Deck 5: Gdp: a Measure of Total Production and Income

Question 1

GDP includes the goods and services produced

A) within a country's borders by citizens and by non-citizens.
B) by a country's legal citizens regardless of where in the world they are located.
C) by a country's citizens but not by non-citizen's within the country's borders.
D) within a country's borders by citizens and non-citizens plus goods produced abroad by the country's citizens.
E) within a country's borders by citizens and by non-citizens minus the production abroad by the country's citizens.

Answer 1

A

Question 2

How are final goods and services valued when measuring nominal GDP?

A) at current market prices
B) at base year prices
C) at foreign exchange parity
D) at factor market prices
E) at producer cost

Answer 2

A

Question 3

Which of the following is classified as a final good or service?
I) tires bought by GM to put on new Tahoes
Ii) mustard bought by Subway to put on its sub sandwiches
Iii) your purchase of online access to the Wall Street Journal

A) i and ii.
B) i, ii and iii.
C) iii only.
D) ii and iii.
E) ii only.

Answer 3

C

Question 4

Which of the following is included in U.S.GDP?
I) the rental value of homes owned by U.S.citizens.
Ii) the production of Suburban SUVs by GM in its plant in Mexico.
Iii) Tickets sold by U2 for concerts held in the United States.

A) ii only.
B) ii and iii.
C) i, ii and iii.
D) i and iii.
E) i only.

Question 5

GDP is best defined as the ________ in a given time period.

A) number of goods and services produced within a country
B) number of final goods and services produced within a country
C) market value of the final goods and services produced within a country
D) market value of the final goods and services consumed by a nation's citizens
E) market value of all the goods and services produced within a country

Question 6

If you make dinner for yourself

A) the market value of your dinner is added to GDP.
B) your service in preparing the meal is valued at a cook's wage and added to GDP.
C) none of what you bought to prepare for dinner is included in GDP.
D) only the market value of ingredients that you purchased this year is added to GDP.
E) the difference between the cost of the ingredients that you purchased this year and the market value of the dinner is added to GDP.

Question 7

To calculate GDP it is necessary to add up the market value of all the ________ produced within a country during a year.

A) goods but not services produced
B) goods and services produced
C) intermediate goods and services produced
D) final goods and services produced
E) intermediate goods and services produced and all the final goods and services produced

Question 8

The total production within an economy is measured as

A) Gross Home Product.
B) Total Domestic Output.
C) Annual Production Value.
D) Gross Domestic Product.
E) Total Annual Output.

Question 9

Gross Domestic Product is equal to the market value of all the final goods and services ________ in a given period of time.

A) produced within a country
B) consumed within a country
C) consumed by the citizens of a country
D) produced by the citizens of a country
E) produced and consumed within a country

Question 10

Measuring total production by valuing items at their market value allows us to

A) separate the value of different goods with identical prices.
B) separate the value of different goods with different prices.
C) add together the value of different goods that have different prices.
D) add together the value of identical goods that have identical prices.
E) ignore the problem that goods and services differ in how long they last.

Question 11

Where are the final goods and services produced that are included in Germany's GDP?

A) within Germany
B) anywhere, as long as they are produced using German resources
C) outside of Germany
D) anywhere, as long as they are produced using German labor
E) within Germany but only if they are produced using only German resources

Question 12

Which of the following correctly describes a final good?
I) A final good is bought by its final consumer.
Ii) A final good can be used by a firm as a component of another good or service.
Iii) Investment goods cannot be a final good.

A) i only.
B) i and ii.
C) i, ii and iii.
D) i and iii.
E) ii and iii.

Question 13

Wobet is a small country that produces only steak and potatoes. Steaks have a price of $10 each and potatoes have a price of $1 each. Suppose that Wobet produces 10 steaks and 20 potatoes in 2010.Using ________, Wobet has GDP equal to ________.

A) market value; 30 units
B) a market basket; 30 units
C) market value; $120
D) real value; $120
E) a price index; $120

Question 14

A measure of a country's production is its

A) gross daily production.
B) general daily product.
C) general domestic production.
D) gross domestic product.
E) gross total output.

Question 15

Which of the following is included in Germany's GDP?
I) BMWs produced in a German owned factory in South Carolina
Ii) the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange
Iii) china produced by the English owned Wedgewood Company at a factory in Berlin, Germany

A) i and iii
B) ii only
C) iii only
D) i and ii
E) None of the above answers are correct.

Question 16

What does GDP measure?

