Chapter 14 Study Questions

When measuring GDP by the income​ approach, wage income includes ​ i) health−care insurance paid for by the firm for its employees ​ ii) Social Security contributions made by the firm ​ iii) wages paid during a​ worker's vacation time

I, ii and iii.

During last​ year, a country produced​ 20,000 pizzas and​ 10,000 hamburgers and nothing else. The pizzas sold for​ $10.00 each and the hamburgers for​ $3.00 each. Nominal GDP was

$230,000.

Item/billions of dollars Wages/300 Consumption expenditure/350 Interest, rent, and profit/50 Statistical discrepancy/0 Government expenditure/300 Indirect taxes minus subsidies/15 Net exports of goods and services/-11 Depreciation/15 Using the information in the table​ above, what does GDP​ equal?

$380 billion

Data for 2015 Item/Quantity/Price Bananas/100/$2.00 Sunscreen/60/$5.00 Data for 2016 Item/Quantity/Price Bananas/125/$400 Sunscreen/75/$400 Bananaland produces only bananas and sunscreen and the quantities and prices for 2015 and 2016 are given in the table above. The base year is 2015. Nominal GDP in 2015 is equal to

$500.

Data for 2009 Item/Quantity/Price Bread/50/$4.00 Soda/50/$5.00 Data for 2010 Item/Quantity/Price Bread/70/$3.00 Soda/50/$6.00 The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2010. What is real GDP in​ 2010?

$510

Item/Billions of dollars Consumption expenditure/4,000 Interest, rent, and profit/300 Investment/1,000 Depreciation/400 Government expenditure on goods and services/300 Net exports of goods and services/200 The table gives data for a nation. What is the amount of the​ country's GDP?

$6,200 billion

Gross Domestic Product equals

Y​ = C​ + I​ + G​ + NX.

Which of the following is a final good or​ service?

a new replacement muffler installed by Midas Mufflers

Spending on financial assets​ ________ counted as part of GDP​ ________.

are​ not; because their purchase is not spending on goods or services

When Jamie purchases a classic 1968 Plymouth Cuda convertible from​ Shane, GDP

does not​ change, because the car was not produced this year.

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.

i and iii.

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

iii only.

The category of​ "rent" in the income approach to GDP

includes the money paid to use land and other rented inputs.

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​________.

increases by​ $200; decreases by​ $200; does not change

Adding​ wages, interest,​ rent, and profits yields

net domestic product at factor cost.

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

popcorn purchased by a movie theater chain in Georgia

Goods and services such as environmental​ quality, leisure​ time, and household production are not included in GDP because they are not

bought in markets.

If nominal GDP increases this​ year, then real GDP

could​ increase, decrease, or not change.

If a firm does not sell all of the goods that it produces in a given time​ period, then the goods

count positively in GDP as inventory investment.

Item/Billions of dollars Consumption expenditure/4,000 Interest, rent, and profit/300 Investment/1,000 Depreciation/400 Government expenditure on goods and services/300 Net exports of goods and services/200 The table gives data for a nation. The value of the​ country's net exports of goods and services shows that the​ country's

value of its exports exceeded the value of its imports.

GDP includes the goods and services produced

within a​ country's borders by citizens and by non−citizens.

Last year for a nation to the​ south, net domestic product at factor cost equaled​ $3,300 billion. Indirect taxes minus subsidies equaled​ $200 billion, depreciation equaled​ $800 billion, the statistical discrepancy equaled​ zero, and net operating surplus equaled​ $150 billion. The​ country's GDP was

​$4,300 billion.

To measure GDP by using the income​ approach, we must add all incomes and then​ ________ depreciation and​ ________ net taxes less subsidie

​add; add

As​ measured, GDP omits which of the​ following? i. Illegal sales of goods and services. ii. Changes in the amount of leisure time. iii. Household production of goods and services.

​i, ii, and iii

Data for 2015 (billions of dollars) Nominal GDP/4,000 GDP using 2015 prices/4,000 GDP using 2016 prices/4,230 Data for 2016 (billions of dollars) Nominal GDP/4,400 GDP using 2015 prices/4,240 GDP using 2016 prices/4,400 The table above gives some data about GDP in a country for two years. Using the​ chained-dollar method for calculating real​ GDP, real GDP increased by​ ________ percent between these two years.

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