Question

1. The circular flow diagram implies that if accounting is done correctly, _______.

A) the flow of expenditure must equal the income of the households making those expenditures.

B) the flow of expenditure must exceed the income of the households making those expenditures.

C) the flow of income must exceed the implied value of the factors of production

D) the implied value of the factors of production must exceed the flow of income

2. Total efficiency units of labor is :

A) obtained by dividing the total capital stock of the economy by the total number of workers.

B) obtained by dividing the total number of workers in the economy by the average efficiency of each worker.

C) obtained by multiplying the total number of workers in the economy b the average efficiency of each worker.

D) obtained by multiplying the total population of the economy by the average amount of capital available to each worker.

3. A shoe retailer does give a bill for shoes purchased from his store and does not report his income correctly to evade taxes.

If you pay him $50, ________.

A) the GDP of your country will fall

B) the GDP of your country will increase

C) the GDP of your country will remain unchanged

D) the trade surplus of your country will increase.

4. John is a U.S. citizen who bought a house in Canada. This purchase will lead to a _______.

A) increase in the GDP of Canada. B) decreases in the GDP of U.S. C) decrease in the GDP of Canada D) increase in the GDP of U.S.

Answer 1

1)

Answer :(a)

The expenditure must equal the income of house holds.

2)

Answer: (c)

It is calculated by the multiplying the tital number of workers with the average efficiency of each worker.

3)

Answer: (c)

Such transactions would not be counted in GDP, thus GDP remains unchanged.

4)

Answer: a

GDP of Canada will rise since new property has been created in domestic territory.