Deck 5: Spending and Output in the Short Run

Question 1

If an automobile manufacturer pays $200 for a car windshield,$400 for four car tires,$100 for a car CD player,and sells cars made with these parts for $20,000,then each car the automobile manufacturer sells contributes how much to GDP?

A) $19,300.
B) $20,000.
C) $20,200.
D) $20,400.
E) $20,700.

Answer 1

$20,000.

Question 2

Factories and machines are examples of

A) consumption goods.
B) non-market goods.
C) value-added goods.
D) publicly provided goods.
E) capital goods.

Answer 2

capital goods.

Question 3

Educational services provided by public schools are

A) included in GDP at market prices.
B) excluded from GDP because they are not sold in markets.
C) excluded from GDP because they are intermediate goods.
D) excluded from GDP because they are publicly provided.
E) included in GDP at cost.

Answer 3

included in GDP at cost.

Question 4

Intermediate goods and services are ________ production and ________ counted in GDP.

A) the end product of;are
B) the end product of;are not
C) used up in the process of;are
D) used up in the process of;are not
E) the ultimate purpose of;are

Question 5

Long-lived goods used for producing other goods and services are called

A) consumption goods.
B) non-market goods.
C) value-added goods.
D) publicly provided goods.
E) capital goods.

Question 6

Capital goods are

A) long-lived goods used for producing other goods and services.
B) the ultimate purpose of production.
C) publicly provided.
D) non-market goods.
E) excluded from GDP.

Question 7

_________ is/are the market value of final goods and services produced within a country during a given period of time.

A) GDP
B) Consumption
C) Value added
D) Transfer payments
E) Net exports

Question 8

Suppose that the total production of an economy consists of 10 billion oranges and 5 billion candy bars,each orange sells for $0.20,and each candy bar sells for $1.00.What is the market value of production in this economy?

A) $1 billion.
B) $2 billion.
C) $5 billion.
D) $7 billion.
E) $11 billion.

Question 9

Gross domestic product (GDP)equals the ________ of final ________ produced within a country during a given period of time.

A) market value;goods
B) market value;services
C) market value;goods and services
D) quantity;goods
E) quantity;goods and services

Question 10

If Bountiful Orchard grows $100,000 worth of peaches,sells $50,000 worth of peaches to consumers,and uses the rest to make jam that is sold to consumers for $100,000,Bountiful Orchard's contribution to GDP is

A) $50,000.
B) $100,000.
C) $150,000.
D) $200,000.
E) $250,000.

Question 11

If the Citrus Growers Association grows $1 million worth of oranges,sells $500,000 worth of oranges to consumers,and uses the rest to make orange juice that is sold to consumers for $3 million,the Citrus Growers' contribution to GDP is

A) $500,000.
B) $1,000,000.
C) $3,500,000.
D) $4,000,000.
E) $4,500,000.

Question 12

The market value of final goods and services produced within a country during a period of time is called

A) guaranteed direct prices.
B) general domestic productivity.
C) government documented production.
D) gross domestic product.
E) growth determined profit.

Question 13

Suppose that the total production an economy consists of 4 billion oranges and 10 billion candy bars,each orange sells for $0.25,and each candy bar sells for $0.50.What is the market value of production in this economy?

A) $0.75 billion.
B) $1 billion.
C) $4.5 billion.
D) $5 billion.
E) $6 billion.

Question 14

The value of unpaid work by a homemaker _________ included in GDP and value of housekeeping services sold in the market _________ included in GDP.

A) is;is not
B) is;is
C) is not;is not
D) is not;is
E) is sometimes;is

Question 15

The value of unpaid childcare services provided by a stay-at-home dad ________ included in GDP and the value of daycare services purchased from a licenced childcare provider _______ included in GDP.

A) is;is not
B) is;is
C) is not;is not
D) is not;is
E) is sometimes;is

Question 16

Final goods and services are _______ production and ________ counted in GDP.

A) the end product of;are
B) the end product of;are not
C) used up in the process of;are
D) used up in the process of;are not
E) transformed in;are not

Question 17

If a pizza maker pays $1 for tomatoes,$1 for cheese,$2 for sausage,and sells the pizza made with these ingredients for $7,then each pizza sold contributes how much to GDP?

A) $3.
B) $4.
C) $7.
D) $9.
E) $11.

Question 18

National defence services provided by the military are

A) included in GDP at market prices.
B) included in GDP at cost.
C) excluded from GDP because they are not sold in markets.
D) excluded from GDP because they are intermediate goods.
E) excluded from GDP because they are publicly provided.

