Deck 7: Measuring GDP

Question 1

GDP uses the market value of goods and services because it:

A) provides a common valuation that allows us to compare one economy to another.
B) provides the opportunity to compare lists of outputs to see who produced more.
C) is the only data that can be gathered about goods and services.
D) markets are the only way to value goods and services.

Answer 1

provides a common valuation that allows us to compare one economy to another.

Question 2

Everyone in an economy tends to do better when we experience:

A) high economic growth, low unemployment, and high inflation.
B) steady economic growth, low unemployment, and stable prices.
C) steady economic growth, high unemployment, and stable prices.
D) high economic growth, high unemployment, and low inflation.

Answer 2

steady economic growth, low unemployment, and stable prices.

Question 3

Inrecent years in China, the fraction of the population living below the international poverty line ($1.25 per person per day):

A) fell substantially.
B) increased dramatically.
C) increased more on average compare toother developing countries.
D) fell to zero.

Answer 3

fell substantially.

Question 4

Macroeconomics works to explain things like:

A) economic growth of Germany.
B) Microsoft's profit in 2015.
C) rates of return on an investment.
D) number of employees in Ford company.

Question 5

Calculating the value of an economy is more complex than just adding up the value of every single thing that is produced because that would lead to:

A) overcounting, as the value of intermediate products would be counted twice.
B) overcounting, as there is a mark-up in everything that is sold.
C) undercounting, as most goods are not sold in retail markets.
D) undercounting, as only observable markets can be recorded.

Question 6

Measuring the national income accounts can NOT be helpful in explaining things like:

A) unemployment rates.
B) economic booms.
C) rates of inflation
D) rates of return on a firm's capital.

Question 7

In macroeconomics, which of the following topics would most likely be studied?

A) Bob's budget
B) Nike's costs of production
C) The growth rate of the oil industry
D) Unemployment in Mexico.

Question 8

We can measure the status of a national economy by looking at:

A) its total expenditures.
B) its median income.
C) We can look at either of these things to get the same measure.
D) Neither of these is used to measure a nation's economic status.

Question 9

One of the economic changes that has most dramatically reshaped the world is:

A) the rapid growth of China's economy.
B) the rapid decline of Haiti's economy.
C) the unemployment rate declining in the U.S. by 40 percent.
D) the rapid growth of Italy's economy.

Question 10

Intermediate goods and services are:

A) used only as inputs to produce something else and are not counted as separate items in GDP.
B) goods that consumers buy in parts-like a new tire for their car-and are included as separate items in GDP.
C) used only as inputs to produce something else and are counted as separate itemsin GDP.
D) goods that consumers buy in parts-like a new tire for their car-and are not included as separate items in GDP.

Question 11

Gross domestic product is the sum of:

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

Question 12

The two largest economies in the world in 2012 were:

A) China and the U.S.
B) Japan and the U.S.
C) England and the U.S.
D) China and Germany.

Question 13

In macroeconomics, we talk about:

A) consumption at a regionallevel.
B) production of mostgoods in the economy.
C) prices in one specific market.
D) investment on a national level.

Question 14

The field of macroeconomics studies ______ and microeconomics studies ______.

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

Question 15

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

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

Question 16

GDP counts:

A) only final goods and services, because otherwise certain things would be double-counted and the GDP would be overestimated.
B) only intermediate goods and services, because those are easier to track.
C) both intermediate and final goods and services because it is important to capture all values, regardless of which market they take place in.
D) all values that are reported to the government.

Question 17

Economic growth can:

A) create less jobs compare to a stagnated economy.
B) increase poverty overall.
C) improve standards of living.
D) reduce the price level in the economy.

Question 18

GDP per capita can be summarized to be:

A) a measure of average well-being in a country.
B) a gauge of the direction an economy when we examine GDP changes over one year.
C) the measure of value of all activity inside a national economy.
D) the best measure of well-being for all citizens inside a country

Question 19

In 1978, China was the world's 15^th-largest economy. By 2011, China had:

A) the second-largest economy in the world.
B) a larger economy than Japan but smaller than Germany.
C) an economy worth about $11 trillion.
D) the fourth-largest economy in the northern hemisphere

Question 20

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

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

Question 21

Which of the following is a final good or service?

