Chapter 15

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 Just the value of the final good, the $20,000 car, is included in GDP.

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

final

GDP is a measure of an economy's:

total output. GDP measures the market value of final goods and services produced in an economy in a given period. Thus, it measures an economy?s total output.

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. Citrus Growers Association sold two final goods, oranges and orange juice, to the ultimate buyer for $3,500,000.

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 The market value is $6.00, because 4 oranges contributed $1.00 and 10 candy bars contributed $5.00.

The additional goods and services produced by women in the United States as their labor force participation increases represent:

an increase in economic activity.

The four categories of final users of GDP are:

households, firms, governments, and the foreign sector.

Goods and services provided by state and local governments are:

included in GDP at cost. State and local government services, like police services, are typically not sold. But they are productive activities, so economists include them in GDP at the cost of production.

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. Products that are not exchanged in markets, like mowing your own lawn, are not valued easily. Thus, it?s difficult to properly gauge their contribution to GDP.

In 2015, Pete Rich purchases a 1642 painting by Rembrandt 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 2015?

$200,000 The auction house added $200,000 value to the transaction for their service to facilitate the sale of this painting, which is the difference in the price of buying the painting versus the price of selling the same painting to the new owner.

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

Fresh vegetables purchased by a restaurant Fresh vegetables purchased by a restaurant are intermediate goods because they are inputs to the final good, a restaurant meal.

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

capital goods.

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

market value; goods and services The gross domestic product is measured in dollars, which is the market value of the goods and services produced.

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

revenue; the cost of inputs purchased from other firms Value added is computed by subtracting the cost of inputs purchased from other firms from revenue received by the sale.