Question 19

A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that

A) higher-priced items count more.
B) GDP increases when not all goods are produced in greater quantities.
C) market prices generally reflect the economic benefit consumers expect to receive from an item.
D) not all economically valuable goods and services are bought and sold in markets.
E) lower-priced items count morE.

Question 20

When economists use market values to aggregate output,they sum the

A) number of items produced.
B) quantity of items produced.
C) price multiplied by the quantity of items produced.
D) social value of items produced.
E) amount of each item produced.

Question 21

In the year 2012,Pete Rich purchases a painting done by Rembrandt in 1,642 for $20 million.He also pays a one percent commission to the auction house that sold the painting.What is the contribution of this transaction to GDP in the year 2012?

A) $0.
B) $200,000.
C) $2 million.
D) $20 million.
E) $20.2 million.

Question 22

A jar of orange marmalade,ultimately sold to a customer at The Corner Store,is produced by the following production process:

What is the value added of The Corner Store?

A) $0.00.
B) $0.50.
C) $0.75.
D) $1.25.
E) $2.00.

Question 23

Goods and services that are consumed by the ultimate user are called ________ goods and services.

A) intermediate
B) final
C) value added
D) nominal
E) real

Question 24

The value of final goods and services equals

A) total business profits.
B) the sum of the value added by all firms.
C) total business spending.
D) the sum of revenues from all sales.
E) total business revenues.

Question 25

In the year 2012,Janice Quinn sells a five-year-old car to Used Car Inc.for $3,000.In the same year,Used Car Inc.resells the car to Ima Goner for $3,500.What is the contribution of this transaction to GDP in the year 2012?

A) $0.
B) $500.
C) $3,000.
D) $3,500.
E) $6,500.

Question 26

A jar of orange marmalade,ultimately sold to a customer at The Corner Store,is produced by the following production process:

What is the value added of Florida Jam Company?

A) $0.00.
B) $0.50.
C) $0.75.
D) $1.25.
E) $2.00.

Question 27

Goods and services that are used up in the production of other goods and services are called _________ goods and services.

A) intermediate
B) final
C) value added
D) nominal
E) real

Question 28

A jar of orange marmalade,ultimately sold to a customer at The Corner Store,is produced by the following production process:

What is the sum of the value added of all the firms?

A) $2.00.
B) $2.50.
C) $2.75.
D) $4.50.
E) $5.25.

Question 29

A firm's revenue from selling its product minus the cost of inputs purchased from other firms is called

A) profit.
B) investment.
C) value added.
D) production costs.
E) intermediate costs.

Question 30

Which of the following transactions would be included in the GDP of Canada?

A) Honda produces cars in Ontario.
B) Bank of Nova Scotia operates a branch in the Bahamas.
C) Nortel Corporation produces telecommunications equipment in the United States.
D) Microsoft Corporation produces Windows Vista in Redmond,Washington.
E) Coca-Cola produces soft drinks in England.

Question 31

A jar of DeLux popcorn,ultimately sold to a customer at Friendly Groceries,is produced by the following production process:

What is the value added of Fulton Family Farm?

A) $0.50.
B) $1.50.
C) $2.00.
D) $2.50.
E) $7.00.

Question 32

Capital goods are treated as _______ goods and,therefore,_______ GDP.

A) final;included in
B) final;excluded from
C) intermediate;included in
D) intermediate;excluded from
E) non-market;excluded from

Question 33

The value added by any firm equals the firm's ______ from selling the product minus _______.

A) revenue;expenses
B) revenue;the cost of inputs purchased from other firms
C) profits;expenses
D) profits;the cost of inputs purchased from other firms
E) revenue;taxes

Question 34

Three equivalent ways to measure GDP are total ___________,total __________,and total _________.

A) profits;production;saving
B) expenditure;income;profits
C) investment;consumption;saving
D) production;income;expenditure
E) revenue;profits;production

Question 35

The sum of the value added by all firms equals total

A) profits.
B) spending on capital goods.
C) private-sector investment.
D) after-tax revenue.
E) value of final goods and services.

Question 36

A jar of DeLux popcorn,ultimately sold to a customer at Friendly Groceries,is produced by the following production process:

What is the value added of Friendly Groceries?

A) $0.50.
B) $1.50.
C) $2.00.
D) $2.50.
E) $7.00.

