Deck 14: Gdp: a Measure of Total Production and Income

Question 1

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 1

at current market prices

Question 2

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 2

iii only

Question 3

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

Answer 3

market value of the final goods and services produced within a country

Question 4

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 5

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 is correct.

Question 6

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 7

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 8

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 9

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 10

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 11

Which of the following is NOT directly included in U.S.GDP?

A)sales to tourists of beach umbrellas in Hilton Head,South Carolina
B)sales of sandwiches at a Subway store in Bangor,Maine
C)ticket sales to Ripley's Aquarium in Gatlinburg,Tennessee
D)popcorn purchased by a movie theater chain in Georgia
E)movie tickets purchased by consumers in Georgia

Question 12

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 13

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 14

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 15

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 16

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 17

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-citizens 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.

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 Olympics 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

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 20

Gross Domestic Product is the market value of all ________ produced within a country in a given period of time.

A)final goods
B)intermediate goods
C)final services
D)intermediate services
E)final goods and services

Question 21

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 22

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 23

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 24

One bag of coffee beans is sold for $7 to a cafe that uses it to brew coffee which it sells to customers for a total of $15.A second bag of coffee is sold directly to Joan for $7,who uses it to brew coffee for her family every morning.What is the contribution to GDP from the purchases of coffee beans and coffee?

A)$7
B)$14
C)$15
D)$22
E)$29

Question 25

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 26

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 27

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 28

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 29

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 30

Investment is defined as the purchase of

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

Question 31

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 32

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,Kentucky
D)legal services provided to first time home buyers during 2010
E)the purchase of a new home in Atlanta,Georgia in 2010

Question 33

Investment includes

A)GM's purchase of robotic machinery.
B)student purchases of laptops.
C)Wal-Mart'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 34

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 35

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 36

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 37

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 38

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 39

Which of the following is an example of an intermediate good or service?

A)gasoline purchased by Sam for her commute to work
B)flour purchased by Jake to bake a cake for his spouse
C)training seminars for employees of an accounting firm
D)golf balls sold to Tiger Woods
E)None of the above are examples of intermediate goods or services.

Question 40

Which of the following is a final good or service?

A)tires purchased by Ford for use on one of their SUVs
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 41

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 42

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 43

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 44

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 45

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 46

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 47

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 48

When an American college student in Davis,California spends $200 on a pair of Louis Vuitton jeans (a famous French brand),U.S.consumption ________,U.S.net exports ________,and U.S.GDP ________.

A)does not change;increases by $200;increases by $200
B)increases by $200;decreases by $200;does not change
C)increases by $200;does not change;increases by $200
D)does not change;does not change;does not change
E)does not change;decreases by $200;decreases by $200

Question 49

Government expenditures on goods and services include
I.the New York City 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 50

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 51

Suppose that business firms spend $500 million on new capital equipment this year.Of this $500 million,$300 million was spent on domestically produced capital and $200 million was spent on foreign-produced capital.All else equal,these transactions contribute ________ to GDP.

A)$0
B)$200 million
C)$300 million
D)$500 million
E)$800 million

Question 52

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 53

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 54

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 55

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 56

Kelly's Surf Shop orders 5,000 new surf boards at the beginning of the year but only sells 4,500 by the end of the year.How are the 500 unsold surfboards accounted for in Gross Domestic Product?

A)They will be included in the nondurable consumption category of GDP.
B)They will be included in the residential investment category of GDP.
C)They will be included in the government spending category of GDP.
D)They will be included in the inventory investment category of GDP.
E)They will be included in the durable consumption category of GDP.

Question 57

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 58

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 59

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 60

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 61

The following are all final goods EXCEPT

A)flour used by the baker to make cupcakes.
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 62

In 2011,U.S.GDP was

A)$15 trillion using the expenditure approach.
B)$15 trillion using the income approach.
C)$15 trillion using the expenditure approach and $14 trillion using the income approach.
D)$16 trillion using the income approach and $14 trillion using the expenditure approach.
E)both A and B are correct.

Question 63

If consumption was 70 percent of GDP and investment and government expenditure were both 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 64

Total income in a country in 2012 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 65

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 66

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 67

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 less than government expenditure on goods and services.
E)investment,government expenditure on goods and services,and consumption expenditure are all about the same size.

Question 68

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 69

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.

Question 70

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 71

Which of the following is directly included in the U.S.GDP for 2013?
I.a 2013 Cadillac Escalade produced and sold as a new car in the United States in 2031
Ii.tires produced in the United States,purchased by General Motors,and installed on a new Cadillac Escalade sold in 2013
Iii.General Motors cars produced in Canada because General Motors is an American corporation

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

Question 72

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 73

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 74

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 75

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 76

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 77

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 78

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 79

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 80

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.