chapter 8

In the equation y = c + i + g + nx... A) Y represents the economy's total income. B) C represents household expenditures on services and durable goods. C) all of the variables are always positive numbers. D) All of the above are correct.

A) Y represents the economy's total income.

If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then ... A) U.S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases. B) U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected. C) U.S. consumption decreases, U.S. net exports increase, and U.S. GDP increases. D) U.S. consumption decreases, U.S. net exports increase, and U.S. GDP is unaffected.

B) U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected

If a state made a previously illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP ... A) decreases. B) increases. C) doesn't change because both legal and illegal production are included in GDP. D) doesn't change because these activities are never included in GDP.

B) increases.

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP? A) $500 B) $700 C) $1,200 D) $1,700

C) $1,200

9. Unemployment compensation is ... A) part of GDP because it represents income. B) part of GDP because the recipients must have worked in the past to qualify. C) not part of GDP because it is a transfer payment. D) not part of GDP because the payments reduce business profits.

C) not part of GDP because it is a transfer payment

Which of the following is not included in the investment component of GDP? A) The purchase of 100 shares of stock. B) The purchase of a $1000 bond. C) A firm's purchase of a used van to use for deliveries. D) None of the above are included in the investment component of GDP.

D) None of the above are included in the investment component of GDP.

which of the following items is included in U.S. GDP? A) the estimated value of production accomplished at home, such as backyard production of fruits and vegetables B) the value of illegally produced goods and services C) the value of cars and trucks produced in foreign countries and sold in the U.S. D) None of the above is included in U.S. GDP.

D) None of the above is included in U.S. GDP.

Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house for $260,000. Which of the following statements is correct regarding the sale of the house? A) The 2014 sale increased 2014 GDP by $260,000 and had no effect on 2011 GDP. B) The 2014 sale increased 2014 GDP by $20,000 and had no effect on 2011 GDP. C) The 2014 sale increased 2014 GDP by $260,000; furthermore, the 2014 sale caused 2011 GDP to be revised upward by $20,000. D) The 2014 sale affected neither 2014 GDP nor 2011 GDP.

D) The 2014 sale affected neither 2014 GDP nor 2011 GDP.

real gdp equation

Nominal GDP/GDP Deflator x 100

Nominal GDP equation

Price x Quantity

Gross domestic product measures ...

income and expenditures