Connections: Sample Quiz

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1. Payments which do not require a good or service in return, such as welfare payments, food stamps, or social security, are considered:

transfer payments.
inventory investments.
real, not nominal, NDP.
rental payments.

2. Which of the following is a correct way to divide GDP into parts?

Consumption, Interest, Government Spending, Net Exports
Consumption, Income, Government Spending, Net Exports
Consumption, Investment, Government Spending, Net Exports
Consumption, Inventory, Government Spending, Net Exports

3. Say's Law says that:

prices that rise most during prosperity will fall least during recession.
supply creates its own demand.
falling prices increase the value of money.
good money drives bad money from circulation.
bad money drives good money from circulation.

4. Says' law was developed to argue that:

Malthus was wrong in saying that population growth would exceed growth in food production.
there could no problem of production outrunning the ability of people to consume.
the value of any commodity was equal to the labor embodied in it.
inflation was always caused by too much money chasing too few goods.

5. The chief economists of the tiny country of Luxemdorf finds that in the past year the government deficit was 500 ducats, investment was 1000 ducats, and private sector savings was 1100 ducats. From these data he can conclude that:

the country imported more than it exported.
the country was suffering from a serious recession.
tax revenues were 400 ducats.
illiquidity in the country was increasing.

6. Which of the following is NOT a transfer payment?

A social security check to a retired worker
Food stamps to a unemployed teacher
A payroll check to an army private
A state scholarship to a needy and smart student

7. Which of the following is NOT considered investment in computing GDP?

Construction of condominiums
An increase in the number of unsold cars at car dealerships
The purchase of airplanes by American Airlines
The purchase of 100 shares of American Airlines stock by an adventurous student
Construction of a shopping mall

8. How does the Commerce Department treat output which is produced by business during a year but which is not sold during that year?

They do not count it until the year in which it is sold.
They include it as part of proprietor's income.
They include it as part of depreciation.
They include it in investment spending.

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Copyright Robert Schenk