Chapter 10 Homework

Expenditures by households on education are included in the investment component of GDP.

False

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300.

False

U.S. GDP and U.S. GNP are related as follows:

GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad

U.S. GNP

excludes production of foreigners working in the U.S. but includes production by U.S. citizens working in foreign countries.

For the economy as a whole,

expenditure must equal income.

Government purchases include spending on goods and services by

federal, state, and local governments.

Tom is an organic gardener. For several years, he produced only for his own consumption, but this year he has sold his vegetables at a farmer's market. The vegetables Tom produces

​are included in GDP for this year, but prior to this year the value of his vegetables was not included in GDP

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015?

$3200

Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, Inc., which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $2.50. Neither firm had any inventory at the beginning of 2014. During that year, Rolling Rawhide produced enough rawhide for 2000 dog chews. Chewy Chomp, Inc. bought 90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015. Chewy Chomp, Inc. produced 1800 dog chews during 2014 and sold each one during that year for $2.50. What was the economy's GDP for 2014?

$4,700

In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan's net exports in 2015?

-$250

Refer to Table 23-6. In 2013, this country's GDP deflator was

100.0

Which of the following is not included in U.S. GDP?

The market value of an oil change that Ben performs on his own car.

Changes in inventory are included in the investment component of GDP.

True

Real GDP is the yearly production of final goods and services valued at

constant prices

The consumption component of GDP includes spending on

durable goods, nondurable goods, and services

Consumer goods that are produced, go into inventory, and are not sold during the current period are

included in current period GDP as inventory investment

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP?

it does not change GDP

Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,

nominal GDP is $100, real GDP is $50, and the GDP deflator is 200

Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound. In 2009, the base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010,

nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83

Which of the following transactions is not included in GDP?

oranges sold by a farmer to a grocery store

When economists talk about growth in the economy, they measure that growth as the

percentage change in real GDP from one period to another.

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

raises GDP

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters.

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption?

the second but not the first

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.