1 The total quantity of all goods and services demanded and

1. The total quantity of all goods and services demanded and purchased by an entire economy in a given period of time is called: (a) aggregate demand (b) individual demand (c) national income (d) net national product. _______2. Households in the aggregate use the largest share of their total income to: (a) pay taxes. (b) consume. (c) save. (d) do none of these. _______3. The largest functional share of the national income consists of: (a) corporate profits. (b) proprietors\' income (single owner) businesses. (c) interest and rental income. (d) wages and salaries. _______4. The personal distribution of income refers to the: (a) manner in which income is distributed among specific households or spending units. (b) distribution of income according to basic resource classes, i.e., wages, rents, interest, and profits. (c) division of income on the basis of industry sources, e.g., agriculture, transportation, mining, etc. (d) division of income between personal taxes, consumption expenditures, and saving. ________5. An industry is best defined as a group of firms: (a) located in the same city or geographic area. (b) which use identical production techniques. (c) producing identical or similar products. (d) which compete for labor. ________6. The functional distribution of income refers to the: (a) manner in which income is distributed among specific households or spending units. (b) distribution of income according to basic resource class, i.e., wages, rents, interest, and profits. (c) division of income on the basis of industry sources, e.g., agriculture, transportation, mining, etc. (d) division of income between personal taxes, consumption expenditures, and saving. ________7. Which of the following statements is most consistent with the benefits-received principle of taxation? (a) People with high incomes should pay more taxes than people with low incomes. (b) The best tax is the income tax. (c) Prosperous corporations should pay substantial taxes even if they use few government goods and services. (d) A childless couple should not be required to pay taxes for the support of public schools. _______8. Demand-pull inflation is an increase in the general price level which results from: (a) an upward shift of the aggregate supply curve (b) an increase in the price of a vital productive resource (c) powerful unions coercing firms to pay higher wages (d) an increase in total spending on final goods and services. ________9. Price increases should be limited because: (a) not all wage earners have a cost-of-living clause in their wage contracts (b) rising prices erode the purchasing power of money (c) some families have fixed incomes (d) all of the above. ________10. Which of the following would be EXCLUDED from 2006 GDP? (a) the sale in 2008 of the 2008 farm crop (b) the sale in 2008 of a factory built in 1995 (c) the construction of a factory in 2006 (d) none of the above. ________11. In achieving economic goals, a society may choose to use the tools of: (a) fiscal or monetary policy (b) direct regulatory policy (c) altering aggregate demand (d) all of the above. ________12. Which of the following WOULD BE included in 2008 GDP? (a) the purchase in 2008 of a 2008 model automobile (b) the purchase in 2008 of a share of General Motors common stock (c) the purchase in 2008 of a used 2002 automobile (d) all of the above. ________13. One of the reasons why GDP is not a measure of social welfare is that GDP does not measure: (a) the \"bads\" of production (b) leisure time (c) product improvement (d) all of the above. ________14. Which of the following changes would cause a decline in GDP? (a) an increase in the amount of leisure time for each individual in the economy (b) an increase in the amount of pollution generated by the production of goods (c) a decrease in the quality of goods and services (d) none of the above. ________15. \"Capital consumption allowances\" is the national income accountant\'s term for: (a) gross private domestic investment (b) gross national product (c) capital formation (d) capital depreciation. ________16. In order to keep track of and to understand the macroeconomy, information on the economy is needed. Such data are compiled in the: (a) U. S. Economic Data Bank (b) national advisory accounts (c) national income accounts (d) national economic accounts. ________17. Economic activity moves through the circular flow. Which part of the flow can be used to measure this activity? (a) bottom flow (product approach) (b) bottom flow (expenditure approach) (c) top flow (income approach) (d) either flow can be used, since they are equal. ________18. The value of GDP can be found by adding together (a) wages, consumption, investment, and exports (b) consumption, investment, government spending, and net exports (c) consumption, investment, transfer payments, and exports (d) wages, investment, government spending, and net exports. ________19. GDP measured by the expenditure method and GDP measured by the income method are: (a) different, since the income method includes depreciation and the expenditure method does not (b) different, since the expenditure method excludes disinvestment and the income method does not (c) entirely different (d) always the same. ________20. Which five accounts form the backbone of the national bookkeeping system? (a) GDP, NDP, PI, depreciation, and taxes (b) GDP, NDP, NI, PI and depreciation (c) GDP, NDP, PI, DI and depreciation (d) GDP, NDP, NI, PI and DI. ________21. The process of evaluating all output using an index of prices for a single year is called: (a) deflating (b) inflating (c) inventory adjustment (d) transfer payment. ________22. The length of business cycles in the United States: (a) is 12 months (b) is 15 months (c) is 60 months (d) varies greatly from one to another. ________23. The present national accounting system does not reflect changes in: (a) quality of life (b) quality of goods and services (c) total production of goods and services (d) both 1 and 2. ________24. The economy\'s labor force includes: (a) all persons over the age of 16 who are employed (b) all persons over the age of 16 who are employed plus all those who do not have a job (c) all persons over the age of 16 who are employed plus all those who are unemployed but actively looking for work (d) all persons over the age of 16. ________25. An unemployed person is said to be structurally unemployed if: (a) she lost her job because of a change in technology (b) he has quit his job to look for a better one (c) he has lost his job during a recession (d) any of the above. 