Deck 7: Measuringgdp

Question 1

Which of the following is a final good?

A) Chocolate chips purchased by Nabisco to make Keebler chocolate chip cookies
B) Chocolate chips purchased by Karen to make chocolate chip cookies for her kids
C) Chocolate chips purchased by Giordano's to make the skillet chocolate chip cookie on its menu
D) Semisweet chocolate used to make Cocoa Krispies cereal

Answer 1

Chocolate chips purchased by Karen to make chocolate chip cookies for her kids

Question 2

Which of the following is an intermediate good?

A) The tomatoes Sally grows in her garden for personal use
B) The tomatoes Carlos buys at a local farmer's stand to make salsa for a party he's hosting
C) The tomatoes Tsubasa buys from the grocery store to make BLT sandwiches
D) The tomatoes a farmer sells to a factory to be used in the production of spaghetti sauce

Answer 2

The tomatoes a farmer sells to a factory to be used in the production of spaghetti sauce

Question 3

The field of macroeconomics studies _______ and microeconomics studies _______.

A) economic aggregates; individual markets
B) individual markets; economic aggregates
C) international variables; variables within a single economy
D) variables within a single economy; international variables

Answer 3

economic aggregates; individual markets

Question 4

A Chinese restaurant buys 1 pound of rice for $1; soy, fish and oyster sauces for $1 each; and assorted vegetables for $20. They create 10 meals with these ingredients and sell each meal for $5. How much does this process contribute to GDP?

A) $23
B) $50
C) $73
D) $27

Question 5

Which of the following is an intermediate good?

A) The rice used to make Chex cereal
B) A bag of Uncle Ben's rice sold to consumers
C) A bag of Quaker's rice cakes sold to consumers
D) All of these are intermediate goods.

Question 6

GDP counts:

A) only final goods and services.
B) only intermediate goods and services.
C) both intermediate and final goods and services.
D) the value of goods produced abroad.

Question 7

The market values of goods and services are used when calculating GDP because they:

A) allow us to compare one economy to another.
B) accurately capture the value of economic activity occurring in black and gray markets.
C) focus on the quantities produced rather than the overall value of production.
D) track production but not spending on services.

Question 8

Which of the following is a final service?

A) A new tire used to replace a flat tired
B) A used car
C) Getting the oil changed in your car
D) Tires purchased by Ford to put on their new Explorers

Question 9

Why doesn't GDP include intermediate goods?

A) Intermediate goods are not sold to consumers.
B) Intermediate goods are never valued at full retail price, leading to an undervaluation of GDP.
C) The value of intermediate goods is included in the final product, and accounting for the value twice would overestimate GDP.
D) All of these are reasons why GDP does not include intermediate goods.

Question 10

The most commonly used metric for measuring the value of a national economy is:

A) gross domestic product (GDP).
B) gross national product (GNP).
C) gross national income (GNI).
D) gross domestic income (GDI).

Question 11

Which of the following topics would most likely be studied in macroeconomics?

A) Consumption at a regional level
B) Production of most goods in the economy
C) Prices in one specific market
D) Investment on a national level

Question 12

You purchase a bag of chocolate chips for $3, a bag of flour for $3, a bag of sugar for $2.00, a half dozen eggs for $1.50, and a half pound of butter for $2.50. You use all these ingredients to make three dozen cookies. Your roommate offers you $15 for the freshly-baked cookies, and you happily accept. How much does this process contribute to GDP?

A) $12
B) $15
C) $22
D) $8

Question 13

Which of the following is not a final good or service?

A) The gallon of milk Jeremy bought to use in his breakfast cereal
B) The notebook Himeko bought to take notes in for her college courses
C) The cheese on the pizza that Teka ordered from Domino's
D) The guacamole Aisha purchased for a Superbowl party

Question 14

Which of the following is not an intermediate good?

A) Tires purchased by Ford to put on their new Explorers
B) Goodyear tires purchased by Priya to put on her car
C) Avocados purchased by Sabra to make their guacamole
D) Beef purchased by McDonald's to make a Big Mac

Question 15

Gross domestic product is the sum of:

A) the market values of all final goods and services produced within a country in a given period of time.
B) the market values of all intermediate goods and services produced within a country in a given period of time.
C) all final goods and services produced by a country's citizens in a given period of time.
D) the market values of all final goods and services produced by a country's citizens in a given period of time.

