MULTIPLE CHOICE QUESTION FOR CHAPTER 1 AND CHAPTER 2

1. Which of the following is true according to the circular flow model?

(A) Firms are suppliers in both the product and factor markets.
(B) Firms are demanders in the product markets and suppliers in the factor markets.
(C) Households are demanders in both the product and factor markets.
(D) Households are demanders in the product markets and suppliers in the factor markets.
(E) The government is a demander in the product market only.

2. A country’s real gross domestic product is the annual value of all final goods and services that are
(A) purchased in that country, adjusted for changes in the price level
(B) produced in that country, expressed in current prices => Nominal GDP
(C) produced in that country, less exports
(D) produced in that country, less depreciation
(E) produced in that country, adjusted for changes in the price level

3. Which of the following is most likely included in gross domestic product?

(A) Matt gives his second-hand bicycle to his brother.
(B) Sal paints his own bicycle.
(C) Ali buys a new bicycle.
(D) Mike buys a share of stock in a bicycle firm.
(E) Daniel bikes to school every day.

4. An increase in inventories will increase which component of gross domestic product?

(A) Personal consumption expenditures
(B) Investment expenditures

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 (C) Government purchases
(D) Exports
(E) Imports

5. As a measure of economic welfare, gross domestic product underestimates a country's production of

goods and services
(A) the production of military goods
(B) the production of antipollution devices
(C) crime prevention services
(D) household production : GDP và GNP bỏ sót giá trị của 1 số sản phẩm được sản xuất và tiêu dùng
như: sản phẩm tự cung tự cấp, không được trao đổi trên thị trường; giá trị của những hoạt động kinh
tế phi pháp hoặc hợp pháp nhưng không báo cáo nhằm trốn thuế; giá trị của những thiệt hại về môi
trường
=>NEW bao gồm: giá trị của những hàng hóa, dịch vụ tự cung tự cấp; giá trị của thời gian nghỉ ngơi;
thu nhập từ kinh tế ngầm (cờ bạc, buôn lậu,…); sự cải thiện chất lượng hang hóa, dịch vụ; sự cải
thiện sức khỏe và nâng cao tuổi thọ; tiến bộ và công bằng xã hội
(E) legal services

6. Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation
(khấu hao) is $500 billion. Disposable income (thu nhập khả dụng) is equal to which of the
following?
(A) $1,500 billion
(B) $2,000 billion
(C) $2,500 billion: Thu nhập khả dụng=Thu nhập cá nhân – Thuế cá nhân
(D) $3,000 billion
(E) There is not enough information to answer the question.

7. If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic
product grew by 4 percent, inflation for this year would be
(A)–7%
(B)7%: Tỷ lệ lạm phát= GDP danh nghĩa – GDP thực tế
(C) 8%
(D) 11%
(E) 15%
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 8. In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200.
Thus real GDP was
(A) $150 billion
(B) $100 billion
(C) $50 billion
(D) $25 billion
(E) $4 billion

9. If a worker’s nominal wage rate increases from $10 to $12 per hour and at the same time the
general price level increases by 10 percent, the worker’s real wage has
(A) approximately decreased by 10%
(B) approximately decreased by 20%
(C) approximately increased by 10%
(D) approximately increased by 20%
(E) not changed

10. The value of which of the following is counted in the United States gross domestic product?
(A) Clean air
(B) Child care a father provides for his child
(C) An automobile produced in Sweden by a United States firm
(D) A car produced in the United States and sold in Europe
(E) Medical services not provided due to preventative health care

11. Which of the following represents a leakage (dòng chảy ra) from the circular flow in an economy?
(A) Consumption spending
(B) Government spending
(C) Investment spending
(D) Unemployment benefits
(E) Imports: Các yếu tố được xem là leakages (dòng chảy ra) là những yếu tố làm cho tiền rời khỏi
chu trình kinh tế nội địa và không tiếp tục tái đầu tư vào nền kinh tế của quốc gia đó. Những
leakages này có thể làm giảm tổng cầu trong nền kinh tế.

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 Imports (Nhập khẩu): là khoản chi tiêu cho hàng hóa và dịch vụ được sản xuất ở nước
ngoài. Khi một quốc gia chi tiêu vào nhập khẩu, tiền sẽ ra khỏi chu trình kinh tế nội địa, gây ra
"leakage."
Các đáp án còn lại như consumption spending (A - Chi tiêu tiêu dùng), government
spending (B - Chi tiêu của chính phủ), và investment spending (C - Chi tiêu đầu tư) đều là những
khoản chi tiêu quay vòng lại trong nền kinh tế, không gây ra dòng chảy ra.
Unemployment benefits (D - Trợ cấp thất nghiệp) là khoản chi mà chính phủ trả cho người
dân và thường quay lại chu trình kinh tế khi người dân tiêu dùng, không phải là dòng chảy ra.