A) value of final goods and services
B) value of all consumer purchases
C) value of all sales
D) value of all goods and services produced
E) value of consumer wealth

Question 17

Gross Domestic Product is defined to be the market value of all the final goods and services produced during a given time period

A) within a country.
B) within and outside a country by that country's citizens.
C) by citizens of the country, regardless of their place of residence.
D) by only legal residents of the country.
E) within a county minus the market value of all the final goods and services produced by that country's citizens outside the country.

Question 18

Which of the following is NOT directly included in Canadian GDP?

A) The purchase of tickets to a Kanye West concert in Montreal.
B) The sale of tickets to the Vancouver Oympics to U.S.citizens.
C) Gasoline purchased by a tour bus operator in Quebec.
D) Bus tickets sold to tourists for a tour bus ride in Montreal.
E) All of the items would be included in Canadian GDP.

Question 19

To calculate GDP it is necessary to

A) add the total amounts of all the goods produced.
B) use the market price to place a dollar value on each good produced.
C) use production cost to place a dollar value on all goods produced.
D) use the average market price over the last five years to place a dollar value on all goods produced.
E) average the cost of producing a good with the price of the good to place a dollar value on all goods produced.

Question 20

Gross Domestic Product measures the

A) quantity of the goods and services produced in a given year, listed item by item, within a country.
B) income of the business sector within a country.
C) market value of the final goods and services produced in a given year within a country.
D) measures the market value of the domestic labor in a given year within a country.
E) market value of the final goods and services consumed by households in a given year within a country.

Question 21

Expenditures on U.S.produced steaks, shoes, and doctor visits are most likely classified as

A) consumption expenditure.
B) investment.
C) government expenditure on goods and services.
D) net exports of goods and services.
E) net imports of goods and services.

Question 22

If a firm does not sell all of the goods that it produces in a given time period, then the goods

A) do not count in GDP ever.
B) do not count in GDP for that time period but always count next period.
C) count positively in GDP as inventory investment.
D) count negatively in GDP as inventory investment.
E) count in GDP the period they are sold to the final user.

Question 23

In measuring GDP, which of the following is included?

A) the value of preparing meals at home
B) the value of stocks and bonds bought and sold
C) the value of used goods when they are sold
D) the value of increases in business inventories
E) the value of durable consumption goods but not the value of nondurable consumption goods.

Question 24

Which of the following would NOT be directly included in the U.S.GDP in 2010?

A) the market value of restaurant meals sold in 2010
B) the market value of the jet fuel bought by Delta to use for its flights in 2010
C) the value of the automobiles produced in 2010 at the Toyota plant located in Georgetown, KY
D) legal services provided to first time home buyers during 2010
E) the purchase of a new home in Atlanta, Georgia in 2010

Question 25

Which of the following is a final good or service?

A) tires purchased by Ford for use on one of their SUV's
B) the new economics textbook you are using
C) the hair gels used by a hair stylist at the local hair salon
D) the butter used by a chef to make butter cream frosting
E) the taco shells purchased by Taco Bell for use in their tacos

Question 26

Net exports of goods and services is equal to the value of

A) exports plus the value of imports.
B) imports minus the value of exports.
C) domestic consumption minus the value of imports.
D) exports minus the value of imports.
E) domestic consumption minus the value of exports.

Question 27

This year a firm produces $100 million worth of cars this year and sells $102 million worth of cars.Which of the following is true?

A) GDP for this year will increase by $100 million.
B) GDP for this year will increase by $102 million.
C) Inventory investment will increase by $2 million.
D) GDP for this year will increase by $202 million.
E) The premise of the question is wrong because it is impossible for a firm to sell more than it produces in a given time period.

Question 28

Economists define investment to include purchases of

A) capital goods and inventories.
B) capital goods, household durable goods, and inventories.
C) capital goods, such as tools, instruments, and buildings.
D) capital goods, equity stocks, and bonds.
E) capital goods, equity stocks, and inventories.

Question 29

Bob's Funky T-shirts began the year with 1,000 shirts in inventory, produced 10,000 shirts during the year and ended the year with 1,100 shirts in inventory.The 100 shirts added to his inventory will be classified as

A) consumption expenditure.
B) investment.
C) net exports of goods and services.
D) exports of goods and services.
E) nondurable consumption goods.

Question 30

A restaurant buys fish to offer as a daily menu special.The purchase of the fish by the restaurant is

A) a consumption expenditure.
B) an investment.
C) an intermediate good.
D) an example of government expenditures on goods and services.
E) part of net exports if the fish was caught beyond the U.S.border.

Question 31

When measuring GDP,

A) the government sector is not included because it is the public sector not the private sector.
B) the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue.
C) only the federal government's expenditure on goods and services are included.
D) the expenditure on goods and services by all levels of government are included.
E) the government sector is not counted because it does not produce goods and services.

