Deck 4: Measuring Gdp and Economic Growth

Question 1

Which of the following expenditures associated with the production of a new high -performance SUV will be directly included in GDP?

A) the purchase of used welding robots to assemble to vehicles
B) the sale of bonds to finance the construction of the assembly plant
C) the purchase of new machine tools to manufacture the engines
D) the purchase of new tires to be installed on the new vehicles

Answer 1

C

Question 2

In the United States, GDP is typically measured

A) weekly.
B) quarterly.
C) daily.
D) monthly.

Answer 2

B

Question 3

Which of the following is a final good?

A) flour used by the bakery to bake cookies
B) flour purchased at the store to bake cookies
C) the memory chips in your new smart phone
D) a share of IBM stock

Answer 3

B

Question 4

Which of the following expenditures is for an intermediate good?

A) General Motors buys new tires to put on the cars itʹs building.
B) A U.S. tire firm sells new tires to Canada.
C) The government buys new tires for its military vehicles.
D) You buy new tires for your used car.

Question 5

Intermediate goods are excluded from GDP because

A) they represent goods that have never been purchased so they cannot be counted.
B) their inclusion would involve double counting.
C) their inclusion would understate GDP
D) the premise of the question is incorrect because intermediate goods are directly included in calculating GDP.

Question 6

GDP does not directly include intermediate goods because

A) that would understate the true size of GDP.
B) intermediate goods are not useful to consumers.
C) that would count the intermediate goods twice.
D) intermediate goods are not valuable.

Question 7

A ton of coal purchased by your local utility to burn to make electricity would be best described as

A) a final product.
B) an intermediate good.
C) a financial asset.
D) a used good.

Question 8

Gross domestic product GDP) measures the

A) number of final goods and services sold in the economy in a given time period.
B) number of final goods and services produced in the economy in a given time period.
C) market value of final goods and services produced in the economy in a given time period.
D) market value of old and new final goods and services sold in the economy in a given time period.

Question 9

Gross domestic product GDP) is the in a given time period.

A) value of all final and intermediate goods and services produced by the economy excluding those goods exported to foreign nations
B) sum of wage and salary compensation of employees and corporate profits
C) value of personal consumption expenditures, gross private domestic investment, and federal government expenditures
D) market value of final goods and services produced by the economy

Question 10

If Nike, an American corporation, produces sneakers in Thailand this would

A) count as part of U.S. GDP since it is a U.S. corporation.
B) add to neither U.S. GDP nor Thailandʹs GDP.
C) count for both Thailandʹs GDP and U.S. GDP.
D) add to Thailandʹs GDP but not to U.S. GDP.

Question 11

Gross domestic product

A) includes all the goods and none of the services produced in an economy in a given time period.
B) measures the value of the aggregate production of goods and services in a country during a given time period.
C) is generally less than federal expenditure in any time period.
D) measures the value of labor payments generated in an economy in a given time period.

Question 12

The calculation of the final goods and services sold in an economy would NOT include

A) Ford Motor Companyʹs purchase of a new industrial robot to be used to produce cars.
B) General Motorsʹ purchases of tires for new automobiles.
C) the purchase of a service by a household.
D) the purchase of a lawnmower by a household.

Question 13

Gross domestic product is the total

A) market value of all goods and services produced within a country in a given time period.
B) amount of final and intermediate goods and services
C) market value of all final goods and services
D) market value of all final and intermediate goods and services

Question 14

In the definition of GDP, ʺmarket valueʺ refers to

A) valuing production in production units.
B) not counting intermediate products.
C) when the production took place.
D) valuing production according to the market price.

Question 15

The word ʺfinalʺ in the definition of GDP refers to

A) counting the intermediate goods and services used to produce GDP.
B) valuing production at market prices.
C) the time period when production took place.
D) not counting intermediate goods or services.

Question 16

GDP is defined as the market value of all in a given time period.

A) final goods and services produced in a country
B) final goods and services produced by citizens of a particular country regardless of where in the world they are located
C) final goods and services produced in a country by only the citizens of the country
D) final goods produced in a country

Question 17

Gross domestic product is a measure of the total value of all

A) sales in an economy over a period of time.
B) capital accumulation in an economy over a period of time.
C) consumer income in an economy over a period of time.
D) final goods and services produced in an economy over a period of time.

