a country's borders.
- Cthe volume of production of a country's output.
- DGNP plus depreciation.
- Enet unilateral transfers from foreigners.
12GNP equals GDP
- Aminus net receipts of factor income from the rest of the world.
- Bplus receipts of factor income from the rest of the world.
- Cminus receipts of factor income from the rest of the world.
- Dplus net receipts of factor income from the rest of the world.
- Eminus depreciation.
13Movements in GDP
- Aand GNP usually do not differ greatly.
- Band GNP usually do not differ greatly, as a practical matter.
- Cand GNP usually do differ greatly.
- Dare usually smaller than those of GNP movements, in practice.
- Eare inversely proportional to movements in GNP.
14In 2006, the United States had
- Aa surplus in the current account.
- Ba balance in the current account.
- Ca deficit in the current account.
- DFrom 2006 data, it is too difficult to determine whether a surplus or a deficit existed in the current account.
- Ea positive balance of net financial flows.
15Net unilateral transfers
- Aare part of a national income.
- Bare part of a country's product.
- Cmust be added to NNP in calculations of national income.
- Dare part of a country's GNP.
- EOnly A and C.
16GDP is different than GNP in that
- Ait accounts for net unilateral transfers.
- Bit does not account for indirect business taxes.
- Cit does not account for a country's production using services with foreign-owned capital.
- Dit accounts for depreciation.
- Eit is unhelpful when tracking national income.
17Movements in GDP
- Adiffer greatly from movements in GNP.
- Bdo not differ greatly from movements in GNP.
- Care not allowed to differ at all from movements in GNP by definition.
- Dneed to be inflation adjusted in order to match movements in GNP.
- Eare not relevant to an examination of national income.
18Purchases of inventories by
- Afirms are not counted in investment spending.
- Bfirms are also counted in investment spending.
- Chouseholds are also counted in investment spending.
- Dhouseholds and Firms are also counted in investment spending.
- Eforeign consumers are counter in investment spending.
19In open economies
- Asaving and investment are necessarily equal.
- Bas in a closed economy, saving and investment are not necessarily equal.
- Csaving and investment are not necessarily equal as they are in a closed economy.
- Dsaving and investment are necessarily equal contrary to the case of a closed economy.
- Einvestment always refers to the domestic stock market.
20Investment is usually
- Amore variable than consumption.
- Bless variable than consumption.
- Cas variable as consumption.
- DIt is hard to tell from the data whether investment is more or less variable than consumption.
- Ea larger component of the GNP than consumption.
21Government purchases are defined as
- Aonly goods purchased by federal, state, or local governments.
- Ball goods and services purchased by the federal government.
- Call goods and services purchased by the federal or state government.
- Dall goods and services purchased by the federal, state, or local government.
- Egoods and services purchased from the government.
22Government transfer payments like social security and unemployment benefits are
- Aincluded in government purchases.
- Bnot included in government purchases.
- Cnot included in government purchases, but they are included in the consumption component of GNP.
- Dnot included in government purchases, but they are part of the investment component of GNP.
- Eincluded in government purchases but not in the GNP.
23In 1929, government purchases accounted for
- Aonly 18.5 percent of U.S. GNP.
- Bonly 8.5 percent of U.S. GNP.
- C28.5 percent of U.S. GNP.
- D38.5 percent of U.S. GNP.
- E48.5 percent of U.S. GNP.
24Which one of the following expressions is the MOST accurate?
- ACA = EX - IM
- BCA = IM - EX
- CCA = EX = IM
- DCA = EX + IM
- ECA - IM = EX
25A country's current account
- Abalance equals the change in its net foreign wealth.
- Bbalance equals the change in its foreign wealth.
- Csurplus equals the change in its foreign wealth.
- Ddeficit equals the change in its foreign wealth.
- Ebalance equals its GNP.
26The CA is equal to
- AY - (C - I + G).
- BY + (C + I + G).
- CY - (C + I + G).
- DY - (C + I - G).
- EY + (C - I - G).
27Which of the following is TRUE?
- AA country with a current account surplus is earning more from its exports than it spends on imports.
- BA country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports.
- CA country with a current account deficit must be increasing its net foreign debts by the amount of the deficit.
- DWe can describe the current account surplus as the difference between income and absorption.
- EAll of the above are true of current account balances.
28Over the 1980s
- Athere is no question that a large increase in U.S. foreign assets did occur.
- Bthere is a question whether a large decrease in U.S. foreign assets did occur.
- Cthere is no question that a large decrease in U.S. foreign assets did occur.
