Macroeconomics

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

b

Goods and services such as environmental quality, leisure time, and household production are not included in GDP because they are not A) productive activities. B) for consumption. C) bought in markets. D) made for profit. E) really durable goods.

c

) If a wealthy woman marries her butler, quits paying him and does not hire a new butler, then A) GDP definitely decreases. B) GDP definitely does not change. C) GDP definitely increases. D) GDP either does not change or increases. E) There is not enough information given to reach a conclusion.

a

Expenditures on U.S. produced steaks, shoes, and doctor visits are most likely classified as A) consumption expenditures. B) investment. C) government expenditures on goods and services. D) net exports of goods and services. E) net imports of goods and services.

a

Net exports of goods and services is defined as equal to A) the value of exports of goods and services minus the value of imports of goods and services. B) U.S. sales of goods and services to the rest of the world plus U.S. purchases of goods and services from the rest of the world. C) U.S. sales of goods and services to the rest of the world. D) U.S. purchases of goods and services from the rest of the world. E) the value of imports of goods and services minus the value of exports of goods and services.

a

The following are all final goods except A) flour used by the baker to make cup cakes. 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

Babysitting services the oldest son provides his parents A) counts as nominal GDP but not real GDP. B) counts as real GDP but not nominal GDP. C) counts as real GDP and nominal GDP. D) does not count as real GDP nor nominal GDP. E) counts in both real and nominal GDP only if the son is not paid.

d

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

e

The GDP deflator equals i. nominal GDP divided by real GDP multiplied by 100. ii. a measure of the price level. iii. an average of current prices expressed as a percentage of base-year prices. A) i only. B) ii and iii. C) iii only. D) i and ii. E) i, ii, and iii.

e

Which of the following is likely to be an unreported economic activity? A) a $25,000 bonus paid to the CEO of a company B) tips paid to a taxi driver C) the minimum wage paid to a teenager working at a McDonalds D) the brokerage fees paid to a broker at Merrill Lynch E) the purchase of shares of stock in Walgreen's Pharmacy

b

Consumption expenditures are defined as spending on goods and services by A) households, businesses and government. B) households. C) businesses and government. D) the rest of the world. E) households and businesses.

b

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

b

Bananaland produces only bananas and sunscreen and the quantities and prices for 2003 and 2004 are given in the table above. The base year is 2003. Real GDP in 2003 is equal to A) $800. B) $640. C) $625. D) $500. E) $200.

d

Everything else the same, if consumption expenditure increases by $200 billion and imports increase by $200 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.

d

Excluding household and underground production leads to A) underestimation of real GDP but not nominal GDP. B) overestimation of real GDP but not nominal GDP. C) overestimation of both real GDP and nominal GDP. D) underestimation of both real GDP and nominal GDP. E) underestimation of real GDP an an overestimation of nominal GDP.

d

Household production, such as baking bread at home, is not included in GDP because it A) has better quality than the bread in the store. B) has lower quality than the bread in the store. C) does not add anything of value to GDP. D) does not involve a market transaction. E) is not really production.

d

The nation's supply of productive resources increases if A) investment is greater than depreciation. B) investment equals depreciation. C) investment is less than depreciation. D) Both answers A and B can be correct. E) None of the above answers are correct because the relationship between investment and depreciation has no bearing on the amount of the nation's productive resources.

a

Which of the following is included in the of U.S. GDP for 2006? i. a 2006 Grand Am produced and sold as a new car in the United States in 2006 ii. tires produced in the United States, purchased by GM, and installed on a new Grand Am sold in 2006 iii. GM cars produced in Canada A) i only. B) ii only. C) i and iii. D) ii and iii. E) i, ii, and iii.

a

) Depreciation is 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.

b

Bananaland produces only bananas and sunscreen and the quantities and prices for 2003 and 2004 are given in the table above. The base year is 2003. Nominal GDP in 2004 is equal to A) $500. B) $800. C) $640. D) $625. E) $200.

b

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 expenditures. B) investment. C) net exports of goods and services. D) exports of goods and services. E) nondurable consumption goods.

b

Which of the following would NOT be directly included in the U.S. GDP in 2009? A) the market value of restaurant meals sold in 2009 B) the market value of the computer chips produced in 2009 and used by Dell in their latest personal computer C) the value of the automobiles produced in 2009 at the Toyota plant located in Georgetown, KY D) legal services provided to first time home buyers during 2009 E) the purchase of a new home in Walnut Creek, California in 2009

b

An example of household production excluded from GDP is A) household cleaning services provided by Merry Maids Incorporated. B) childcare provided by a certified nanny. C) tree trimming you provide at your parent's home. D) plumbing work completed by Joe Fix-it. E) lawn care provided by a local lawn care company.

