Question 1

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

Accepted Answer

The basic point is that nothing escapes

Question 2

Assume that a small country produces only green peppers and red peppers.Last year,it produced 100 green peppers and 50 red peppers and sold them at prices of $2 per green pepper and $3 per red pepper.This year,it produced 150 green peppers and 60 red peppers and sold them at prices of $2 per green pepper and $4 per red pepper.What is real GDP this year if the base year is last year?

Accepted Answer

A) $540 
B) $400 
C) $480 
D) $350 
E) $890 
A) $540 
B) $400 
C) $480 
D) $350 
E) $890

Question 3

Total expenditure equals total income

Accepted Answer

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. 
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 4

Depreciation is

Accepted Answer

A) fall in the value of an exchange rate. 
B) the decrease in the value of capital resulting from its use and obsolescence. 
C) the decrease in the purchasing power of a dollar because of inflation. 
D) part of consumption expenditure. 
E) part of net domestic product at factor cost. 
A) fall in the value of an exchange rate. 
B) the decrease in the value of capital resulting from its use and obsolescence. 
C) the decrease in the purchasing power of a dollar because of inflation. 
D) part of consumption expenditure. 
E) part of net domestic product at factor cost.

Question 5

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.

Accepted Answer

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

Question 6

If you mow the lawn yourself,the lawn mowing is considered household production.If you pay Larry's Lawn Service to mow your lawn,the lawn mowing is considered

Accepted Answer

A) a leisure time activity. 
B) a service,that will be counted as part of GDP. 
C) a service,but is not counted as part of GDP because it simply replaces a service you used to perform. 
D) rent,and therefore is counted as part of GDP. 
E) underground production because it replaces the underground production of you mowing your lawn. 
A) a leisure time activity. 
B) a service,that will be counted as part of GDP. 
C) a service,but is not counted as part of GDP because it simply replaces a service you used to perform. 
D) rent,and therefore is counted as part of GDP. 
E) underground production because it replaces the underground production of you mowing your lawn.

Question 7

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?

Accepted Answer

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

Question 8

-The table above has information about an economy.Using this information,GDP equals

Accepted Answer

A) $6,500 billion. 
B) $7,800 billion. 
C) $7,000 billion. 
D) $8,500 billion. 
E) some amount that cannot be calculated without information on the amount of government expenditures. 
A) $6,500 billion. 
B) $7,800 billion. 
C) $7,000 billion. 
D) $8,500 billion. 
E) some amount that cannot be calculated without information on the amount of government expenditures.

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

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

Question 11

A country with a real GDP per person similar to real GDP per person in the United States but with limited political freedom is generally considered to have

Accepted Answer

A) a lower standard of living than the United States. 
B) a larger Human Development Index because the other country still needs to develop more political freedom. 
C) the same standard of living as the United States. 
D) an understated GDP. 
E) an overstated nominal GDP. 
A) a lower standard of living than the United States. 
B) a larger Human Development Index because the other country still needs to develop more political freedom. 
C) the same standard of living as the United States. 
D) an understated GDP. 
E) an overstated nominal GDP.

Question 12

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.

Accepted Answer

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 
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 13

-Based on the figure above,in which quarter or quarters did a trough occur?

Accepted Answer

A) between 2012,2nd quarter to 2013,2nd quarter and also between 2014,2nd quarter to the end of the figure 
B) in 2013,2nd quarter 
C) between 2013,2nd quarter to 2014,2nd quarter 
D) in 2014,2nd quarter 
E) There are no troughs illustrated in the figure. 
A) between 2012,2nd quarter to 2013,2nd quarter and also between 2014,2nd quarter to the end of the figure 
B) in 2013,2nd quarter 
C) between 2013,2nd quarter to 2014,2nd quarter 
D) in 2014,2nd quarter 
E) There are no troughs illustrated in the figure.

Question 14

To calculate GDP it is necessary to

Accepted Answer

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. 
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 15

The following are all final goods EXCEPT

Accepted Answer

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. 
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 16

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

Accepted Answer

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

Question 17

Investment is defined as

Accepted Answer

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. 
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 18

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

Accepted Answer

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

Question 19

According to the income approach to measuring GDP,the largest income category is

Accepted Answer

A) wages. 
B) interest. 
C) rent. 
D) profits. 
E) consumption expenditure. 
A) wages. 
B) interest. 
C) rent. 
D) profits. 
E) consumption expenditure.

Question 20

If the statistical discrepancy is zero,in order to calculate GDP from the value of net domestic product at factor cost,we must add

Accepted Answer

A) the value of intermediate goods and subtract the value of imports. 
B) direct taxes,subtract corporate profit,and add investment. 
C) indirect taxes,subtract subsidies,and add depreciation. 
D) subsidies,subtract indirect taxes and depreciation. 
E) indirect taxes,subsidies,and depreciation. 
A) the value of intermediate goods and subtract the value of imports. 
B) direct taxes,subtract corporate profit,and add investment. 
C) indirect taxes,subtract subsidies,and add depreciation. 
D) subsidies,subtract indirect taxes and depreciation. 
E) indirect taxes,subsidies,and depreciation.

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

Total expenditure equals total income

Depreciation is

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.

If you mow the lawn yourself,the lawn mowing is considered household production.If you pay Larry's Lawn Service to mow your lawn,the lawn mowing is considered

-The table above has information about an economy.Using this information,GDP equals

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

A country with a real GDP per person similar to real GDP per person in the United States but with limited political freedom is generally considered to have

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.

-Based on the figure above,in which quarter or quarters did a trough occur?

To calculate GDP it is necessary to

The following are all final goods EXCEPT

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

Investment is defined as

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

According to the income approach to measuring GDP,the largest income category is

If the statistical discrepancy is zero,in order to calculate GDP from the value of net domestic product at factor cost,we must add

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

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

Use the idea of the circular flow diagram to explain why the value of production equals total income equals total expenditure.

Total expenditure equals total income

Depreciation is

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.

If you mow the lawn yourself,the lawn mowing is considered household production.If you pay Larry's Lawn Service to mow your lawn,the lawn mowing is considered

-The table above has information about an economy.Using this information,GDP equals

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

A country with a real GDP per person similar to real GDP per person in the United States but with limited political freedom is generally considered to have

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.

-Based on the figure above,in which quarter or quarters did a trough occur?

To calculate GDP it is necessary to

The following are all final goods EXCEPT

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

Investment is defined as

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

According to the income approach to measuring GDP,the largest income category is

If the statistical discrepancy is zero,in order to calculate GDP from the value of net domestic product at factor cost,we must add

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

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.