- Dthere is no question that there was almost no change in U.S. foreign assets.
- Ethere is no question that rising exports exceeded U.S. foreign debt.
29In a closed economy, national saving
- Asometimes equals investment.
- Balways equals investment.
- Cis always less than investment.
- Dis always more than investment.
- Eis never equal to investment.
30For open economies,
- AS = I.
- BS = I + CA.
- CS = I - CA.
- DS > I + CA.
- ES < I + CA.
31An open economy
- Acan save only by building up its capital stock.
- Bcan save only by acquiring foreign wealth.
- Ccannot save either by building up its capital stock or by acquiring foreign wealth.
- Dcan save either by building up its capital stock or by acquiring foreign wealth.
- Ecan save by avoiding excessive imports.
32A closed economy
- Acan save either by building up its capital stock or by acquiring foreign wealth.
- Bcan save only by building up its capital stock.
- Ccan save only by acquiring foreign wealth.
- Dcannot save either by building up its capital stock or by acquiring foreign wealth.
- Ecan save by avoiding excessive imports.
33Disposable income is National income
- Aless taxes collected from households and firms by the government.
- Bplus net taxes collected from households and firms by the government.
- Cless net taxes collected from firms by the government.
- Dless net taxes collected from households by the government.
- Eless net taxes collected from households and firms by the government.
34Government savings, S^g, is equal to
- AT - G.
- BT + G.
- CT = G.
- DT + G - I.
- ET - G = I.
35Which of the following is FALSE about private savings and government savings?
- AS^P = Y - T - C
- BUnlike private saving decisions, government saving decisions are often made with an eye toward their effect on output and employment.
- CTotal savings (S) = S^P + S^g.
- DThe national income identity can help us to analyze the channels through which government saving decisions influence macroeconomic conditions.
- ENone of the above; all statements are true.
36In a closed economy, private saving, S^P, is equal to
- AI - (G - T).
- BI + (G - T).
- CI + (G + T).
- DI - (G + T).
- EI + (G - T) + C.
37In an open economy, private saving, S^P, is equal to
- AI - CA + (G - T).
- BI + CA - (G - T).
- CI + CA + (G - T).
- DI - CA - (G - T).
- EI + CA + (G + T).
38Ricardian equivalence argues that when the government cuts taxes and raises its deficit,
- Aconsumers anticipate that they will face lower taxes later to pay for the resulting government debt.
- Bconsumers anticipate that they will higher services from the government.
- Cconsumers anticipate that they will face higher taxes later to pay for the resulting government debt.
- Dconsumers anticipate it will affect their future taxes, in general in the direction of lowering future taxes.
- Econsumers anticipate that the low tax rates will continue.
39Ricardian equivalence argues that when the government
- Aincreases taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
- Bcuts taxes and decreases its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
- Ccuts taxes and raises its surplus, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
- Dcuts taxes and raises its deficit, consumers anticipate that they will face lower taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
- Ecuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
40In the United States over the past fifty years, the fraction of GNP devoted to consumption has fluctuated in a range of about
- A42 to 49 percent.
- B32 to 39 percent.
- C22 to 29 percent.
- D82 to 89 percent.
- E62 to 70 percent.
41In the United States, (gross) investment has fluctuated between ________ of GNP in recent years.
- A2 and 12 percent
- B11 and 22 percent
- C22 and 32 percent
- D32 and 42 percent
- E42 and 52 percent
42Government purchases currently take up about
- A20 percent of U.S. GNP, and this share has not changed much since the late 1950s.
- B38 percent of U.S. GNP, and this share has not changed much since the late 1950s.
- C18 percent of U.S. GNP, and this share has been increasing since the late 1950s.
- D18 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
- E25 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
43The position of the United States current account balance in 2009 was
- Alent over 6 percent of its GNP, resulting in a large current account surplus.
- Bborrowed over 9 percent of its GNP, leading to a large current account deficit.
- Cachieved a currant account balance of zero.
- Dborrowed over 10 percent of its GNP, leading to a large current account deficit.
- Eborrowed less then 5 percent of its GNP, leading to a large current account surplus.
44Which one of the following statements is FALSE?
- AThe United States had accumulated substantial foreign wealth by the early 1980s.
- BThe 1980s witnessed a sustained current account deficit of proportions unprecedented in the twentieth century opened up.
- CIn 1987, the country became a net debtor to foreigners for the first time since World War I.
- DU.S. foreign debt has continued to grow and now stands at 25 percent of GNP.
- EThe U.S. foreign debt was paid off in the 1990s, allowing the U.S. to attain a current account surplus. However, the deficit has returned in recent years.