Question 37

A jar of DeLux popcorn,ultimately sold to a customer at Friendly Groceries,is produced by the following production process:

What is the sum of the value added of all of the firms?

A) $0.50.
B) $1.50.
C) $2.00.
D) $4.00.
E) $7.00.

Question 38

A jar of orange marmalade,ultimately sold to a customer at The Corner Store,is produced by the following production process:

What is the value added of Citrus Growers Inc.?

A) $0.00.
B) $0.50.
C) $0.75.
D) $1.25.
E) $2.00.

Question 39

A jar of DeLux popcorn,ultimately sold to a customer at Friendly Groceries,is produced by the following production process:

What is the value added of DeLux Popcorn Co.?

A) $0.50.
B) $1.50.
C) $2.00.
D) $2.50.
E) $7.00.

Question 40

Which of the following would be included in Canada's GDP?

A) Bombardier builds a plane in Montreal that is sold to American Airlines.
B) Daimler-Chrysler produces a car in Germany that is sold in Toronto.
C) Nestlé produces a candy bar in Switzerland that is sold in Calgary.
D) Royal Bank of Canada operates a branch in Nassau,Bahamas.
E) Canada's Wonderland provides entertainment services in an amusement park in Japan.

Question 41

Given the following data for an economy,compute the value of GDP.

A) 130.
B) 140.
C) 150.
D) 160.
E) 320.

Question 42

Given the following data for an economy,compute the private-sector investment component of GDP.

A) 30.
B) 40.
C) 60.
D) 70.
E) 110.

Question 43

Given the following data for an economy,compute the value of GDP.
Consumption expenditures
1000
Imports
600
Government purchases of goods and services
700
Construction of new homes and apartments
500
Sales of existing homes and apartments
600
Exports
500
Government payments to retirees
200
Household purchases of durable goods
300
Beginning-of-year business inventory
500
End-of-year business inventory
600
Business fixed investment
300

A) 2,400.
B) 2,500.
C) 2,600.
D) 2,700.
E) 5,600.

Question 44

Which of the following would increase the consumption component of Canada's GDP?

A) You purchase a bottle of British Columbia wine.
B) A person in Paris purchases a bottle of British Columbia wine.
C) A restaurant in Montreal purchases a bottle of British Columbia wine to include on its wine list.
D) A restaurant in Edmonton purchases a bottle of French wine to include on its wine list.
E) The Canadian government buys a bottle of British Columbia wine to serve at a State dinner.

Question 45

GDP can be measured as each of the following EXCEPT

A) the market value of production.
B) total expenditure on final goods and services.
C) incomes of capital and labour.
D) total business revenues.
E) the sum of value added.

Question 46

Consumption expenditures include spending by households on

A) exports.
B) inventories.
C) residential housing.
D) services.
E) taxes.

Question 47

The market value of all domestically-produced final goods and services is also equal to the total amount spent by ______________,less spending on imported goods and services.

A) households and firms
B) firms and governments
C) households,firms,and governments
D) households,firms,and the foreign sector
E) households,firms,governments,and the foreign sector

Question 48

Which of the following would be included in the calculation of GDP for 2012?

A) The price of a home built in 1991 and sold in 2012.
B) The price of 100 shares of Exxon stock purchased in 2012.
C) The price of a classic 1960 Thunderbird purchased in 2012.
D) The price of a new punch press built and purchased in 2012 to replace a worn-out machine.
E) The price of a used bicycle purchased at a garage sale in 2012.

Question 49

Net exports equal

A) the value added of exports.
B) exports minus imports.
C) the market value of exports.
D) exports plus imports.
E) exports minus depreciation.

Question 50

The value of goods produced,but unsold,in the current period is

A) excluded from GDP.
B) counted in GDP as inventory investment.
C) counted in GDP as consumption spending.
D) counted in GDP as services.
E) allocated to GDP in future periods.

Question 51

Which of the expenditure components of GDP can be negative?

A) Consumption spending on durables.
B) Consumption spending on services.
C) Business fixed investment.
D) Government purchases of goods and services.
E) Net exports.

Question 52

Which of the following would increase the net export component of Canada's GDP?

A) A car produced in Japan is purchased in British Columbia.
B) A bottle of British Columbia wine is purchased in California.
C) A bottle of French wine is purchased in Quebec.
D) A car produced in Cambridge,Ontario is purchased in Winnipeg,Manitoba.
E) A bottle of French wine is purchased in London,England.

Question 53

Which of the following is an intermediate good and,therefore,excluded from the calculation of GDP?