12. In 2017 Sabrina earned an annual salary of $100,000 as an engineer. In 2018, her income rose to
$105,000. The inflation rate in 2018 was 2%. How did Sabrina’s nominal income and real income
change in 2018 compared to 2017?
(A) Nominal income decreased and real income decreased.
(B) Nominal income decreased and real income did not change.
(C) Nominal income increased and real income decreased.
(D) Nominal income increased and real income did not change.
(E) Nominal income increased and real income increased.

13. A continuous increase in the consumer price index is

(A) deflation
(B) stagflation
(C) inflation
(D) recession
(E) disinflation

14. If purchases of education and medical care were counted as investment rather than consumption,
gross domestic product would
(A) not change, because there is no change in total expenditures
(B) increase, because investment is included in gross domestic product but consumption is not
(C) increase, because consumption is included in gross domestic product but investment is not
(D) decrease, because investment is weighted more heavily than consumption in calculating gross
domestic product

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 (E) decrease, because consumption is weighted more heavily than investment in calculating gross
domestic product.

15. The consumer price index (CPI) does not measure the true cost of inflation because
(A) improvements in the quality of goods or services are not fully reflected
(B) lenders are better off when actual inflation is less than anticipated inflation
(C) borrowers are better off when actual inflation is greater than anticipated inflation
(D) changes in consumers’ real income are not accounted for
(E) consumers may substitute toward more expensive goods without being significantly worse off

16. The consumer price index (CPI) measures the

(A) value of current gross domestic product in base-year dollars
(B) prices of all consumer goods and services produced in the economy
(C) prices of selected raw materials purchased by firms
(D) prices of a specific group of goods and services purchased by consumers
(E) prices of imports, but not exports

17. Which of the following is an example of how the consumer price index exhibits bias in its estimates
of changes in the cost of living?
(A) Energy prices have a higher impact on inflation than other input costs do.
(B) New products are always overrepresented in the CPI
(C) The assigns greater weight to measures of welfare than it does to economic activity.
(D) Product improvements are not always fully reflected in the calculation of the GDP
(E) The adjusts for the substitution of less expensive goods by consumers.

18. A criticism of the consumer price index as a measure of the cost of living is that it
(A) understates the rate of inflation because the base year is outdated
(B) understates the rate of inflation because it only considers spending by typical urban consumers
(C) understates the rate of inflation because it reflects the increase in prices due to the introduction of
new goods
(D) overstates the rate of inflation because it ignores consumers’ ability to substitute among similar
items when prices change
(E) overstates the rate of inflation to compensate for statistical errors in data collection

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 19. Which of the following transactions would be counted as investment spending in the calculation of
a nation’s gross domestic product?
(A) Robert buys 100 shares of stock in an energy company.
(B) Ming purchases a new delivery truck for her bakery business.
(C) Latasha pays a mechanic to repair her personal car.
(D) Sam earns interest on Canadian government bonds.
(E) Taylor receives unemployment benefits when he loses his job.

20. Which of the following transactions would represent an addition to a nation's current gross domestic
product?
(A) Ms. Smith purchases a share of stock in an automobile company.
(B) A retailer increases her stock of imported shoes.
(C) The government increases its domestic purchases of food for use by the military.
(D) A corporation sells shoes from last year's inventory.
(E) A mother sells her car to her daughter.

21. In one year, spending on consumption, investment, and government purchases was equal to 103
percent of a country’s gross domestic product. This would be possible only if
(A) the money supply increased
(B) net exports were positive
(C) net exports were negative
(D) the government ran a budget surplus
(E) the government had a balanced budget

22. Suppose that the consumer price index rises from 100 to 200. From this information we may
conclude that
(A) each person’s real income is cut in half
(B) consumer incomes are doubled
(C) the prices in an average consumer’s market basket are doubled
(D) all consumer goods prices are doubled
(E) all prices in the economy are doubled

23. Nominal gross domestic product is best defined as

(A) the market value of all goods and services consumed in a nation in a given year
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 (B) the market value of final goods and services produced in a nation in a given year
(C) the base-year value of total goods and services produced in a nation in a given year
(D) the base-year value of final goods and services produced in a nation in a given year
(E) the market value of all goods and services produced and consumed in a nation in a given year

24. Which of the following transactions will be included in the calculation of Country X's Gross
Domestic Product in 2020?
(A) The sale of corporate stocks
(B) The exchange of a used automobile for a used boat
(C) The purchase of new construction equipment
(D) Social Security checks received by retirees
(E) Carrots grown in a household’s backyard and consumed by the family

25. Which of the following describes scarcity?

(A) Wants are limited.
(B) Wants exceed resources.
(C) Resources are unlimited.
(D) Resources are fully employed.
(E) Resources are allocated efficiently.