Question 32

Consumption goods and services include

A) washing machines and tickets to football games.
B) new homes and existing homes (as long as improvements have been made to the existing home).
C) tickets to concerts and medical care provided to veterans by the government.
D) new and used textbooks as long as they are sold via stores or online.
E) vacation time accumulated by workers.

Question 33

Which of the following is included as investment in GDP?
I) cars produced during the year but unsold at the end of the year
Ii) new capital equipment produced and purchased during the year
Iii) purchases of a company's stocks and bonds

A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii

Question 34

Government expenditure on goods and services include i) the New York City's library's purchase of new books
Ii) Washington D.C.'s purchase of gas for its city buses
Iii) California's payment of wages to prison guards.

A) i and ii.
B) i and iii.
C) ii and iii.
D) i, ii and iii.
E) i only.

Question 35

Investment is the expenditure done by

A) savers.
B) firms.
C) governments.
D) the rest of the world.
E) Both answers A and B are correct.

Question 36

Investment includes

A) GM's purchase of robotic machinery.
B) student purchases of laptops.
C) Walmart's purchase of health insurance for its workers.
D) the New York City library's purchase of new books.
E) wages paid to military personnel.

Question 37

Which of the following is a final good or service?

A) the grilled chicken purchased by Taco Bell for use in their burritos
B) a new replacement muffler installed by Midas Mufflers
C) the fertilizer purchased by Royal Lawn and Landscape
D) the computers purchased by Office Depot for sale to its customers
E) the CPUs purchased by Dell to be used in their computers

Question 38

Investment is defined as the purchase of

A) any financial asset only.
B) additions to inventories only.
C) financial assets and inventories only.
D) the purchase of new capital goods and additions to inventories.
E) the purchase of new capital goods but not additions to inventories.

Question 39

Which of the following is classified as an intermediate good?
I) the purchase of a Big Mac by a college student
Ii) McDonald's purchase of pickles
Iii) a McDonald's restaurant owner's interest payment for the loan on her building.

A) ii only.
B) ii and iii.
C) i only.
D) i and iii..
E) i, ii and iii.

Question 40

Consumption expenditure includes spending

A) on intermediate goods and services by firms.
B) on office supplies by firms.
C) by households.
D) by households and spending on office supplies by firms.
E) by governments when they are buying goods and services that consumers also buy.

Question 41

Net exports of goods and services are defined as the

A) value of the goods we sell to foreigners.
B) income we receive from selling goods to foreigners.
C) value of exports minus the value of imports.
D) value of exports minus the income we receive from foreigners.
E) value of exports plus the income we receive from foreigners.

Question 42

Last year U.S.net exports of goods and services was negative.This fact means that last year

A) there was an error made when calculating net exports of goods and services for the United States.
B) the value of U.S.exports was greater than the value of U.S.imports.
C) the value of U.S.exports was less than the value of U.S.imports.
D) U.S.consumption expenditure plus investment was less than the value of exports plus the value of imports.
E) U.S.consumption expenditure plus investment plus government expenditures on goods and services was less than the value of exports plus the value of imports.

Question 43

Which of the following is included in the of U.S.GDP for 2011?
I) a 2011 Cadillac Escalade produced and sold as a new car in the United States in 2011
Ii) tires produced in the United States, purchased by GM, and installed on a new Cadillac Escalade sold in 2011
Iii) GM cars produced in Canada

A) i only
B) ii only
C) i and iii
D) ii and iii
E) i, ii, and iii

Question 44

Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________.

A) expenditure; investment; income
B) expenditure; income; value of production
C) consumption; expenditure; value of production
D) investment; income; consumption
E) consumption; investment; expenditure

Question 45

In a circular flow diagram, i) the value of production = income
Ii) the value of production = expenditure
Iii) expenditure = income

A) i, ii and iii are true statements.
B) only iii is a true statement.
C) i and ii are true statements.
D) i and iii are true statements.
E) only i is a true statement.

Question 46

Everything else the same, if government expenditure increases by $400 billion and imports increase by $400 billion, then GDP

A) increases by $400 billion.
B) increases by $200 billion.
C) decreases by $400 billion.
D) does not change.
E) decreases by $200 billion.

Question 47

Gross Domestic Product equals

A) Y = C + I - G + NX.
B) Y = C - I + G + NX.
C) Y = C + I + G + NX.
D) Y = C - I - G - NX.
E) Y = C + I + G - NX.

Question 48

The following are all final goods except

A) flour used by the baker to make cup cakes.
B) bread eaten by a family for lunch.
C) pencils used by a 6th grader in class.
D) Nike shoes used by a basketball player.
E) a computer used by Intel to design new computer chips.