Question 16

The system we use to measure the value of an economy is called:

A) national income accounting.
B) national economic valuation.
C) macroeconomic summation.
D) national expenditure accounting.

Question 17

Intermediate goods and services are:

A) used only as inputs to produce something else and are not counted as separate items in GDP.
B) goods or services that consumers buy in parts and are included as separate items in GDP.
C) used only as inputs to produce something else and are counted as separate items in GDP.
D) good or services that are not technically complex.

Question 18

Attempting to calculate the value of an economy by adding up the value of every good and service produced would lead to:

A) overcounting, as the value of intermediate products would be counted twice.
B) overcounting, as every good sold is marked-up in price.
C) undercounting, as most goods are not sold in retail markets.
D) undercounting, as the value of money changes over time.

Question 19

Which of the following topics would most likely be studied in microeconomics?

A) Bob's household budget
B) The U.S. federal budget
C) Interest rate policy in Europe
D) Unemployment in Mexico

Question 20

Which of the following is a final good?

A) Coffee grounds used by Elodie to make herself coffee every morning
B) Coffee grounds used by a coffee shop to make the coffee purchased by Udoka every morning
C) Coffee grounds used by Edy's to make coffee flavored ice cream
D) None of these are final goods.

Question 21

U.S. gross domestic product (GDP) includes goods produced by:

A) foreign firms on U.S. soil.
B) U.S. firms on foreign soil.
C) foreign firms on foreign soil.
D) None of these are included in U.S. GDP.

Question 22

Which of the following is an example of a good that would not count toward U.S. GDP?

A) A T-shirt made by H&M in Cambodia
B) A T-shirt made by Organi-tee in Oregon
C) A LED TV made by Toshiba in Georgia
D) A bottle of spring water made by Poland Springs in Maine

Question 23

According to the circular flow model, expenditures by one person translate:

A) directly into income for someone else.
B) indirectly into the value of that person's time.
C) directly into taxes collected by a local government.
D) indirectly into the household's budget.

Question 24

Juan is an American citizen who works for a U.S.-owned architectural firm located in Mexico. Juan's work will contribute toward:

A) U.S. GDP, because he's a U.S. citizen.
B) U.S. GDP, because he's working for a U.S. firm.
C) Mexico's GDP, because he's working in Mexico.
D) both Mexico's and U.S. GDP.

Question 25

John is a U.S. citizen who works for Walmart in Mexico. John's work contributes to:

A) U.S. GDP, but not U.S. GNP.
B) U.S. GNP, but not U.S. GDP.
C) both U.S. GDP and U.S. GNP.
D) neither U.S. GDP nor U.S. GNP.

Question 26

The market value of a good or service is the:

A) price at which the good or service is bought and sold.
B) government's valuation of the good or service using the CPI.
C) price at which producers are willing to sell the good or service.
D) None of these are true.

Question 27

Which of the following is an example of a good that would not count toward U.S. GDP?

A) A car made by Toyota in Tennessee
B) A car made by Ford in Michigan
C) Sneakers made by Nike in Indonesia
D) Sneakers made by New Balance in Ohio

Question 28

Anke is a German citizen who works for Volkswagen in Fresno, California. Anke's work contributes to:

A) U.S. GDP, but not U.S. GNP.
B) U.S. GNP, but not U.S. GDP.
C) Germany's GDP, but not U.S. GDP.
D) Germany's GDP and U.S. GNP.

Question 29

In order to estimate the current annual GDP, economists:

A) multiply the quarterly estimate by four.
B) adjust quarterly GDP estimates to account for seasonal patterns.
C) take an average of the last four quarters measured.
D) adjust GDP for changes in price level.

Question 30

Sally is a U.S. citizen who works for an Italian company at its branch office located in Tulsa, Oklahoma. Sally's work will contribute toward:

A) U.S. GDP, because Sally's a U.S. citizen.
B) U.S. GDP, because she's working in the United States.
C) Italy's GDP, because she's working for an Italian firm.
D) both U.S. and Italy's GDP.

Question 31

The sum of all the money people spend buying final goods and services-omitting spending on intermediate goods, so as not to double-count-equals:

A) the market value of all output sold in the economy.
B) the gross domestic product of the economy.
C) total expenditure in the economy.
D) All of these are true.