A) Coffee grounds you use to make your coffee every morning
B) Coffee grounds used by a coffee shop to make your coffee every morning
C) Coffee grounds used by Edy's to make coffee ice cream
D) None of these is a final good or service.

Question 22

An example of a final good is:

A) chocolate chips purchased by Nabisco to make Keebler chocolate chip cookies.
B) chocolate chips purchased by you to make chocolate chip cookies.
C) chocolate chips purchased by a restaurant to make a chocolate chip cookie pie to sell.
D) chocolate used to make Cocoa Rice Krispies.

Question 23

An example of a final service is:

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

Question 24

An example of an intermediate good would be:

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

Question 25

Which of the following is an intermediate good?

A) Tomatoes grown in your garden that you use to make salsa.
B) Tomatoes you buy at a local farmer's stand that you use to make salsa.
C) Tomatoes sold in the grocery store that you use to make salsa.
D) Tomatoes sold to a factory and used in the production of spaghetti sauce.

Question 26

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

A) A gallon of milk for your breakfast cereal
B) A notebook for your college courses
C) The cheese on the pizza you bought from Domino's
D) The salsa you use while watching football on the weekend.

Question 27

An example of a good or service that would not count in the U.S. GDP would be:

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

Question 28

You purchase a bag of chocolate chips for $3, a bag of flour for $1, a bag of sugar for $.50, a half dozen eggs for $.50, and a half pound of butter for $2. You use all these ingredients to make three dozen cookies. Your roommate offers you $15 for them, and you happily accept. How much does this process contribute to GDP?

A) $7
B) $15
C) $22
D) $8

Question 29

An example of a good or service that would not count in the U.S. GDP would be:

A) a t-shirt made by The Gap in Cambodia.
B) a t-shirt made by Organi-tee in Oregon.
C) a TV made by Toshiba in Georgia.
D) a bottle of water made by Poland Springs in Maine.

Question 30

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

A) U.S. GDP since Sally's a citizen.
B) U.S. GDP since the location of her office is in the U.S.
C) Italian GDP since she's working for an Italian firm.
D) both the U.S. and Italy's GDP.

Question 31

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

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

Question 32

An American citizen works for a U.S.-owned architectural firm located in Mexico. This architect will contribute toward:

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

Question 33

Which of the following is not an intermediate good?

A) Tires purchased by Ford to put on their new Explorers.
B) Tires sold by Goodyear to put on your Explorer.
C) Tomatoes used by Ortega to make their salsa.
D) Beef purchased by McDonald's to make a Big Mac.

Question 34

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

A) U.S. GDP since the location of the plant is in the U.S.
B) Japan's GDP since he's a Japanese citizen.
C) Japan's GDP since it's a Japanese firm.
D) both the U.S. and Japan's GDP.

Question 35

Intermediate goods are not included in GDP because:

A) certain goods that are used in the production of a final good would be counted twice.
B) the value of goods bought by producers to make something else would be counted twice.
C) the value of goods used by firms to make the goods they sell is included in the firm's product; accounting for the value twice would overestimate GDP.
D) All of these statements are true

Question 36

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

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

Question 37

The goods and services that count toward GDP are:

A) defined in terms of the location of production, not the citizenship of the producer.
B) anything produced by a nation’s citizens, regardless of who owns it.
C) citizens producing things no matter where they produce it.
D) things like stocks and bonds issued by a corporation.

Question 38

An example of a good or service that would count in the U.S. GDP would be a bag of coffee made in:

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

Question 39

An example of a good or service that would count in the U.S. GNP would be a bag of coffee made in:

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

Question 40

Suzi is a British citizen who works for Yankee Candles in Massachusetts. Suzi's work will be included in:

A) U.S. GDP since she's working for a U.S. firm.
B) U.S. GDP since she's working for a firm located in the U.S.
C) England's GDP since she's a British citizen.
D) both the U.S. and England's GDP.

Question 41

The circular flow model illustrates the crucially important idea of macroeconomics, which is that:

A) every expenditure of someone in the economy is exactly equal to the income of another.
B) only two markets exist in every economy-input and output.
C) income is lower when there is more spending on goods and services.
D) the flow of two things in the economy-"stuff" and "money"-travel in the same direction.

