Question 1

In the GDP accounts production equals

Accepted Answer

income

Answer

income - imports

Answer

income + saving

Answer

income - government expenditures

Question 2

In the simple circular-flow diagram, with households and firms, GDP can be computed as the

Accepted Answer

income received by households, in the form of wages, rent and profit.

Answer

payments made by firms for labor.

Answer

income received by households in the form of wages.

Answer

profits received by households.

Question 3

Social Security payments are indexed for inflation using

Accepted Answer

the CPI.

Answer

the PPI.

Answer

the GDP deflator.

Answer

real interest rates.

Question 4

The CPI differs from the GDP deflator in that

Accepted Answer

increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.

Answer

increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.

Answer

the CPI is a price index, while the GDP deflator is an inflation index.

Answer

substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.

Related quizzes