26. Scarcity exists because

(A) human wants exceed the productive capacity of the economy
(B) supplies of land and other natural resources are unlimited
(C) physical capital does not depreciate
(D) population and labor force growth are slowing
(E) innovation causes unemployment

27. Which of the following is included in the computation of gross domestic product?
(A) Government transfer payments, such as unemployment benefits
(B) Purchases of used goods, such as used cars
(C) Child care tasks performed by househusbands
(D) Total value of business inventories : GDP counts only the change (additions or reductions) in
inventories.

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 (E) Additions to business inventories

28. When the average price level increases by 10 percent in a given year, which of the following must
increase by 10 percent for real output to remain constant?
(A) Real national income
(B) Nominal national income
(C) The international value of the currency
(D) Real interest rates
(E) Nominal interest rates

29. Which of the following explains why the rate of change of the consumer price index tends to
overstate the actual inflation rate?
(A) Consumers will require more income to buy goods whose prices have increased
(B) Nominal wages do not always increase by as much as prices do
(C) When real wages increase, consumers can afford higher-priced goods
(D) Consumers tend to substitute lower-priced goods that may not be represented in the basket of
goods
(E) The basket of goods in the base year is frequently updated with new products.

30. GDP is an imperfect measure of a nation’s economic performance because it does not account for
which of the following?
(A) Purchases made by the nation’s government
(B) Purchases of domestically produced goods by international consumers
(C) Purchases of internationally produced goods by domestic consumers
(D) Goods produced at home for personal consumption
(E) Personal consumption expenditures on durable goods

31.

Which of the following can be concluded from the data above?

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 (A) The base year for the price index was year 1.
(B) The base year for the price index was year 3.
(C) The economy was producing higher-quality goods and services in years 2 and 3 than in year 1.
(D) The economy was experiencing inflation during years 2 and 3
(E) The economy was experiencing deflation during years 1, 2, and 3.

32. Suppose that a typical consumer buys the following quantities of three
commodities in 1993 and 1994.

Which of the following can be concluded about the consumer price index (CPI) for this individual
from 1993 to 1994 ?
(A) It remained unchanged.
(B) It decreased by 25%.
(C) It decreased by 20%.
(D) It increased by 20%.
(E) It increased by 25%.

33.

Assume that an economy produces just two goods, X and Y, as shown in the
table above. If year 1 is the base year, the consumer price index for year 2 in
this economy is

(A) 57.1

(B) 66.7

(C) 100

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 (D) 175

(E) 250

34. Country X produces only apples and bananas. The following table shows prices and
quantities of both products in two years.

Assuming year 1 is the base year, what is the nominal and real gross domestic product for year 2 ?
Nominal GDP Real GDP
A $200 $280
B $200 $200
C $280 $200
D $280 $560
E $560 $280

35. The table below shows a country’s macroeconomic data in 2024

The country's gross domestic product is

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 (A) $220 billion

(B) $282 billion

(C) $304 billion

(D) $309 billion

(E) $347 billion

36.

According to the data above, in which year was real gross domestic product (GDP) the largest?
(A)1980
(B)1990
(C) 2000
(D) 2010
(E) 2015

37. For an economy consisting of households and businesses only, which of the following is consistent
with the circular flow of income and production?
(A) Households are producers of goods and services and consumers of resources.
(B) Households are users of resources, and businesses are sources of saving.
(C) Households are suppliers of resources and consumers of goods and services.
(D) Businesses are users of taxes, and households are sources of taxes.
(E) Businesses are suppliers of resources and consumers of goods and services.

38. The term “value added” for a firm is best defined as which of the following?
( A) The firm’s sales
(B) The firm’s sales minus depreciation

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 (C) The firm’s sales minus its losses
(D) The firm’s sales minus the cost of inputs purchased from other firms
(E) The firm’s profits from its sales

39. Inflation occurs when there is a sustained increase in which of the following?
(A) Real gross domestic product
(B) The average price level
(C) The price of any commodity
(D) Labor productivity
(E) The unemployment rate

40. Suppose the gross domestic product is $15 million, where consumer spending is $4 million,
investments are $2 million, government spending is $5 million, and exports are $4 million. How
much is spent on imports?
(A) $2 million
(B) $3 million
(C) $5 million
(D) $4 million
(E) $0

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