Deck 4: Measuring GDP and Economic Growth

Question 1

In the definition of GDP,"market value" refers to

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

Answer 1

C

Question 2

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

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

Answer 2

A

Question 3

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

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

Answer 3

B

Question 4

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

A) final goods 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 and services produced in a country

Question 5

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

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

Question 6

The word "final" in the definition of GDP refers to

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

Question 7

Intermediate goods are excluded from GDP because

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

Question 8

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

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

Question 9

Gross domestic product is the total ________ produced within a country in a given time period.

A) market value of all final and intermediate goods and services
B) market value of all goods and services
C) amount of final and intermediate goods and services
D) market value of all final goods and services

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) count for both Thailand's GDP and U.S. GDP.
C) add to Thailand's GDP but not to U.S. GDP.
D) add to neither U.S. GDP nor Thailand's GDP.

Question 11

Which of the following expenditures is for an intermediate good?

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

Question 12

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

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

Question 13

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

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

Question 14

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) measures the value of labor payments generated in an economy in a given time period.
D) is generally less than federal expenditure in any time period.

Question 15

Which of the following is a final good?

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

Question 16

GDP does not directly include intermediate goods because

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

Question 17

Gross domestic product (GDP) measures the

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

Question 18

In the United States,GDP is typically measured

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

Question 19

In 2013,Ozzie purchased a 2010 Ford Escort from his neighbor for his son,purchased a 2009 "one owner" Camry from Larchmont Toyota for his wife,bought a 2013 new Ford for himself,and sold his 2002 Dodge Caravan to his teenage nephew.Which,if any,of these transactions will be included in GDP in 2013?

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

Question 20

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

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

Question 21

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

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

Question 22

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

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

Question 23

The circular flow of income shows that

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

Question 24

The circular flow diagram indicates that

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

Question 25

The circular flow diagram shows that

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

Question 26

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

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

Question 27

In the above figure,flow B represents ________.

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

Question 28

The circular flow diagram shows

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

Question 29

In the circular flow of economic activity

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

Question 30

In the circular flow diagram,aggregate expenditure includes

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

Question 31

In the above figure,flow B represents households' ________.

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

Question 32

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

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

Question 33

GDP counts only final goods and services because this

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

Question 34

In computing GDP,it is essential to

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

Question 35

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

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

Question 36

The factor market can best be described as where

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

Question 37

In the circular flow of income

A) households demand goods and services that are supplied by firms, and the firms demand factors that are supplied by intermediate firms.
B) households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms.
C) households sell goods and services while firms sell factors.
D) 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.

Question 38

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

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

Question 39

Compared to the other sources of spending,net exports is

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

Question 40

In the circular flow model of an economy,households

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

Question 41

Gross investment equals

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

Question 42

In the above figure,consumption expenditure is shown by flow

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

Question 43

Gross domestic product is the

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

Question 44

Gross investment equals net investment plus

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

Question 45

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 46

In the above figure,household income is shown by flow

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

Question 47

Gross investment is equal to

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

Question 48

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) gross investment
C) depreciation
D) net investment

Question 49

Which of the following is correct?

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

Question 50

Gross domestic product (GDP) is

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

Question 51

According to the circular flow diagram,the dollar value of a nation's output is equal to

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

Question 52

Which of the following relationships is correct?

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

Question 53

Net investment equals

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

Question 54

Total output and total income in the circular flow model

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

Question 55

Choose the best statement.

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

Question 56

Depreciation is defined as the

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

Question 57

Gross domestic product can be calculated

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

Question 58

GDP equals

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

Question 59

Comparing aggregate expenditure and aggregate incomes shows that

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

Question 60

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

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

Question 61

The largest component of GDP in the expenditure approach is

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

Question 62

________ is gross investment minus ________.

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

Question 63

Net investment equals

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

Question 64

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

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

Question 65

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

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

Question 66

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

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

Question 67

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

A) Shaniq's purchase of a meal at the Olive Garden in Atlanta.
B) a Senator from Iowa being paid the monthly salary.
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.

Question 68

GDP can be computed as the sum of

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

Question 69

Net investment is the

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

Question 70

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

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

Question 71

GDP equals

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

Question 72

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

Question 73

The expenditure approach measures GDP by adding

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

Question 74

Two methods of measuring GDP are

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

Question 75

The difference between gross investment and net investment is

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

Question 76

Of the following,the largest component of GDP is

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

Question 77

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

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

Question 78

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

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

Question 79

Net investment

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

Question 80

Which of the following is not a final good?

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