MSC: Understanding 29. Using the expenditure approach, investment includes: a. household residential expenditures. b. firm structures, equipment, and inventories. c. fixed firm and household structures, equipment, and inventories. d. government and firm equipment expenditures. e. government defense and firm equipment expenditures. ANS: C DIF: Moderate REF: 2.2 TOP: II.B. MSC: Understanding 30. Which of the following is/are NOT included in the expenditure approach to national income accounting? a. transfer payments d. changes in stock prices b. taxes e. None of these answers is correct. c. Social Security ANS: E DIF: Moderate REF: 2.2 TOP: II.B. MSC: Applying 31. Which of the following are included in the expenditure approach to national income accounting? a. defense expenditures d. household service expenditures b. firm expenditures on equipment e. All of these answers are correct. c. residential expenditures ANS: E DIF: Moderate REF: 2.2 TOP: II.B. MSC: Applying 32. In 2015, the U.S. GDP was about ________, and ________ was/were the largest share. a. $5 trillion; net exports b. $22.5 billion; government expenditures c. $10.5 trillion; investment d. $13.6 billion; consumption e. $17.9 trillion; consumption ANS: E DIF: Easy REF: 2.2 TOP: II.B. MSC: Remembering 33. During the 1940s, ________ increased sharply as a percentage of U.S. GDP because of ________. a. government expenditure; World War II b. residential investment; the war on poverty c. nonresidential investment; the space program d. durable consumption expenditures; rationing of nondurable goods e. transfer payments; the New Deal ANS: A DIF: Easy REF: 2.2 TOP: II.B. MSC: Remembering 34. Which of the following is/are NOT included in the expenditure approach to national income accounting? a. software d. All of these answers are correct. b. taxes e. None of these answers is correct. c. defense expenditures ANS: B DIF: Moderate REF: 2.2 TOP: II.B.
MSC: Applying 35. U.S. expenditure shares by households, firms, and the government were relatively ________ except during ________. a. constant; the 1970s d. constant; the Vietnam War b. variable; the Great Depression e. variable; the 1990s c. constant; World War II ANS: C DIF: Moderate REF: 2.2 TOP: II.C. MSC: Understanding 36. Since about ________, U.S. expenditure shares by households, firms, and the government have been relatively ________. a. 1939; constant b. the Great Depression era; constant c. 1950; variable d. 1950; constant e. 1945; constant ANS: D DIF: Moderate REF: 2.2 TOP: II.C. MSC: Understanding 37. According to the text, the gains in GDP’s consumption share have: a. caused a rapid decline in inventories. b. driven investment below 10 percent. c. no impact on net exports. d. been at a cost to net exports and government spending. e. also pushed up the government expenditure share. ANS: D DIF: Moderate REF: 2.2 TOP: II.C. MSC: Understanding 38. Prior to the late 1970s, the United States ________ about as much as it ________. a. exported; consumed d. invested; exported b. exported; imported e. imported; invested c. imported; consumed ANS: B DIF: Moderate REF: 2.2 TOP: II.C. MSC: Understanding 39. According to the income approach to GDP, the largest percentage of GDP comes from: a. indirect business taxes. d. depreciation of fixed capital. b. firm profits. e. None of these answers is correct. c. compensation to employees. ANS: C DIF: Easy REF: 2.2 TOP: II.C. MSC: Understanding Refer to the following table when answering the following questions. Table 2.2: U.S. 2014–2015 Domestic Income ($ billions) 2014 2015 Compensation of employees, paid 9,264 9,704 Wages and salaries 7,487 7,866
79. If the nominal GDP rises by 6 percent and the real GDP rises by 3 percent, then the price level ________ by ________ percent. a. rises; 3 d. falls; 9 b. rises; 9 e. There is no change in inflation. c. falls; 3 ANS: A DIF: Moderate REF: 2.3 TOP: III.C.2. MSC: Applying 80. FRED stands for: a. Food and Resource Economics Department. b. Financial Reporting Exposure Draft. c. Federal Reserve Economic Database. d. Florida Research & Economic Database. e. Faculty Research Expertise Database. ANS: C DIF: Easy REF: 2.3 TOP: III.C.3. MSC: Remembering 81. To get a more accurate view of the size of countries’ economies, we first need to convert each country’s GDP to the dollar using ________ and then adjust for ________. a. the interest rate; the exchange rate b. the exchange rate; price level differences c. price level differences; the interest rate d. the exchange rate; fiscal policy e. fiscal policy; the exchange rate ANS: B DIF: Moderate REF: 2.4 TOP: IV. MSC: Analyzing 82. If we want to calculate the Mexican real GDP in U.S. dollars but adjusted for prices, which of the following would we use? a. b. c. d. e. None of these answers is correct. ANS: A DIF: Moderate REF: 2.4 TOP: IV. MSC: Applying 83. If we want to calculate the U.S. real GDP in Mexican pesos, which of the following would we use? a. b. c. d. e. None of these answers is correct. ANS: B DIF: Moderate REF: 2.4 TOP: IV. MSC: Applying 84. Define E  $/£ as the dollar/pound exchange rate and NGDPUK as the United Kingdom’s nominal GDP; then , the United Kingdom’s nominal GDP in dollars, is given by: a. . d. . b. . e. None of these answers is correct.
(Source: FRED II, Eurostat) ANS: Looking at the data in the first column, indeed the 18 EZ economies are growing. But once you do some calculations adjusting for prices, different currencies, and both, a different picture arises. First, we can see that PPP GDP in euros has stayed more or less constant at about €7.6 trillion. This is because, although the EZ economies have been growing, it has been slow, about 1.5 percent. Secondly, we see that, relative to the dollar, the euro buys fewer goods and services. Similarly, for real GDP, inflation was relatively high from 2010–2013, and then calmed down, eroding income. With respect to nominal GDP in U.S. dollars, we see that in 2015 it fell and is roughly €1 trillion less than it was in 2010; this is largely due to the sharp decline in the value of the euro relative to the U.S. dollar in 2015. All these combine to reduce PPP adjusted GDP over the period. Table 2.7: U.S. and Eurozone (18 Economies) Nominal GDP in 2014 Year Eurozone NGDP (billions) $US/Euro Exchange Rate PEZ/PUS CPI GDP PPP (€s) RGDP (€s) NGDP ($US) GDP PPP $US 2010 9,535 1.33 0.79 0.933 7,536 10,222 12,658 10,004 2011 9,794 1.39 0.78 0.958 7,641 10,222 13,634 10,636 2012 9,835 1.29 0.78 0.982 7,625 10,013 12,651 9,809 2013 9,936 1.33 0.76 0.995 7,549 9,982 13,201 10,029 2014 10,113 1.33 0.76 1.000 7,683 10,116 13,439 10,210 2015 10,403 1.11 0.77 1.000 7,981 10,403 11,547 8,858 DIF: Difficult REF: 2.4 TOP: IV. MSC: Analyzing