Question 42

Using the expenditure method to estimate GDP, we would include:

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

Question 43

U.S. Gross Domestic Product includes goods produced by:

A) foreign firms on U.S. soil.
B) U.S. firms on foreign soil.
C) foreign firms on foreign soil.
D) None of these statements is true.

Question 44

One way to estimate GDP is to:

A) measure the total expenditure of an economy.
B) add up all the money people spend buying final and intermediate goods and services.
C) add together the market value of only final services sold in the economy.
D) add together the market value of only final goods sold in the economy and not services.

Question 45

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

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

Question 46

If we add up all the money people spend buying final goods and services-being careful to omit spending on intermediate goods so as not to double-count-the sum will be:

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

Question 47

In order to estimate the current annual GDP, economists:

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

Question 48

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

A) directly into income for someone else.
B) indirectly into the value of that person's time.
C) directly into his or her income.
D) indirectly into the household's budget.

Question 49

A closed economy refers to an economy in which:

A) all goods are produced and sold domestically.
B) all goods are consumed domestically.
C) intermediate goods are sold domestically.
D) a country exports, but does not allow imports.

Question 50

GDP is most often discussed using _______ figures, although it is typically calculated _______.

A) annual; quarterly
B) annual; monthly
C) quarterly; monthly
D) quarterly; annually

Question 51

In August of this year, Jack can best estimate the current year's GDP by:

A) adjusting the first two quarterly estimates of GDP for seasonal variation.
B) taking an average of the last four quarterly estimates of GDP available.
C) multiplying the most recent quarter's GDP estimate by four.
D) looking back at previous years GDP in order to make an accurate projection.

Question 52

Quarterly GDP:

A) is always shown as a seasonally adjusted estimate for an annual rate.
B) takes account of unpredictable seasonal patterns in order to guess at annual GDP.
C) is adjusted for predictable, seasonal variation to predict what GDP would be if the economy continues at its current pace.
D) is the only representation of GDP that economists view as credible.

Question 53

We can measure total production by:

A) adding up what people spend on final goods and services.
B) adding up everyone's asset wealth.
C) comparing cost of inputs to final sale price.
D) adding up all spending in the economy on all goods and services.

Question 54

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

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

Question 55

The market value of a good or service is the:

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

Question 56

The income approach to calculating GDP:

A) is more accurate than using the expenditure approach.
B) is less accurate than using the expenditure approach.
C) will generate the same answer as using the expenditure approach.
D) is simpler to calculate than the expenditure approach.

Question 57

U.S. Gross National Product includes goods produced by:

A) foreign firms on U.S. soil.
B) U.S. firms on foreign soil.
C) foreign firms on foreign soil.
D) None of these statements is true.

Question 58

GDP could be calculated over:

A) a month.
B) a quarter.
C) a year.
D) any time period.

Question 59

Kelly is a U.S. citizen who works for Burton located in Germany. Kelly's work contributes to:

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

Question 60

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

A) U.S. GDP, but not U.S. GNP.
B) U.S. GNP, but not U.S. GDP.
C) German GDP, but not U.S. GDP.
D) German GDP and U.S. GNP.

Question 61

A good that would be counted as consumption in GDP would be the:

A) Subway sandwich Tony ate for lunch.
B) $10 Tony received after winning a bet with his friend.
C) $50 in wages Tony received that day from working all afternoon.
D) common stock Tony purchased for his 401(k).

Question 62

Government purchases, as a component of GDP include all except:

A) goods and services bought by all levels of government.
B) both consumption- and investment-type goods bought by the government.
C) include services the government pays for.
D) goods purchased by government from foreign countries.

Question 63

Jake, Sr. sells the family business, a factory that produces snake oil, to Jake, Jr., for $100, even though the factory has been assessed at $400,000. How will this transaction affect GDP?

A) Investment will increase by $100.
B) Investment will increase by $400,000.
C) Consumption will increase by $400,000.
D) GDP will not be affected by the transaction.

Question 64

An example of a transfer payment is:

A) a federal income tax refund.
B) a Social Security payment.
C) the $3 donation to the Wildlife Fund you make on your tax return.
D) the taxes corporations pay on profit.

Question 65

Spending on imports should get _________ GDP, and spending on exports should be __________.

