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Quiz 1
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1
The word "net" in the term "net domestic investment" means that:
A)resales of existing capital equipment are not counted
B)investment by foreigners in the U.S. is not counted
C)investment to replace capital that was used up in the production of the year's output is not counted
D)depreciation must be added to gross investment
2
If gross investment exceeds depreciation:
A)the nation's capital stock will expand
B)net investment will be negative
C)net investment will exceed gross investment
D)the nation's capital stock will shrink
3
"The market value of all final goods and services produced within a nation in a given year." This best describes:
A)Net domestic product
B)Gross domestic product
C)National income
D)Personal income
4
The XYZ Corporation raised $50 million in the sale of common stock last year. It spent $30 million on new plant and equipment, $15 million on replacing equipment that had worn out during the previous year, and $5 on a new advertising campaign. XYZ's:
A)Gross investment was $50 million
B)Net investment was $45 million
C)Gross investment was $45 million
D)Net investment was $35 million
5
ABC Company had net investment of $20 million and gross investment of $25 million last year while paying $3 million in sales tax receipts to the government. Its depreciation last year was:
A)$17 million
B)$22 million
C)$8 million
D)$5 million
6
Last year nominal GDP increased by 8% while real GDP increased by 10%. From this, we can conclude that:
A)net investment was positive last year
B)the price level increased last year
C)the price level decreased last year
D)unemployment increased last year
7
Refer to the following diagram:
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After 2000:
A)the price index is less than 100
B)real GDP is growing faster than nominal GDP
C)the price level is falling
D)the price index exceeds 100
8
GDP:
A)includes the value of both market and nonmarket transactions
B)corrects for improved product quality over time
C)corrects for improved productivity that results in increased leisure time
D)does not include transactions conducted "off-the-books"
9
Real GDP is found by:
A)adding depreciation to nominal GDP
B)adjusting nominal GDP by the GDP price index
C)adding up the dollar value of all transactions in the economy in a given year
D)excluding exports and imports from nominal GDP
10
In calculating GDP:
A)both exports and imports are added
B)neither exports nor imports are added
C)exports are added and imports are subtracted
D)imports are added and exports are subtracted





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