Question 32

U.S. gross national product (GNP) includes goods produced by:

A) foreign firms on U.S. soil.
B) U.S. firms on foreign soil.
C) foreign firms on foreign soil.
D) None of these are included in U.S. GNP.

Question 33

Yuto is a Japanese citizen working for Toyota at its manufacturing plant located in Tennessee. Yuto's work will contribute toward:

A) U.S. GDP, because the location of the plant is in the United States.
B) Japan's GDP, because he's a Japanese citizen.
C) Japan's GDP, because he's working for a Japanese firm.
D) both U.S. and Japan's GDP.

Question 34

A bag of coffee made in _______would count toward U.S. GDP.

A) Vermont by Green Mountain Coffee Roasters
B) Colombia by Dunkin' Donuts
C) Canada by Starbucks
D) All of these would count toward U.S. GDP

Question 35

We can measure total production by:

A) adding up what people spend on final goods and services.
B) adding up everyone's asset wealth.
C) comparing the cost of inputs to final sale price.
D) adding up the value of the intermediate goods used to produce final goods and services.

Question 36

Siobhan is an Irish citizen who works for Yankee Candles in Massachusetts. Siobhan's work will contribute toward:

A) U.S. GDP, because she's working for a U.S. firm.
B) U.S. GDP, because she's working in the United States.
C) Ireland's GDP, because she's an Irish citizen.
D) both U.S. and Ireland's GDP.

Question 37

The goods and services that count toward GDP are defined in terms of:

A) the location of production, not the citizenship of the producer.
B) the citizenship of the producer, not the location of production.
C) citizens producing within a country's borders.
D) the total production of companies owned by citizens, regardless of the actual location of production.

Question 38

One way to estimate GDP is to:

A) measure the total expenditure of an economy.
B) add up the value of final and intermediate goods and services sold in a given year.
C) add together the market value of final services sold in the economy.
D) add together the market value of final goods sold in the economy, but not services.

Question 39

Which of the following is an example of a good or service that would count toward U.S. GNP?

A) A 20 oz. bottle of Diet Coke made by Coca-Cola
B) A Fiesta automobile produced by Ford Motor Company
C) A bag of Columbian coffee sold at a Dunkin' Donuts in the United States
D) All of these would count toward U.S. GNP.

Question 40

GDP can be calculated over:

A) a month.
B) a quarter.
C) a year.
D) GDP can be calculated over any of these time periods.

Question 41

Chiku decides to open a bagel shop in an up-and-coming neighborhood. She decides to buy an old pizza shop for $150,000 and spends $10,000 installing new equipment that will allow her to make bagels instead of pizza. How will Chiku's recent purchases affect GDP?

A) Investment will increase by $160,000
B) Investment will increase by $150,000 and consumption will increase by $10,000
C) Consumption will increase by $150,000 and investment will increase by $10,000
D) Investment will increase by $10,000

Question 42

Ted is moving into his first apartment. He decides to buy a barely-used washer/dryer set from Craigslist and hires a company to pick it up and deliver it to his apartment. Which part of this transaction will be counted in GDP?

A) The value of the washer/dryer set
B) The value of the delivery service
C) The value of the washer/dryer set and the delivery service
D) No part of this transaction will count toward GDP.

Question 43

The income approach to calculating GDP is:

A) more accurate than the expenditure approach to calculating GDP.
B) less accurate than the expenditure approach to calculating GDP.
C) the same as the expenditure approach to calculating GDP.
D) simpler to carry out than the expenditure approach to calculating GDP.

Question 44

Inventory is the stock of goods that a company:

A) produces this year, but keeps to sell next year.
B) produced last year and was forced to sell below cost.
C) is producing, but has already sold contractually.
D) produces and sells within a given time period.

Question 45

Which of the following is a consumption good that would be counted in GDP?

A) A new bicycle purchased from Walmart
B) A vintage bottle of wine purchased at an auction
C) A washing machine purchased at a garage sale
D) Newly issued stock purchased online

Question 46

Which of the following is not included in government purchases?

A) Goods and services bought by all levels of government
B) Consumption and investment goods bought by the government
C) Services paid for by the government
D) Goods purchased by foreign governments

Question 47

Which idea does the circular flow model illustrate?