A) subtracted from; included
B) included in; included as well
C) subtracted from; subtracted as well
D) included in; subtracted

Question 66

Investment, as a part of GDP, includes:

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

Question 67

A consumption good that would be counted in GDP would be a:

A) new bicycle.
B) vintagebottle of wine purchased at an auction.
C) washing machine purchased at a garage sale.
D) A newly issued stock.

Question 68

Transfer payments are:

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

Question 69

Inventory is the stock of goods that a company:

A) produces this year, but keeps to sell them next year.
B) produced last year, but had to sell for below cost.
C) produces now but has contractually already sold it.
D) produces and sells in a given time period.

Question 70

A consumption good that would NOT be counted in GDP would be:

A) the coffee Cyndi buys on her way to work in the morning.
B) Cyndi's brand new car.
C) the sunglasses Cyndi bought on clearance sale yesterday.
D) Ford company's purchase of steel.

Question 71

Investment, as a part of GDP, includes:

A) spending on productive inputs such as stocks, bonds, and other types of financial instruments.
B) any goods that are bought by firms who plan to use those purchases to produce other goods and services in the future, rather than consuming them.
C) consumption goods that are purchased by households.
D) any item you buy that you are looking for a return on over time.

Question 72

Mikey likes bagels, so he buys an old pizza shop for $150,000 and spends $10,000 installing new equipment which will allow him to make bagels instead of pizza. How will Mikey's recent purchases affect GDP?

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

Question 73

Ace has always been a top student, so it was no surprise he won a $1,500 scholarship from the company where he worked summers to help with college expenses. Ace decides to spend his scholarship money on a new Apple MacBook. How will GDP be affected by Ace's recent purchases?

A) Consumption will go up by $1,500, because a computer is a durable good.
B) Investment will go up by $1,500, because a computer is a durable good.
C) GDP will not be affected, since Ace acquired the computer with scholarship money.
D) Consumption will go up by $1,500, because a computer is a nondurable good.

Question 74

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

A) Clipboards at the Department of Motor Vehicles.
B) Maintenance of government buildings.
C) Social Security payments.
D) City fireworks displays on the Fourth of July.

Question 75

Ted moves into his first apartment. He buys a barely used washer/dryer set from Craigslist and hires a company to pick it up and deliver it to his apartment. What about this transaction will be counted in GDP?

A) The value of the washer/dryer set
B) The value of the delivery service
C) The value of the washer/dryer set and the delivery service
D) Nothing about this transaction will count toward GDP

Question 76

Upon getting a big promotion, Sally decides to buy a house in the neighborhood she grew up in as a child. In fact, the house she buys used to belong to a neighbor of hers, and so she's certain it's in good shape and well worth the $200,000 she pays for it. The only thing Sally needs to do is replace all the gutters for $1,000, which she happily does. How will GDP be affected by Sally's recent purchases?

A) Consumption will increase by $1,000, and investment will increase by $200,000.
B) Consumption will increase by $210,000.
C) Investment will increase by $201,000.
D) GDP will increase by $1000.

Question 77

Apple has been producing the new iPhone throughout 2013, but doesn't plan to sell it until March 2014. How are these iPhones, which are sitting in a warehouse somewhere in the U.S., affecting GDP?

A) They are inventory and will decrease investment in 2013.
B) They will increase GDP only in the year they are produced, 2013.
C) They are considered inventory until they sell, so investment will increase when they are sold in 2014.
D) They are not counted in GDP at all since they were not sold.

Question 78

At the end of the year, Ford realizes it has overproduced Fiestas, because 2,500 of them are left unsold. How is this accounted for in that year's GDP? The cars are:

A) considered inventory and their value will increase investment.
B) considered durable goods, and their value will increase consumption.
C) not counted until they are sold in next year's GDP.
D) considered a bad thing and reduce the value of investment.

Question 79

All are examples of government purchases that would be included in GDP except:

A) pencils for the employees of the FBI to use.
B) the salaries of those in the military working in California.
C) replacement calculators for the Congressional Budget Office.
D) salaries paid by government to foreign contractors in Iraq.

Question 80

Consumption, as a component of GDP:

A) measures spending on goods and services by individuals and households.
B) includes nondurable goods only.
C) includes durable goods only.
D) measures spending only on goods, not services, by private individuals and households.