Question 49

U.S.net exports include

A) sales of Hollywood movies to the rest of the world.
B) the production of Ford Mustangs in China that are sold in China.
C) Honda automobiles produced and sold in Japan.
D) the sale of shares of Nike stock on the New York Stock Exchange.
E) the sale of U.S.government securities to U.S.citizens.

Question 50

Last year in Candamica, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion.Hence total expenditure was

A) $24.5 billion.
B) $34.5 billion.
C) $36.5 billion.
D) $34 billion.
E) undetermined without information about imports.

Question 51

GDP is equal to the ________ value of all the final goods and services produced within a country in a given period of time.

A) production
B) market
C) wholesale
D) retail
E) typical

Question 52

Which of the following expenditure components of GDP can be negative or positive?

A) Consumption expenditure
B) Investment
C) Government expenditure on goods and services
D) Net exports of goods and services
E) None of the above because expenditure can never be negative.

Question 53

Production by Honda, a Japanese firm, in the United States is included in ________ GDP and production by Nike Corporation, a U.S.firm, in Vietnam is included in ________ GDP.

A) Japanese; U.S.
B) U.S.; Vietnamese
C) U.S.; U.S.
D) Japanese; Vietnamese
E) U.S.and Japanese; U.S.and Vietnamese

Question 54

Undistributed profits ________ counted as part of GDP because ________.

A) are not; households are not paid by the firms.
B) are; they can be used to buy other goods.
C) are ; they are considered income paid to households and loaned back to firms.
D) are not; they are considered an intermediate good.
E) are; firms are required to pay corporate income taxes on them.

Question 55

The abbreviation "GDP" stands for

A) Gross Domestic Product.
B) Gross Domestic Prices.
C) General Domestic Prices.
D) Great Domestic Prices.
E) Government's Domestic Politics.

Question 56

Total expenditure equals total income

A) because firms pay out everything they receive as income to the factors of production.
B) if firms earn zero profit.
C) if firms do not save for future investment.
D) only if firms sell all the goods they produce in a given time period.
E) only if net taxes equals government expenditures on goods and services.

Question 57

In the circular flow, how are the "value of production", "income", and "expenditures" related?

A) They have no relationship to each other.
B) Once tax payments are subtracted at each stage, they are equal.
C) Expenditures on GDP equals the value of production which equals income.
D) Once net exports of goods and services are subtracted from GDP, all three are equal.
E) Value of production always equals income but expenditures is smaller because households save some of their income and do not spend it.

Question 58

The circular flow shows that GDP measures i. total income
Ii) total expenditures
Iii) price changes

A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii

Question 59

The purchase of a new Boeing fighter jet by Israel is classified in the U.S.GDP accounts as

A) export expenditure.
B) consumption expenditure.
C) investment expenditure.
D) government expenditure.
E) import expenditure.

Question 60

In calculating GDP, we must

A) add the market value of imports and subtract the market value of exports.
B) add the market value of exports and subtract the market value of imports.
C) exclude net exports of goods and services (NX).
D) add the value of the goods produced outside of the United States by American firms.
E) subtract the market value of imports, because these goods are produced in a country other than the United States, and subtract the market value of exports, because these goods are consumed in a country other than the United States.

Question 61

The value of used goods ________ counted as part of GDP ________.

A) are; as long as they are classified as consumption goods.
B) are; as long as they are classified as investment goods.
C) are not; because they were counted during the period when they were counted as new goods.
D) are not; because most fall in value and would cause a decrease in the value of GDP.
E) may be; as long as their value has risen.

Question 62

Total expenditure equals

A) C + I + G + NX.
B) C + I + G - NX.
C) C + I - G + NX.
D) C - I + G + NX.
E) C - I - G - NX.

Question 63

The expenditure approach to measuring GDP is done by using data on only

A) consumption expenditure.
B) consumption expenditure and investment.
C) consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.
D) consumption expenditure, investment, and government expenditures.
E) wages, rent, interest, and profit.

Question 64

The table gives data for a nation.What is the amount of the country's GDP?

A) $6,000 billion
B) $6,200 billion
C) $6,600 billion
D) $6,900 billion
E) $5,800 billion.

Question 65

In 2009, U.S.GDP was

A) $14 trillion using the expenditure approach.
B) $14 trillion using the income approach.
C) $14 trillion using the expenditure approach and $13 trillion using the income approach.
D) $13 trillion using the income approach and $14 trillion using the expenditure approach.
E) both A and B are correct.