A) Every expenditure someone makes in an economy is exactly equal to another individual's income.
B) Only two markets exist in every economy-input and output.
C) Income is lower when there is more spending on services compared to goods.
D) The flow of two things in the economy-production and money-travel in the same direction.

Question 48

Apple has started producing the newest iPhone, but doesn't plan to sell the phones it makes this year until the official product launch next year. How will these iPhones affect this year's GDP?

A) They are inventory and will decrease GDP
B) They will increase GDP
C) GDP will increase next year, when the phones are sold
D) GDP will increase by less than the full cost of the phone due to depreciation

Question 49

Rachel decides to buy a house for $200,000. The only thing Rachel needs to do is replace all the gutters for $1,000, which she happily does. How will GDP be affected by Rachel's recent purchases?

A) GDP will increase by $199,000.
B) GDP will increase by $190,000.
C) GDP will increase by $201,000.
D) GDP will increase by $1,000.

Question 50

One of the most crucial ideas in macroeconomics is understanding that:

A) zero unemployment is the best way to achieve economic growth.
B) total expenditures or total income both measure total production of an economy.
C) economic downturns can be prolonged by fiscal policy.
D) GNP is the most commonly used measurement of total production.

Question 51

Investment, as a part of GDP, includes:

A) stocks.
B) bonds.
C) gold.
D) factories.

Question 52

Which of the following is a good that would be counted as consumption in GDP?

A) The Subway sandwich Tony ate for lunch
B) The cake Tony baked at home and shared with his roommate
C) The money Tony spent on the purchase of a used car
D) Common stock that Tony purchased for his 401(k)

Question 53

Investment, as a part of GDP, includes:

A) spending on stocks, bonds, and other types of financial instruments.
B) goods bought by firms that plan to use those purchases to produce other goods and services in the future.
C) goods used by government-contracted firms to build roads or bridges.
D) buying a house to renovate and resell it.

Question 54

Amin wins a $1,500 scholarship from the company he interns at during the summer months. Amin decides to spend the scholarship money on an Apple MacBook for his schoolwork. How will GDP be affected by this scenario?

A) Consumption will increase by $1,500.
B) Investment will increase by $1,500.
C) GDP will not be affected because Amin acquired the computer with scholarship money.
D) GDP will decrease by $1,500 because an Apple MacBook is an import to the United States.

Question 55

Which of the following is a consumption good that would not be counted in GDP?

A) The coffee Cyndi buys on her way to work in the morning
B) Cyndi's brand-new car
C) The sunglasses Cyndi bought on clearance sale yesterday
D) The flour Cyndi purchases to make bread for her catering business.

Question 56

Which of the following does not appear in GDP as a part of government spending?

A) Clipboards at the Department of Motor Vehicles
B) Maintenance of government buildings
C) Social Security payments
D) City firework displays on Independence Day

Question 57

A closed economy is one in which:

A) all goods are produced and sold domestically; no outside trade occurs.
B) all goods are consumed domestically; no goods are exported.
C) only intermediate goods are sold domestically.
D) goods are exported, but not imported.

Question 58

Consumption, as a component of GDP, measures:

A) spending on goods and services by individuals and households.
B) spending on luxury items only.
C) spending by the government.
D) spending only on goods, not services, by individuals and households.

Question 59

At the end of the year, 2,500 Ford Explorers are waiting to be delivered to dealerships. How is this overproduction accounted for in this year's GDP?

A) The cars are inventory, and their value will increase investment.
B) The cars are durable goods, and their value will increase consumption.
C) The cars are not counted toward this year's GDP; they will count toward next year's GDP when they are sold.
D) The cars are unsold inventory and they reduce the value of investment.

Question 60

What is included when using the expenditure method to estimate GDP?

A) Consumption, investment, government purchases, and net exports
B) Consumption, government revenues, durable goods, and net exports
C) Consumption, capital investment, government purchases, and exports
D) Consumption, investment, government purchases, and imports

Question 61

Which of the following is an example of a U.S. import?

A) A French bottle of wine consumed by an American
B) An HP computer, made in the United States, purchased by a U.S. college student who plans to study abroad in France
C) A bushel of apples that Canadians pick and enjoy in Vermont
D) An HP computer, made in the United States, purchased by a French student

Question 62

Using the income approach to calculating GDP, in a simple closed economy, the national income equals:

A) wages + interest + rental income + profits.
B) wages + interest + government income + profits
C) wages + government spending + earned interest + investment + profits
D) wages + interest + rental income - profits.

