Econ 2010 Chapter 4

Final goods and services are ______ production and ______ counted in GDP.

the end products of; are

The sum of the value added by all firms equals total:

value of final goods and services.

Labor income includes:

wages, salaries, and earnings of the self-employed.

Which of the following would increase the consumption component of U.S. GDP?

You purchase a vacation at Disney World in Florida.

Consumption expenditures include spending by households on:

services.

Government purchases include all of the following EXCEPT:

social security benefits paid by the federal government.

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

spending on final goods and services.

One way to avoid counting the prices of intermediate goods multiple times in computing the value of GDP is to:

sum the value added of producers of both intermediate and final goods and services.

The most commonly used measure of an economy's output is:

gross domestic product.

Which of the following would increase the consumption component of U.S. GDP?

You purchase a bottle of California wine.

Which of the following expenditures would increase the investment component of U.S. GDP?

You purchase a new house.

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 investment component of GDP?

$0.8 billion

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 investment component of GDP?

$1.0 billion

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

$150,000.

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?

$2.0 billion

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?

$2.0 billion

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?

$20,000

In 2009, Pete Rich purchases a painting done by Rembrandt in 1642 for $20 million. He also pays a one percent commission to the auction house that sold the painting. What is the contribution of these transactions to GDP in the year 2009?

$200,000

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 investment component of GDP?

$25 million

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

$3,500,000.

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 value of the investment component of GDP?

$30 million

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 value of GDP?

$50 million

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?

$50 million

In 2010, 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 Hilda Quinn Goner for $3,500. What is the contribution of these transactions to GDP in the year 2010?

$500

Suppose that the total production of an economy consists of 4 oranges and 10 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?

$6.00

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?

$7

Suppose that the total production of an economy consists of 10 oranges and 5 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?

$7.00

Which of the following would increase the net export component of U.S. GDP?

A bottle of California wine is purchased in London.

Which of the following would increase the investment component of U.S. GDP?

A laundry in Seattle purchases a new clothes-washing machine produced in the U.S.

Which of the following is an example of a capital good?

A metal-stamping machine used to produce cars sold to an automaker

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

A new CD player sold to an automaker for installation in a car

Which of the following would be classified as a final good?

A new computer sold to a business firm.

In which of the following situations would GDP not change?

As domestic consumers buy fewer tobacco products, tobacco manufacturers instead sell their products, at the same price, to foreign buyers.

Which of the following is NOT a capital good?

Batteries purchased by a car manufacturer to install in new cars

Which of the following would be included in the GDP of the United States?

Boeing builds a plane in Seattle that is sold to Air Canada.

Which of the following would increase the investment component of U.S. GDP?

Disney World purchases tires for the monorail from a firm in Ohio.

Which of the following is NOT classified as a final good?

Fresh vegetables purchased by a restaurant

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

GDP

Which one of the following activities is most likely to be counted in GDP?

Gail buys paper and crayons to donate to poor children in need of school supplies.

Which of the following transactions would be included in the GDP of the United States?

Honda produces cars in Ohio.

Which of the following would increase the government purchases component of U.S. GDP?

The U.S. federal government pays $3 billion in salaries to soldiers in the military.

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. Which expression of the output of this economy is most consistent with the concept of GDP?

This economy produces $7.00 worth of food.

Which of the following expenditures would increase the consumption component of U.S. GDP?

You buy a pizza.

When the production process extends over more than one year, the value of the final product is:

allocated to GDP in each year according to the value added in that year.

The value of intermediate goods is excluded from the measurement of GDP in order to:

avoid double counting.

Real GDP is measured in ______ prices; nominal GDP is measured in ______ prices.

base-year; current

Investment spending includes spending on:

capital goods, residential housing, and changes in inventories.

Factories and machines are examples of:

capital goods.

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

capital goods.

Profits, rents, interest, and royalties are examples of:

capital income.

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

gross domestic product.

Changes in business inventories are:

classified as investment expenditures.

Spending on durable goods, nondurable goods, and services is included in:

consumption expenditures.

The four components of aggregate expenditures are:

consumption, investment, government spending, and net exports.

The largest expenditure component of U.S. GDP is:

consumption.

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

counted in GDP as inventory investment.

Consumption spending includes spending on:

durables, nondurables, and services.

Summing the value added of all firms yields the value of final goods and services produced because both measures:

exclude the value of intermediate goods and services.

Net exports equal:

exports minus imports.

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

final

Government expenditures include spending by federal, state, and local governments on:

final goods and services.

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

final; included in

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.

households, firms, governments, and the foreign sector

The four categories of final users of GDP are:

households, firms, governments, and the foreign sector.

Educational services provided by public schools are:

included in GDP at cost.

Goods and services provided by state and local governments are:

included in GDP at cost.

National defense services provided by the military are:

included in GDP at cost.

If business inventories equal $40 billion at the beginning of the year and $55 billion at the end of the year, then, assuming no other changes, GDP must have:

increased by $15 billion.

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

intermediate

GDP equals the value added by producers of:

intermediate goods and services, as well as final goods and services.

Spending on new capital goods, new homes, and the addition of unsold goods to company inventories is included in:

investment.

The value of unpaid childcare services provided by a stay-at-home dad ______ included in GDP; the value of daycare services purchased from a licensed childcare provider ______ included in GDP.

is not; is

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

is not; is

Wages and salaries are examples of:

labor income.

Capital goods are

long-lived goods used for producing other goods and services.

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

market value; goods and services

Which of the expenditure components of GDP can be negative?

net exports.

Investment spending includes spending on:

new capital goods.

A measure of GDP in which quantities produced are valued at current-year prices is called:

nominal GDP.

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

not all economically valuable goods and services are bought and sold in markets.

Capital income in the U.S. equals approximately ______ of GDP.

one third

If an economy produces 3 million oranges that sell for $0.25 each and 100,000 cars that sell for $25,000 each, then when the market value of total output is calculated:

oranges receive a smaller weight than cars.

Real GDP measures the ______ of production; nominal GDP measures the ______ of production.

physical volume; current dollar value

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

price times the quantity of each item produced.

The total income of capital and labor must equal the value of total:

production.

Total spending on final goods and services in an economy must equal total:

production.

Three equivalent ways to measure GDP are total _____, total _____, and total ______.

production; income; expenditure

Capital income includes:

profits, rent, and interest.

The government expenditure component of GDP includes:

purchases of final goods and services.

A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

real GDP.

Comparisons of economic activity over time should be made using:

real GDP.

To compare the change in physical production (GDP) between 2000 and 2006, we should compare ______ GDP in 2000 with ______ GDP in 2006.

real; real

If total output is calculated by adding up the market value of goods and services produced, then more expensive items:

receive a greater weight than cheaper items.

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

revenue; the cost of inputs purchased from other firms

The value of final goods and services equals:

the sum of the value added by all firms.

GDP can be measured as each of the following EXCEPT:

total business revenues.

GDP is a measure of an economy's:

total output.

Labor income in the U.S. equals approximately ______ of GDP.

two thirds

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

used up in the process of; are not

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

value added.