A) A set of tires sold to a car owner.
B) A loaf of bread purchased by a grocery store.
C) 100 shares of stock in Microsoft.
D) A new home.
E) A pre-owned automobilE.

Question 54

Net investment is

A) equal to gross investment less replacement investment.
B) equal to gross investment plus replacement investment.
C) always positive.
D) always negative.
E) equal to government savings

Question 55

Government purchases include all of the following EXCEPT

A) pension benefits paid by the federal government.
B) the construction of a new courthouse built by a local government.
C) the salary paid to an elementary school teacher employed by a local public school board.
D) the purchase of new military hardware by the Canadian Forces.
E) the construction of new highways by provincial governments.

Question 56

Which of the following would increase the government purchases component of Canada's GDP?

A) The federal government pays $3 billion in pensions to government workers.
B) The federal government pays $3 billion in interest on the national debt.
C) The federal government pays $3 billion in salaries to soldiers in the military.
D) The federal government pays $3 billion in interest to foreign holders of Canadian government bonds.
E) The federal government pays $3 billion to Employment Insurance recipients.

Question 57

Which of the following would increase the private-sector investment component of Canada's GDP?

A) You purchase a new washing machine produced in Canada.
B) You purchase a new washing machine produced in France.
C) A laundry in Calgary purchases a new washing machine produced in Canada.
D) A laundry in Mexico purchases a new washing machine produced in Canada.
E) The Canadian government purchases a new washing machine produced in Canada for rangers to use in a Canadian national park.

Question 58

Given the following data for an economy,compute the private-sector investment component of GDP.

A) 300.
B) 400.
C) 800.
D) 900.
E) 1,500.

Question 59

Private-sector investment includes spending on

A) consumer durable goods.
B) new capital goods.
C) services.
D) stocks and bonds.
E) exports.

Question 60

When net investment is positive

A) replacement investment exceeds gross investment.
B) the government is running a surplus.
C) exports exceed imports.
D) the capital stock grows from one year to the next.
E) consumption must exceed government purchases.

Question 61

The government purchases component of GDP includes

A) purchases of final goods and services.
B) interest payments on government debt.
C) transfer payments.
D) pensions paid to government workers.
E) payments made to social security recipients.

Question 62

An economy produces only 500,000 tables valued at $100 each.Of these,100,000 are sold to consumers,200,000 are sold to businesses,100,000 are sold to the government,and 50,000 are sold abroad.No tables are imported.The unsold tables at the end of the year are held in inventory by the table manufacturers.What is the value of the private-sector investment component of GDP?

A) $2 billion.
B) $10 million.
C) $20 million.
D) $25 million.
E) $50 million.

Question 63

If business inventories equal $20 billion at the beginning of the year but equal $30 billion at the end of the year,then GDP has

A) decreased by $10 billion.
B) increased by $10 billion.
C) increased by $20 billion.
D) increased by $30 billion.
E) not changed.

Question 64

Total spending on final goods and services in an economy must equal the total value of

A) profits.
B) production.
C) revenues from all transactions.
D) consumption.
E) investment.

Question 65

Government purchases include spending by all levels of government on

A) consumer durables,nondurables,and services.
B) stocks,bonds,and other financial instruments.
C) capital goods,residential housing,and changes in inventories.
D) final goods and services.
E) goods and services sold abroad minus goods and services produced abroad.

Question 66

Changes in business inventories are

A) classified as consumption expenditures.
B) classified as private-sector investment expenditures.
C) classified as government purchases.
D) classified as net exports.
E) excluded from GDP.

Question 67

Real GDP measures the _________ of current production.

A) change in the volume
B) physical volume
C) current dollar value
D) base-year value
E) change in the market value

Question 68

An economy produces 1,000,000 computers valued at $2,000 each.Households purchase 200,000 computers,of which 100,000 are imported.Businesses purchase 300,000 domestically-produced computers.The government purchases 300,000 domestically-produced computers,and 100,000 domestically-produced computers are sold abroad.The unsold computers at the end of the year are held in inventory by the computer manufacturers.What is the value of the private-sector investment component of GDP?

A) $0.5 billion.
B) $0.6 billion.
C) $0.8 billion.
D) $0.9 billion.
E) $1.0 billion.

Question 69

The total market value of production in an economy must equal the total value of

A) profits.
B) revenues from all transactions.
C) consumption.
D) investment.
E) spending on final goods and services.

