Module 2.1 [5.4] MCQ - MACRO - Circular Flow and Gov't Defecits

Which of the following is not a flow represented in the circular flow diagram?

• prices and employment

• taxes and government spending

• income and expenditures

• factors of production and factor payments

• saving and lending

Which of the following leaks out of the circular flow in the expanded circular-flow model?

• investment spending

• government transfers

• private savings

• the value of exports

• government spending

Which of the following is injected into the circular flow in the expanded circular-flow model?

• the value of imports

• government transfer payments

• taxes

• private savings

• factor payments

GDP is equal to

• the total value of all final goods and services produced in an economy during a given period.

• C + I + G + M

• the total value of intermediate goods plus final goods.

• the total income received by producers of final goods and services.

• the total of all goods and services sold during a year.

To calculate GDP using the income approach requires summing which of the following?

• wages, rent, interest, and profit

• C, I, G, and (X - M)

• the value of all intermediate goods

• all injections into the circular flow

• disposable income of all households

The value-added approach to calculating GDP involves adding up

• the total income spent on all final goods and services.

• the contributions of each firm to the total value of each final good or service.

• the combined earnings of each factor of production.

• the total cost of producing each final good and service.

• the income and expenditure flows in the circular flow of the economy.

Which of the following components makes up the largest percentage of GDP measured by aggregate spending?

• consumer spending

• investment spending

• government purchases of goods and services

• exports

• imports

If government spending exceeds tax revenues, which of the following is necessarily true? There is a

• positive budget balance.

• budget deficit.

• recession.

• government debt.

• contractionary fiscal policy.

Which of the following fiscal policies is expansionary?
TAXES | GOVERNMENT SPENDING

• increase by $100 million | increases by $100 million

• decrease by $100 million | decreases by $100 million

• increase by $100 million | decreases by $100 million

• decrease by $100 million | increases by $100 million

• both (a) and (d)

The cyclically adjusted budget deficit is an estimate of what the budget balance would be if real GDP were

• greater than potential output.

• equal to nominal GDP.

• equal to potential output.

• falling.

• calculated during a recession.