Question 18

In 2011, Ozzie purchased a 2008 Ford Escort from his neighbor for his son, purchased a 2007 ʺone ownerʺ Camry from Larchmont Toyota for his wife, bought a 2011 new Ford for himself, and sold his 2000 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2011?

A) the purchase of the Ford and the Caravan
B) only the purchase of the Ford
C) all four transactions
D) all three purchases but not the sale

Question 19

A loaf of bread purchased by one of your instructors would be best described as

A) an intermediate good.
B) a used good.
C) a financial asset.
D) a final good.

Question 20

If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexicoʹs GDP and U.S. GDP .

A) increases; decreases
B) increases; increases
C) increases; does not change
D) does not change; increases

Question 21

In the circular flow diagram, aggregate expenditure includes the sum of

A) income and saving.
B) saving and investment.
C) consumption, investment, and saving.
D) consumption and investment.

Question 22

In the above figure, flow B represents .

A) household purchases of goods and services
B) firmsʹ payments for labor services
C) household income
D) household borrowing

Question 23

The factor market can best be described as where

A) firms buy the services of labor, land and capital.
B) households buy goods and services.
C) governments sell goods and services.
D) firms buy goods and services.

Question 24

The circular flow diagram shows

A) how nominal GDP is distinct from real GDP.
B) the flows between different sectors of the economy.
C) the effects of inflation in a simple economy.
D) how the prices of factors are determined.

Question 25

The circular flow diagram indicates that

A) firms buy the services of factors of production from the government.
B) households sell goods and services to the government.
C) households sell the services of factors of production to firms.
D) firms buy goods and services from households.

Question 26

In the circular flow of income

A) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from other firms.
B) households sell goods and services while firms sell factors.
C) households demand goods and services that are supplied by firms, and the firms demand factors that are supplied by intermediate firms.
D) households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms.

Question 27

In computing GDP, it is essential to

A) avoid double counting.
B) include government transfer payments.
C) count all intermediate products directly as they are produced.
D) include government tax revenues.

Question 28

Which of the following is true regarding the circular flow diagram?
I. ʺAggregate incomeʺ is the flow of income earned by firms.
II. Retained earnings are considered income earned by firms rather than part of householdsʹ income.
III. The government, households, and firms all have transactions in the goods market.

A) III only
B) I and II
C) I and III
D) I only

Question 29

The circular flow shows that the household sector earns its income by

A) selling goods and services.
B) buying factors of production.
C) selling financial assets.
D) selling factors of production.

Question 30

If we compare the four sources of spending in the economy we see that

A) government expenditure is the largest.
B) business investment is the largest.
C) household consumption is the smallest.
D) household consumption is the largest.

Question 31

In the circular flow model of an economy, households

A) receive income from producers for the use of factors in the factor markets.
B) receive income from buyers of goods and services.
C) receive income from the sale of factors in the goods markets.
D) pay firms for the use of their factors.

Question 32

Compared to the other sources of spending, net exports is

A) small and positive.
B) large and negative.
C) large and positive.
D) small and negative.

Question 33

GDP counts only final goods and services because this

A) method avoids double counting of goods going through several stages of production.
B) method avoids understating the value of GDP produced during a given year.
C) amount can be more easily determined in the marketplace.
D) method avoids including any goods that are produced this year and sold next year.

Question 34

Double counting counting the same thing twice) in GDP accounting is avoided by not including

A) intermediate goods.
B) illegal activities.
C) depreciation.
D) net exports.

Question 35

In the circular flow diagram, aggregate expenditure includes

A) consumption expenditure, investment, government expenditure and net exports
B) consumption expenditure, saving, investment and net exports
C) consumption expenditure, saving, investment and government expenditure
D) consumption expenditure, saving, government expenditure and net exports

Question 36

In the above figure, flow B represents householdsʹ .

A) consumption expenditures
B) income
C) saving
D) investment

Question 37

The circular flow of income shows that

A) firms generally are the demanders in the goods markets and suppliers in the factor markets.
B) governments purchase goods and services.
C) households transact only in the goods market.
D) None of the above answers is correct.

Question 38

The circular flow diagram shows that

A) the total amount of income generated by the economy equals the total purchases of final goods and services.
B) consumption expenditure equals saving.
C) the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services.
D) goods and factor markets are independent.

Question 39

The circular flow model shows that consumer goods and services produced by business firms are sold in the

A) goods market.
B) labor market.
C) factor market.
D) financial market.