Question 66

When calculating GDP, purchases of used goods are

A) included at the original price.
B) included by taking the original price and subtracting the (current) used price.
C) included at the (current) used price.
D) not included.
E) included at the original price minus any depreciation.

Question 67

In recent years, which of the following has been negative?

A) consumption expenditure
B) investment
C) government expenditure on goods and services
D) net exports of goods and services
E) wages

Question 68

The table gives data for a nation.The value of the country's net exports of goods and services shows that the country's

A) value of its exports exceeded the value of its imports.
B) value of its imports are negative.
C) net exports of goods and services are decreasing.
D) value of its imports exceeded the value of its exports.
E) value of its imports must equal zero.

Question 69

Net exports of goods and services increase when

A) exports of goods and services decrease and imports of goods and services do not change.
B) consumption expenditure increases.
C) exports of goods and services increase and imports of goods and services do not change.
D) consumption expenditure decreases.
E) imports of goods and services increase and exports of goods and services do not change.

Question 70

In comparing the magnitudes of the components of GDP according to the expenditure approach, we see that in the United States

A) government expenditure on goods and services is the largest category.
B) investment is the largest category.
C) investment is much larger than government expenditure on goods and services.
D) investment is about the same size as government expenditure on goods and services.
E) investment, government expenditure on goods and services, and consumption expenditure are all about the same size.

Question 71

In 2009 in the United States, consumption expenditure was $9,996 billion, investment was $1,559 billion, government expenditures on goods and services were $2,927 billion, and total exports were $1,492 billion.GDP equaled

A) $12,641 billion.
B) $10,120 billion.
C) $11,488 billion.
D) $14, 415 billion.
E) some amount, but there is not enough information given to calculate GDP.

Question 72

Total income in a country in 2010 is $780 billion.Total expenditure in the country

A) cannot be determined.
B) is greater than $780 billion.
C) is $780 billion.
D) is less than $780 billion.
E) is either less than or equal to $780 billion.

Question 73

If the purchase of used goods was to be incorporated into measuring GDP using the expenditure approach, then

A) we also will have to account for spending on financial assets.
B) it will be very difficult to assign a fair market value to a used good.
C) we will be counting the value of the used goods both at the time of their production and at the time of their re-sale.
D) we will have to account for the natural depreciation that a used good experiences.
E) consumption spending would need to be adjusted for depreciation.

Question 74

In one year, a firm increases its production by $9 million and increases sales by $8 million.All other things in the economy remaining the same, which of the following is true?

A) GDP increases by $8 million and inventory investment decreases by $1 million.
B) GDP increases by $9 million and inventory investment increases by $1 million.
C) Inventory investment decreases by $1 million.
D) GDP increases by $8 million and investment increases by $1 million.
E) GDP increases by $17 million.

Question 75

The largest expenditure category in the United States is

A) consumption expenditure.
B) investment.
C) government expenditure on goods and services.
D) net exports of goods and services.
E) wages.

Question 76

If consumption was 70 percent of GDP and both investment and government expenditure were 18 percent each, then we see that

A) GDP can be over 100 percent because it is "gross" rather than "net."
B) the error is due to rounding.
C) exports must be less than imports.
D) exports must be more than imports.
E) we must subtract depreciation from investment so that the components of GDP do not exceed 100 percent.

Question 77

$\begin{array}{lc}\text { Item } & \text { Billions of dollars } \\\hline \text { Consumption expenditure } & 7,500 \\\text { Investment } & 1,300 \\\text { Government expenditure on goods and services } & 1,400 \\\text { Net exports of goods and services } & -200\end{array}$

-Based on the data in the table above, what does GDP equal?

A) $10,200 billion
B) $10,400 billion
C) $10,000 billion
D) $9,800 billion
E) $8,900 billion

Question 78

Investment is defined as

A) the purchase of a stock or bond.
B) financial capital.
C) what consumers do with their savings.
D) the purchase of new capital goods by firms.
E) spending on capital goods by governments.

Question 79

Total expenditure in the United States is equal to consumption expenditure plus investment

A) plus government expenditure on goods and services plus imports of goods and services.
B) minus government expenditure on goods and services minus imports of goods and services.
C) plus government expenditure on goods and services plus exports of goods and services.
D) plus government expenditure on goods and services plus exports of goods and services minus imports of goods and services.
E) plus government expenditure on goods and services plus exports of goods and services plus imports of goods and services.

Question 80

In order to measure gross domestic product, we can follow

A) only one approach: the circular flow approach.
B) only one approach: the national accounts approach.
C) two approaches: the expenditure approach and the income approach.
D) three approaches: the expenditure approach, the income approach, and the production approach.
E) three approaches: the expenditure approach, the income approach, and the market-based approach.