45Every international transaction automatically enters the balance of payments
- Aonce either as a credit or as a debit.
- Btwice, once as a credit and once as a debit.
- Conce as a credit.
- Dtwice, both times as debit.
- Ethe times, once as a credit, once as a debit, and once as an exchange.
46The official settlements balance or balance of payments is the sum of
- Athe current account balance, the capital account balance, the non reserve portion of the financial account balance, the statistical discrepancy.
- Bthe current account balance and the capital account balance.
- Cthe current account balance, the capital account balance, the non reserve portion of the financial account balance.
- Dthe current account balance and the non reserve portion of the financial account balance.
- Ethe current account balance and the interest in all investments.
47An American buys a Japanese car, paying by writing a check on an account with a bank in New York. How would this be accounted for in the balance of payments?
- Acurrent account, a Japanese good import
- Bcurrent account, a U.S. good import
- Cfinancial account, a U.S. asset import
- Dfinancial account, a U.S. asset export
- Ea current account as a U.S. good import and a financial account, a U.S. asset export
48The United States issues a $10,000 debt forgiveness to Argentina. How is this accounted for in the balance of payments?
- Afinancial account, U.S. asset import
- Bcurrent account, Argentina transfer payment
- Ccurrent account, U.S. service export
- Dfinancial account, U.S. asset export
- Ecurrent account, Argentina good import
49A U.S. citizen buys a newly issued share of stock in England, paying for his order with a check, which the British company deposits in its own U.S. bank account in New York. How is this transaction accounted for in the balance of payments?
- Afinancial account, U.S. asset export
- Bcurrent account, U.S. service import
- Ccurrent account, British good export
- Dfinancial account, British asset import
- Efinancial account, U.S. asset import
50You travel to Paris and pay for a $100 dinner with your credit card. How is this accounted for in the balance of payments?
- Acurrent account, French service import
- Bcurrent account, U.S. good export
- Cfinancial account, U.S. asset export
- Dfinancial account, U.S. asset import
- Efinancial account, French asset export
51The German government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy French currency from its citizens. How is this accounted for in the balance of payments?
- Acurrent account, French good export
- Bcurrent account, German good import
- Cfinancial account, French asset export
- Dfinancial account, German asset export
- Efinancial account, German asset import
52The earnings of a Spanish factory with British owners are
- Acounted in Spain's GDP.
- Bpart of Britain's GNP.
- Conly counted in Britain's GDP.
- Donly part of Spain's GNP.
- Ecounted in Britain's GDP and are a part of Spain's GNP.
53The services British capital provides in Spain are a service export from Britain
- Atherefore they are subtracted from British GDP in calculating British GNP.
- Btherefore they are added to Spanish GDP in calculating Spanish GDP.
- Ctherefore they are added to British GDP in calculating British GNP.
- Dtherefore they are added to Spanish GNP in calculating Spanish GDP.
- Etherefore they are subtracted from Spanish GNP.
54Unilateral transfers between countries are
- Along-term loans.
- Bonly international gifts, never payments that do not correspond to the purchase of any good, service, or asset.
- Cpart of the current account but not a part of national income.
- Dknown for reducing the income of capital owners.
- Ethe difference between Y and GNP if the identity Y = C + I + G + CA holds exactly.
55Which of the following statements about the central bank is TRUE?
- AOnly the central bank may hold foreign reserves and intervene officially in exchange markets.
- BCentral banks have little power to alter macroeconomic conditions.
- CToday, central banks' reserves consist largely of gold.
- DThe Federal Reserve holds only a small level of official reserve assets other than gold.
- ECentral banks never inject money into the economy.
56How do we allocate statistical discrepancy among the current, capital, and financial accounts?
- AWe have no way of knowing exactly how to allocate this discrepancy.
- BDepend on the degree of certainty by which we attribute to these accounts.
- CDivide it evenly amongst the three accounts.
- DDepend on the convention adopted by the specific financial institution.
- EStatistical discrepancy signals human errors made when dealing with financial accounts.
57Which of the following is TRUE about current cost method and market value method?
- AThey are used by the BEA to place current values on foreign indirect investments.
- BThese methods lead to the same valuations.
- CBased on the current cost method, the BEA's 2009 estimate of U.S. net foreign wealth was $2,737.86 billion.
- DThe current cost method is preferred by the BEA.
- EForeign direct investments of the U.S. are valued at their original purchase price.
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- Quiz on IE Chapter 13, created by ulckapatel on 23/11/2015.
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