2 ________26. Cyclical unemployment exists because: (a) some workers become dissatisfied with their jobs and quit (b) the level of economic activity is subject to fluctuations (c) some workers lack marketable job skills (d) businesses refuse to hire older workers. ________27. Some unemployment of labor is considered normal. It is made up of: (a) frictional and some cyclical unemployment (b) the unemployment resulting from a recession plus structural unemployment (c) frictional and some seasonal unemployment (d) cyclical and some structural unemployment. ________28. Which of the following best defines GDP? (a) the income earned in a year by the suppliers of all factors of production (b) the total market value of goods and services consumed in a year (c) the total market value of all final goods and services produced in the economy during a year (d) the income actually received by households. ________29. An example of a durable good is a: (a) banana (b) visit to the dentist (c) pencil (d) refrigerator. ________30. An example of a nondurable good is a: (a) shoemaking machine (b) dining room table (c) cup of coffee (d) car. ________31. During a period of unanticipated inflation, generally among the losers would be: (a) holders of fixed-dollar assets (b) creditors (c) those with fixed-dollar incomes (d) all of the above. ________32. Which one of these is the largest single component of GDP? (a) government expenditure (b) investment (c) personal savings (d) personal consumption expenditures. ________33. The economic cost of unemployment can be measured by: (a) the amount of unemployment compensation paid (b) the gap between maximum and actual GDP (c) the gap between potential and actual GDP (d) the loss of self-esteem suffered by the unemployed workers. ________34. Of the following groups in the labor force, the incidence of unemployment is highest among: (a) white-collar workers (b) whites (c) blacks (d) blue-collar workers. ________35. An income tax is progressive if: (a) the tax rate varies inversely with income (b) the percentage of income paid as taxes increases as income increases (c) the percentage of income paid as taxes is the same regardless of the size of income (d) the absolute amount paid as taxes varies directly with income. ________36. The largest source of tax revenue for the Federal government is: (a) sales and excise taxes (b) corporate income taxes (c) property taxes (d) personal income taxes. ________37. Using income as the tax base, which of the following is a regressive tax? (a) the corporate income tax (b) the personal income tax (c) a 2 percent general sales tax (d) the Federal inheritance tax. _______38. The key agency in the preparation of the president’s budget is: (a) the Treasury (b) the OMB (c) the Comptroller of the Currency (d) the Department of Defense _______39. The federal government’s fiscal year begins on: (a) January 1 (b) July 1 (c) October 1 (d) November 1 _______40. Compared to federal spending, state and local spending is: (a) twice as large (b) about the same (c) half as large (d) one quarter as large _______41. The largest federal government purchase of final goods and services is for: (a) Social Security (b) Defense (c) Interest on the national debt (d) foreign aid 3 ______42. The most PROGRESSIVE tax listed here is the: (a) Social Security tax (b) federal personal income tax (c) federal excise tax (d) state sales tax ______43. Which is true: (a) The rich are hurt more than the poor by regressive taxes. (b) The poor are hurt more than the rich by progressive taxes. (c) The federal personal income tax is a regressive tax. (d) None of these statements is true. ______44. You can LEGALLY cut down on how much income tax you pay by means of: (a) tax avoidance (b) tax evasion (c) both tax evasion and tax avoidance (d) neither tax evasion nor tax avoidance ______45. The most important source of STATE tax revenue is the _____ tax. (a) property (b) income (c) excise (d) sales ______46. The most important source of LOCAL tax revenue is the _____ tax. (a) property b. income c. excise d. sales ______47. Compared with the citizens of other industrial countries, Americans are: (a) much more heavily taxed (b) somewhat more heavily taxed (c) taxed at about the same rate (d) not as heavily taxed ______48. An example of a public good is: (a) a Honda Accord (b) a movie theater (c) a Boeing 747 (d) a lighthouse ______49. If Adam Smith were alive today he would say that our government is: (a) too small (b) too large (c) too fancy (d) too strange _____50. The role of government grew most rapidly during the period: (a) 1920-1933 (b) 1933-1945 (c) 1945-1960 (d) 1960-1975

Solution

Answer : 1) The correct option is a.

Because when for a given time period say for one year in an economy the total quantity for goods and services is demanded and puchased then this total demand for goods and services for that year is called aggregate demand.

2) The correct option is b.

Households maily earn to spend their income on consumption and after consumption the remaining income is used for other purposes like savings and etc. And hence a largest share of household\'s income is spent on consumption.

3) The correct option is d.

The national income shows the income level of whole nation and in a nation the biggest part of total national income is captured by labour wages and employeer\'s salaries as labour and employeers contributions are greater in income in comparison to others which is added in total national income.

4) The option number a is correct.

Personal distributional income means the total income is distributed on specific households or on household spendings for product units which are consumed by them .

5) The correct option is c.

When all firms in an industry produce and sell the exactly same product, which is called identical product, then all firms work as a group in the industry and hence in this situation the industry is look like a group.

6) The correct option is b.

Because the functional distributional income means the total income of a nation which is distributed among labour wages, capital interests, rent of land and organisational profits as income of a nation occurs from these basic resources.