Question 63

In a country open to trade, imports count as _______ while exports are _______.

A) income; expenditure
B) expenditure; rental income
C) rental income; expenditure
D) expenditure; income

Question 64

Transfer payments are:

A) spending that transfers resources from the government to individuals.
B) payments that individuals make to the government.
C) the transfer of stock ownership in lieu of payment with cash or other liquid assets.
D) the transfer of cash for payments of a good or service.

Question 65

What are U.S. imports?

A) U.S. goods sold to foreigners
B) Foreign goods bought by Americans
C) U.S. goods sold to Americans
D) Foreign and U.S. goods sold to foreigners

Question 66

What are U.S. exports?

A) U.S. goods sold to foreigners
B) Foreign goods bought by Americans
C) U.S. goods sold to Americans
D) Foreign and U.S. goods sold to foreigners

Question 67

Real GDP is calculated:

A) on goods and services valued at constant prices.
B) on goods and services valued at current prices.
C) on changes in prices over time.
D) by including the value of goods and services traded in the underground economy.

Question 68

What are the four components that make up GDP in the expenditure approach?

A) Consumption, Investment, Government Purchases, and Net Exports
B) Consumption, Investment, Government Purchases, and Exports
C) Capital, Investment, Government Purchases, and Net Exports
D) Consumption, Income, Government Purchases, and Exports

Question 69

Which of the following is an example of a transfer payment?

A) A federal income tax refund
B) A Social Security payment
C) The money you send to a friend through Venmo
D) The taxes corporations pay on profit

Question 70

Which of the following is an example of a U.S. export?

A) A French bottle of wine consumed by an American
B) An HP computer, made in the United States, purchased by a U.S. college student who plans to study abroad in France
C) A bushel of apples that Canadians pick and enjoy in Vermont
D) An HP computer, made in the United States, purchased by a French student

Question 71

The value-added approach measures the:

A) profit a firm earns selling a new product.
B) utility a consumer gets from a good or service.
C) difference between the sale value of a product and the value of the inputs that went into making it.
D) difference between the sale value of a product in one country and the sale value of the same product in another country.

Question 72

If imports are $4 trillion and net exports are $4 trillion, what must be the value of exports?

A) $0 trillion
B) $8 trillion
C) $4 trillion
D) $2 trillion

Question 73

If total consumption is $5 trillion, investments $2 trillion, government purchases $1 trillion, exports $1 trillion, and imports $3 trillion, the GDP must equal:

A) $6 trillion.
B) $12 trillion.
C) $9 trillion.
D) $3 trillion.

Question 74

If consumption is $7 trillion, wages $10 trillion, interest $1 trillion, rental income $1.5 trillion and profits $2 trillion, what is the value of the economy using the income approach?

A) $14.5 trillion
B) $7.5 trillion
C) $21.5 trillion
D) $13 trillion

Question 75

Which of the following is not included in the income approach to calculating GDP?

A) Rental income
B) Interest
C) Consumption
D) Profits

Question 76

The value-added approach of calculating GDP:

A) is an alternative, and equally valid, way of avoiding the problem of double-counting.
B) breaks down the total amount paid for a product to see how much of it was created at each step of the production process.
C) is especially useful when thinking about the services involved in the resale of existing goods.
D) All of these are correct.

Question 77

Net exports will be negative if:

A) imports exceed exports.
B) exports exceed imports.
C) the economy is closed.
D) None of these are correct.

Question 78

If consumption is $6 trillion, investment is $3 trillion, government purchases are $1 trillion, and GDP is $12 trillion, then net exports must equal:

A) $22 trillion.
B) $10 trillion.
C) $2 trillion.
D) $12 trillion.

Question 79

Net exports equal:

A) total exports plus total imports.
B) total imports minus total exports.
C) total exports minus total imports.
D) total exports plus total imports, minus tariffs.

Question 80

Using the income approach, what is the value of profits in an economy if total expenditure equals $250 billion, wages $150 billion, rental income $50 billion, and interest $25 billion?

A) $250 billion
B) $25 billion
C) $75 billion
D) $150 billion