Question 40

In the circular flow of economic activity

A) aggregate income measures the dollar value of labor resources only.
B) aggregate expenditure is measured as it moves through the financial markets.
C) aggregate expenditure measures the dollar value of purchases of factors.
D) aggregate expenditure measures the dollar value of purchases of final goods and services.

Question 41

Depreciation is defined as the

A) decrease in the stock of capital due to investment by firms.
B) increase in the stock of capital due to investment by firms.
C) decrease in the stock of capital due to wear and tear.
D) increase in the stock of capital due to wear and tear.

Question 42

Gross domestic product is the

A) total amount that buyers spent on the final goods and services produced in a country during a specific time.
B) total amount of income earned in producing the final goods and services in a country during a specific time.
C) value of the final goods and services produced in a country during a specific time.
D) All of the above answers are correct.

Question 43

GDP equals

A) C+I+G+X+M).
B) C+S+G+X-M)
C) C+I+G+X-M)..
D) C+S+G+X-M),

Question 44

Gross investment is equal to

A) depreciation plus net investment.
B) depreciation minus net investment.
C) net investment minus capital stock.
D) net investment plus capital stock.

Question 45

Which of the following is correct?

A) Aggregate income, aggregate expenditure and GDP are all equal.
B) Aggregate expenditure equals GDP but is less than aggregate income.
C) Aggregate income is greater than aggregate expenditure but equal to GDP.
D) Aggregate income is greater than GDP but equal to aggregate expenditure.

Question 46

In the above figure, household income is shown by flow

A) A.
B) B.
C) C.
D) F.

Question 47

Total output and total income in the circular flow model

A) are measures of the economyʹs level of savings.
B) include only intermediate goods.
C) are related because national income is less than national product.
D) are equal to each other.

Question 48

Gross investment equals

A) net investment + depreciation.
B) depreciation + change in inventories.
C) net investment + change in inventories.
D) net investment - depreciation + change in inventories.

Question 49

Which of the following relationships is correct?

A) Consumption expenditure = Net Investment - Depreciation
B) Depreciation = Gross Investment - Consumption expenditure
C) Net Investment = Gross Investment + Depreciation
D) Gross Investment = Net Investment + Depreciation

Question 50

Which of the following are equal to one another?
I. aggregate production
II. aggregate expenditure
III. aggregate income

A) II equals III, but not I.
B) I equals II equals III.
C) I equals III, but not II.
D) I equals II, but not III.

Question 51

Net investment equals

A) capital stock minus depreciation.
B) gross investment minus depreciation.
C) gross investment/depreciation.
D) the total quantity of plant, equipment and buildings.

Question 52

Gross domestic product can be calculated

A) by adding up the income tax returns of all members of the society.
B) by adding up the personal consumption of all members of the society.
C) either by valuing the nationʹs output of goods and services or by valuing the income generated in the production process.
D) by adding up the value of all intermediate goods used in the economy.

Question 53

Comparing aggregate expenditure and aggregate incomes shows that

A) aggregate income is usually greater than aggregate expenditure.
B) aggregate income can not equal aggregate expenditure if we have any savings.
C) they are equal.
D) aggregate expenditure is usually greater than aggregate income.

Question 54

Gross investment equals net investment plus

A) dividends paid to the owners of the company.
B) depreciation.
C) capital gains.
D) capital.

Question 55

In the above figure, consumption expenditure is shown by flow

A) A.
B) B.
C) C.
D) F.

Question 56

The circular flow shows that

A) aggregate production equals aggregate expenditure.
B) aggregate expenditure is less than aggregate income.
C) GDP equals aggregate income.
D) Both answers A and C are correct.

Question 57

Suppose Mail Boxes Etc. buys a new copier for its store for $1000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, has occurred.

A) replacement investment
B) net investment
C) depreciation
D) gross investment

Question 58

According to the circular flow diagram, the dollar value of a nationʹs output is equal to

A) profits.
B) wages.
C) total income.
D) net income minus taxes.

Question 59

Choose the best statement.

A) An increase in compensation of employees increases aggregate income but does not change GDP.
B) GDP equals aggregate expenditure and equals aggregate income.
C) An increase in government purchases increases aggregate expenditure but does not change GDP.
D) GDP always equals aggregate expenditure and sometimes equals aggregate income.