c

During 2008, net domestic product at factor cost equals $3,300 billion. Indirect taxes minus subsidies equals $200 billion, depreciation equals $800 billion, the statistical discrepancy equals zero, and net operating surplus equals $150 billion. The country's GDP equals A) $2,300 billion. B) $3,500 billion. C) $4,300 billion. D) $4,450 billion. E) $4,150 billion.

c

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.

c

If you buy a five-year old TV from a friend, the amount you paid for the TV is A) always added to consumption expenditures but not investment. B) always added to investment but not consumption. C) not included in this year's GDP. D) added to investment if the TV is expected to last more than 5 additional years and added to consumption if the TV is expected to last less than 5 additional years. E) included in this year's GDP only if the TV set was manufactured in the United States.

c

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.

c

Last year the United States 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 were greater than the value of U.S. imports. C) the value of U.S. exports were 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.

c

The category of "rent" in the income approach to GDP A) includes the money paid to rent apartments only. B) includes the money paid to rent machinery only. C) includes the money paid to use land and other rented inputs. D) does not have any connection to owner-occupied housing. E) includes only the imputed rent for owner-occupied housing.

c

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.

c

The purchase of the financial assets, such as stocks and bonds, is not included in GDP because A) they are too expensive. B) taxes are paid on them. C) brokerage firms don't want them to be included. D) they don't represent the production of goods or services. E) The question errs because the purchase of financial assets is counted as part of GDP.

c

To measure GDP by using the income approach, we must add all incomes and then ________ depreciation and ________ net taxes less subsidies. A) neither add nor subtract; add B) add; neither add nor subtract C) add; add D) add; subtract E) subtract; add

c

Total income in a country in 2000 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.

c

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

c

Bananaland produces only bananas and sunscreen and the quantities and prices for 2003 and 2004 are given in the table above. The base year is 2003. Nominal GDP in 2003 is equal to A) $500. B) $625. C) $640. D) $800. E) $100.

d

In comparing the magnitudes of the components of GDP according to the expenditure approach, we see that in the United States A) government expenditures 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 about the same size as government expenditure on goods and services. E) investment, government expenditure on goods and services, and consumption expenditure are all about the same size.

d

In recent years, which of the following has been negative? A) consumption expenditure B) investment C) government expenditures on goods and services D) net exports of goods and services E) wages

d

In year 2007, in Candamica, consumption expenditure was $13 billion, interest, rent, and profit were $1.5 billion, government expenditures on goods and services were $3 billion, net exports of goods and services amounted to $2 billion, and investment was $8 billion. Hence total expenditure was A) $24.5 billion. B) $27.5 billion. C) $22.5 billion. D) $26 billion. E) $16 billion.

d

Investment is defined as the purchase of A) any financial asset only. B) additions to inventories only. C) financial assets and inventories only. D) the purchase of new capital goods and additions to inventories. E) the purchase of new capital goods but not additions to inventories.

d

Leisure time is ignored when calculating GDP because leisure time A) does not effect our standard of living. B) has been declining over time. C) is not an economic good. D) does not involve a measurable market transaction. E) is not productive.

d

The GDP deflator is A) a measure of the level of production. B) always greater than 100. C) the price level during the base year. D) a measure of the price level. E) equal to nominal GDP during the base year.

d

The calculation of GDP excludes A) government expenditures on office supplies. B) households' purchases of shampoo. C) businesses' purchase of new machine tools. D) a family member painting the family home. E) expenditures on durable goods.

d

The income approach measures GDP by summing A) C + I + G + NX. B) the total production of all final goods and services produced in a year within a country's borders. C) the wealth of households, business and government. D) the incomes paid households for the resources they own. E) Both answers A and D are correct.

d

The measurement of GDP makes a distinction between A) goods and services, including goods and excluding services. B) final goods and services and intermediate goods and services, so that GDP includes intermediate goods and services but excludes final goods and services. C) goods and services, including services but excluding goods. D) final goods and services and intermediate goods and services, so that GDP includes final goods and services but excludes intermediate goods and services. E) durable goods and nondurable goods so that GDP includes only durable goods.

d

The purchase of stocks and bonds is A) included in GDP as investment. B) included in GDP as a consumption expenditure. C) included in GDP as an intermediate good. D) not included in GDP as investment. E) not included in GDP because these are intermediate goods.

d

Which of the following expenditure components of GDP can be negative or positive? A) Consumption expenditures B) Investment expenditures C) Government purchases of goods and services D) Net exports of goods and services E) None of the above because expenditure can never be negative.

d

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

d