Question 70

An economy produces 500,000 tables valued at $100 each.Households purchase 100,000 tables,of which 50,000 are imported.Businesses purchase 200,000 domestically-produced tables.The government purchases 100,000 domestically-produced tables,and 50,000 domestically-produced tables are sold abroad.The unsold tables at the end of the year are held in inventory by the table manufacturers.What is the value of GDP?

A) $5 million.
B) $40 million.
C) $45 million.
D) $50 million.
E) $95 million.

Question 71

An economy produces only 1,000,000 computers valued at $2,000 each.Of these,200,000 are sold to consumers,300,000 are sold to businesses,300,000 are sold to the government,and 100,000 are sold abroad.No computers are imported.The unsold computers at the end of the year are held in inventory by the computer manufacturers.What is the value of the private-sector investment component of GDP?

A) $0.3 billion.
B) $0.4 billion.
C) $0.6 billion.
D) $0.7 billion.
E) $0.8 billion.

Question 72

The four components of aggregate expenditures are

A) consumption,imports,government purchases,and net exports.
B) consumption,interest payments,government purchases,and net exports.
C) consumer durables,private-sector investment,government purchases,and net exports.
D) consumption,imports,government purchases,and exports.
E) consumption,private-sector investment,government purchases,and net exports.

Question 73

An economy produces 1,000,000 computers valued at $2,000 each.Households purchase 200,000 computers,of which 100,000 are imported.Businesses purchase 300,000 domestically-produced computers.The government purchases 300,000 domestically-produced computers,and 100,000 domestically-produced computers are sold abroad.The unsold computers at the end of the year are held in inventory by the computer manufacturers.What is the value of GDP?

A) $0.9 billion.
B) $1.0 billion.
C) $1.8 billion.
D) $2.0 billion.
E) $3.8 billion.

Question 74

Consumption spending includes spending on

A) durables,nondurables,and services.
B) stocks,bonds,and other financial instruments.
C) capital goods,residential housing,and changes in inventories.
D) goods and services by federal,provincial,and local governments.
E) goods and services sold abroad minus goods and services produced abroad.

Question 75

An economy produces 500,000 tables valued at $100 each.Households purchase 100,000 tables,of which 50,000 are imported.Businesses purchase 200,000 domestically-produced tables.The government purchases 100,000 domestically-produced tables,and 50,000 domestically-produced tables are sold abroad.The unsold tables at the end of the year are held in inventory by the table manufacturers.What is the value of the private-sector investment component of GDP?

A) $10 billion.
B) $20 million.
C) $25 million.
D) $30 million.
E) $50 million.

Question 76

An economy produces only 500,000 tables valued at $100 each.Of these,100,000 are sold to consumers,200,000 are sold to businesses,100,000 are sold to the government,and 50,000 are sold abroad.No tables are imported.The unsold tables at the end of the year are held in inventory by the table manufacturers.What is the value of GDP?

A) $5 million.
B) $40 million.
C) $45 million.
D) $50 million.
E) $95 million.

Question 77

Which of the following would increase the consumption component of Canada's GDP?

A) You purchase a vacation in Niagara Falls,Canada.
B) A Canadian business purchases a vacation package in Niagara Falls,Canada as a reward for the firm's best salesperson.
C) A Canadian firm purchases tires from a firm in Ohio.
D) A French man purchases a vacation in Niagara Falls,Canada.
E) A Saudi business purchases a luxury aircraft made by Bombardier.

Question 78

Private-sector investment includes spending on

A) durables,nondurables,and services.
B) stocks,bonds,and other financial instruments.
C) capital goods,residential housing,and changes in inventories.
D) goods and services by federal,provincial,and local governments.
E) goods and services sold abroad minus goods and services produced abroad.

Question 79

Net export spending is expenditures on

A) consumer durables,nondurables,and services.
B) stocks,bonds,and other financial instruments.
C) capital goods,residential housing,and changes in inventories.
D) goods and services by federal,provincial,and local governments.
E) goods and services sold abroad minus goods and services produced abroad.

Question 80

An economy produces only 1,000,000 computers valued at $2,000 each.Of these,200,000 are sold to consumers,300,000 are sold to businesses,300,000 are sold to the government,and 100,000 are sold abroad.No computers are imported.The unsold computers at the end of the year are held in inventory by the computer manufacturers.What is the value of GDP?

A) $0.9 billion.
B) $1.0 billion.
C) $1.8 billion.
D) $2.0 billion.
E) $3.8 billion.