National income:
a. is included in gross private domestic investment.
b. includes the sum of all payments made to resource owners for the use of their resources.
c. includes depreciation.
d. is often measured as C + I + G + (X M).
QUESTION 2The net exports effect exists because a:
a. higher price level will reduce interest rates and stimulate foreign investment.
b. lower price level will make domestically produced exports less expensive relative to foreign goods.
c. higher price level will reduce the purchasing power of money.
d. lower price level will encourage Americans to import more foreign goods.
QUESTION 3National income is calculated by subtracting ____ from GDP.
a. depreciation.
b. investment and net exports.
c. Social Security insurance contributions and transfer payments.
d. corporate and personal income taxes.
QUESTION 4According to the interest rate effect, as the price level:
a. rises, people feel poorer and buy less.
b. rises, United States products become more expensive and foreigners buy less U.S. goods.
c. rises, interest rates fall, and people buy less.
d. rises, interest rates rise, and people buy less.
e. falls, interest rates fall, and people buy less.
QUESTION 5The sum of payments made to resource owners for the use of their resources is:
a. gross domestic product.
b. net domestic product.
c. national income.
d. personal income.
e. disposable personal income.
QUESTION 6The interest rate effect predicts that higher prices:
a. make it more expensive to borrow, leading to higher interest rates and less investment.
b. make people worse off by reducing the value of their wealth, leading them to save more and spend less.
c. decrease borrowing, leading to higher interest rates and less investment.
d. decrease borrowing, leading to lower interest rates and more investment.
e. increase borrowing, leading to higher interest rates and less investment.
QUESTION 7When depreciation is subtracted from:
a. personal income, we get national income.
b. gross domestic product, we get national income.
c. gross domestic product, we get personal income.
d. disposable personal income, we get gross domestic product.
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