Question 60

Gross domestic product GDP) is

A) the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports.
B) the sum of compensation of employees, proprietorsʹ income, net interest, rental income, corporate profits, depreciation, and indirect business taxes minus subsidies.
C) the value of all final goods and services produced in a country during a year.
D) all of the above

Question 61

The largest component of GDP in the expenditure approach is

A) personal consumption expenditures.
B) net exports.
C) government expenditure on goods and services.
D) gross private domestic investment.

Question 62

GDP can be computed as the sum of

A) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.
B) the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time.
C) all sales that have taken place in an economy over a period of time.
D) the total expenditures of consumers and business over a period of time.

Question 63

Net investment equals

A) gross investment + depreciation.
B) depreciation + addition to inventories.
C) gross investment - depreciation.
D) savings - depreciation.

Question 64

The four categories of expenditure used by the expenditure approach method to calculate GDP are

A) consumption expenditure, taxes, saving and investment.
B) consumption expenditure, investment, government expenditure and net exports.
C) saving, taxes, government expenditure and investment.
D) consumption expenditure, investment, net imports and saving.

Question 65

is gross investment minus .

A) Depreciation; replacement investment
B) The capital stock; depreciation
C) The capital stock; net investment
D) Net investment; depreciation

Question 66

Of the following, the largest component of GDP is

A) personal consumption expenditure.
B) government expenditure on goods and services.
C) gross private domestic investment.
D) net exports of goods and services.

Question 67

If depreciation is less than gross investment, then net investment is

A) zero.
B) negative.
C) positive.
D) This situation could never occur because it is impossible for depreciation to be less than gross investment.

Question 68

GDP using the expenditure approach equals the sum of personal consumption expenditures plus

A) gross private investment plus government expenditure on goods and services.
B) gross private investment plus government expenditure on goods and services minus imports of goods and services.
C) gross private investment plus government expenditure on goods and services plus net exports of goods and services.
D) gross private investment.

Question 69

The expenditure approach measures GDP by adding

A) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, subsidies paid by the government, indirect taxes paid, and depreciation.
B) consumption expenditure, gross private domestic investment, net exports of goods and services, and government expenditure on goods and services.
C) compensation of employees, rental income, corporate profits, net interest, proprietorsʹ income, indirect taxes paid, and depreciation and subtracting subsidies paid by the government.
D) compensation of employees, rental income, corporate profits, net interest, and proprietorsʹ income.

Question 70

In the equation, GDP = C + I + G + X - M, G refers to

A) federal government expenditures plus all transfer payments.
B) the taxes and expenditures of all government units.
C) local, state, and federal government expenditure on goods and services, but does not include transfer payments.
D) local, state, and federal government spending for all purposes.

Question 71

Which of the following is NOT part of the expenditure approach to measuring GDP?

A) net interest
B) personal consumption expenditures
C) net exports of goods and services
D) gross private domestic investment

Question 72

To measure GDP using the expenditure approach you must collect data on

A) saving.
B) exports.
C) inflation.
D) wages.

Question 73

GDP equals

A) the value of the aggregate production in a country during a given time period.
B) aggregate income.
C) aggregate expenditure.
D) all of the above

Question 74

Which of the following is NOT a final good?

A) a new car sold to Avis for use in their fleet of rental cars
B) a hot dog sold to a spectator at a Chicago Bears football game
C) a new computer sold to an NYU student
D) a purse sold to a foreign visitor

Question 75

The difference between gross investment and net investment is

A) depreciation.
B) the capital stock.
C) equal to saving.
D) the real interest rate.

Question 76

Net investment

A) equals gross investment minus depreciation.
B) equals gross investment plus depreciation.
C) is equivalent to the existing capital stock in the economy.
D) is the only measure of investment used to calculate GDP.

Question 77

Net investment is the

A) profit or loss in the stock market.
B) value of software and other network related products.
C) value of the depreciated capital multiplied by the changes in the price level.
D) total amount of gross investment minus depreciation.

Question 78

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

A) government expenditure on goods and services.
B) investment.
C) net exports.
D) the implicit payments for unpaid household work.

Question 79

Two methods of measuring GDP are

A) the income approach and the receipts approach.
B) the income approach and the expenditure approach.
C) the goods approach and the services approach.
D) the saving approach and the investment approach.

Question 80

All of the following are components of the expenditure approach to measuring GDP EXCEPT

A) a Senator from Iowa being paid the monthly salary.
B) Shaniqʹs purchase of a meal at the Olive Garden in Atlanta.
C) the army buying new M1 Abram tanks.
D) Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan.