ECON 211- Chapter 10, Econ test 2

A farmer produces potatoes, and sells them to a company which uses them all to make potato chips. The potatoes produced by the farmer are called A. intermediate goods. B. final goods. C. transitory goods. D. inventory goods.

A

What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services? A. costs B. investment C. capital D. consumption

B. investment

Inflation Rate Equation

CPI this year - CPI last year / CPI last year x 100

Real GDP Equation

Price of Base Year x Quantity of current year

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. -Federal government paychecks to soldiers -The costs of air and water pollution -The import and sale of illegal drugs from South America -The variety of goods available to consumers

-The costs of air and water pollution -The import and sale of illegal drugs from South America -The variety of goods available to consumers

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. -The loss of enjoyment people incur when scenic land is converted to commercial use -The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government -Expenditures on federal highways -The quality of goods available to consumers

-The loss of enjoyment people incur when scenic land is converted to commercial use -The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government -Expenditures on federal highways -The quality of goods available to consumers

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. -The value produced when you wash your own car at home -Funds spent by city governments to renovate their buildings -The costs of overfishing and other overly intensive uses of resources -The leisure time enjoyed by households

-The value produced when you wash your own car at home -The costs of overfishing and other overly intensive uses of resources -The leisure time enjoyed by households

If you buy pizza at your favorite local pizzeria, A. both GDP and consumption spending will be higher. B. GDP will be unchanged, but consumption spending will be higher. C. GDP will be higher, but consumption spending will be unchanged. D. neither GDP nor consumption is changed, because pizza is not a durable good.

A

In a simple circular-flow diagram, households buy goods and services with the income they get from A. wages, rent, and profits. B. wages and profit. C. wages and rent. D. wages.

A

When an American household purchases a bottle of Italian wine for $100, A. U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change. B. U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by $100. C. U.S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP increases by $100. D. U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by $100.

A

Table 23-1 The table below contains data for Chereaux for the year 2015. GDP $200 Income earned by citizens abroad $9 Income foreigners earn here $5 Losses from depreciation $6 Indirect business taxes $10 Statistical discrepancy $0 Retained earnings $8 Corporate income taxes $12 Social insurance contributions $30 Interest paid to households by government $8 Transfer payments to households from government $55 Personal taxes $60 Nontax payments to government $11 Refer to Table 23-1. The market value of all final goods and services produced within Chereaux in 2015 is A. $200. B. $214. C. $230. D. $204.

A. 200 (BECAUSE THE OTHER THINGS AREN'T MENTIONED #trick question)

When economists refer to intangible items, they are referring to such things as A. hair styling and dental care, and the value of such items is included in GDP. B. illegal goods, and the value of such items is excluded from GDP. C. hair styling and dental care, and the value of such items is excluded from GDP. D. illegal goods, and the value of such items is included in GDP.

A. hair styling and dental care, and the value of such items is included in GDP.

The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland's A. net factor payments from abroad are negative, and its GDP is larger than its GNP. B. net factor payments from abroad are positive, and its GDP is larger than its GNP. C. net factor payments from abroad are negative, and its GNP is larger than its GDP. D. net factor payments from abroad are positive, and its GNP is larger than its GDP.

A. net factor payments from abroad are negative, and its GDP is larger than its GNP.

Consumption consists of spending by households on goods and services, with the exception of A. purchases of new houses. B. purchases of intangible services. C. purchases of durable goods. D. spending on education.

A. purchases of new houses.

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply. The value produced when you wash your own car at home The quality of goods available to consumers Expenditures on federal highways The costs of overfishing and other overly intensive uses of resources

All besides expenditures on federal Highways are included

Expenditures on a nation's domestic production

Are equal to its domestic product

GDP per person tells us the income and expenditure of the

Average Person in the economy

A manufacturer produces 500,000 MP3 players in the first quarter of the year. It sells 400,000 of them and adds 100,000 of them to inventory. All the players added to inventory are purchased by consumers in the second quarter. How are the 100,000 that go into inventory counted in GDP? A. The MP3 players will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise GDP by the value of the MP3 players. B. The MP3 players will be counted as a change in inventory in the first quarter, and so will be included in first quarter GDP as part of investment. C. Since the MP3 players were purchased by consumers in the second quarter, they will be counted as an increase in second- quarter GDP. D. Since the MP3 players eventually will be bought by consumers, they will be included as consumption in the first quarter.

B

An American company operates a coffeehouse in Lisbon, Portugal. Which of the following statements is accurate? A. The value of the goods and services produced by the coffeehouse is included in U.S. GDP, but not in Portuguese GDP. B. The value of the goods and services produced by the coffeehouse is included in Portuguese GDP, but not in U.S. GDP. C. The value added by American workers and equipment in Portugal is included in U.S. GDP and the value added by Portuguese workers and equipment is included in Portuguese GDP. D. The value of the goods and services produced by the coffeehouse is included in both Portuguese GDP and U.S. GDP.

B

EZ Rental Car buys cars from a Japanese owned car manufacturer who produces the cars in the U.S. Which of the following is correct? A. U.S. investment increases, but GDP increases by a smaller amount. B. U.S. investment and GDP increase by the same amount. C. U.S. investment increases, but U.S. GDP does not. D. There is no effect on U.S. investment, or U.S. GDP.

B

If a U.S. company buys a computer server made in China by a Chinese firm, and the Chinese firm uses the payment to buy stocks issued by a U.S. company then other things the same A. U.S. exports decrease, U.S. imports are unchanged. B. U.S. imports increase but U.S. exports are unchanged. C. U.S. exports increase, but U.S. imports are unchanged. D. U.S. exports and U.S imports increase.

B

John plows snow from driveways. He spends $2 on gas and charges $25 each time he plows. What's the total contribution to GDP each time John plows a driveway? A. $27 B. $25 C. $23 D. $2

B

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that A. GDP is not a useful measure of society's welfare. B. GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare. C. GDP is still the best measure of society's welfare because these other values cannot actually be measured. D. GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government.

B

Portland Sardines produced $14 million worth of cans of sardines. In producing these cans of sardines, it purchased $2 million dollars' worth of tin from foreign countries and paid workers who reside in Canada but commuted to the U.S. $1 million, all other labor was provided by U.S. residents. How much of the company's production was included in U.S. GDP? A. $11 million B. $12 million C. $13 million D. $14 million

B

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2010 Quality Motors produced $30 million worth of automobiles, with $17 million in sales to Americans, $9 million in sales to Canadians, and $4 million worth of automobiles added to Quality Motors' inventory. The transactions just described contribute how much to U.S. GDP for 2010? A. $17 million B. $30 million C. $26 million D. $21 million

B

Sally drives an automobile she purchased several years ago. This year she bought gasoline and some parts and spent five hours making repairs. Which of the following is included in this year's GDP? A. the amount she paid to buy gasoline, new parts, and the value of her time making repairs. B. the amount she paid to buy gasoline and new parts, but not the value of her time. C. only the amount she paid to buy new parts. D. only the amount she paid to buy gasoline.

B

Which of the following correctly lists what is included in the consumption component of GDP? A. household purchases of nondurable goods and durable goods other than residential construction but not household purchases of services B. household purchases of services, nondurable goods, and durable goods other than residential construction C. household purchases of services, nondurable goods, and all durable goods D. household purchases of services and household purchases of nondurable goods but not any household purchases of durable goods

B

Which of the following is a correct statement? A. How equally income is distributed is accounted for when computing real GDP per person. B. The value of leisure time is excluded in the calculation of GDP per person. C. Rich and poor countries often have very similar standards of living. D. International data provides strong evidence that a nation's real GDP per person is not associated with other measures of the quality of life.

B

Which of the following items is included in U.S. GDP? A. the difference in the price of the sale of an existing home and its original purchase price B. goods produced by foreign citizens working in the United States C. known illegal activities D. None of the above is included in U.S. GDP.

B

Table 23-6 The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013 . Prices and Quantities Year Price of Waffles Quantity of Waffles Price of Pancakes Quantity of Pancakes 2010 $2.00 80 $1.00 100 2011 $2.00 100 $2.00 120 2012 $2.00 120 $3.00 150 2013 $4.00 150 $3.00 200 Refer to Table 23-6. In 2010, this country's nominal GDP was A. $620. B. $260. C. $440. D. $760.

B. $260.

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP? A. GDP increases by $3.00. B. GDP increases by $5.00. C. GDP increases by $6.00. D. GDP increases by $7.00. Hide Feedback

B. GDP increases by $5.00.

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct? A. Only Joe's grocery store purchases are included in GDP. B. Only Joe's and Jim's grocery store purchases are included in GDP. C. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value. D. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information

B. Only Joe's and Jim's grocery store purchases are included in GDP.

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has A. not caused any change in measured GDP. B. caused measured GDP to rise. C. probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted. D. caused measured GDP to fall.

B. caused measured GDP to rise.

14. Chapter mank07t, Section .165, Problem 026 Figure 23-1. Refer to Figure 23-1. Which of the following pairs correctly identify W and Y? A. markets for factors of production and markets for goods and services B. firms and households C. expenditures and income D. consumption and investment

B. firms and households

Suppose an economy produces only cranberries and maple syrup. In 2010, 50 units of cranberries are sold at $20 per unit and 100 units of maple syrup are sold at $8 per unit. In 2009, the base year, the price of cranberries was $10 per unit and the price of maple syrup was $15 per unit. For 2010, A. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 90. B. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90. C. nominal GDP is $2000, real GDP is $1800, and the GDP deflator is 111.1. D. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 111.1.

B. nominal GDP is $1800, real GDP is $2000, and the GDP deflator is 90.

A farmer sells $50,000 worth of apples to individuals who take them home to eat, $75,000 worth to a company that uses them all to produce apple juice, and $100,000 worth of apples to a grocery store that sells all of them to households. How much of the farmer's sales will be included as apples in GDP? A. $225,000 B. $175,000 C. $150,000 D. $50,000

C

A macroeconomist is interested in A. explaining price changes in a particular market. B. explaining how changes in sellers' behavior affect prices of a particular good. C. explaining why the unemployment rate is higher. D. All of the above are correct.

C

If the amount U.S. citizens earn abroad is larger than the amount foreign citizens working in the U.S. earn, then A. U.S. net factor payments from abroad are negative, and GNP is larger than GDP. B. U.S. net factor payments from abroad are negative, and GDP is larger than GNP. C. U.S. net factor payments from abroad are positive, and GNP is larger than GDP. D. U.S. net factor payments from abroad are positive, and GDP is larger than GNP.

C

If total spending rises from one year to the next, then which of the following could not be true? A. the economy is producing a larger output of goods and services, and goods and services are selling at higher prices. B. the economy is producing a larger output of goods and services, and goods and services are selling at lower prices. C. the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices. D. the economy is producing a smaller output of goods and services, and goods and services are selling at higher prices.

C

In computing GDP, market prices are used to value final goods and services because A. market prices reflect the quantity sold. B. market prices do not change much over time, so it is easy to make comparisons between years. C. market prices reflect the values of goods and services. D. None of the above is correct; market prices are not used in computing GDP.

C

Juan, a Mexican citizen, works only in the United States. The value of the output he produces is not included in either U.S. GNP or U.S. GDP. included in U.S. GNP, but it is A. not included in U.S. GDP. B. included in U.S. GDP, but it C. is not included in U.S. GNP. D. included in both U.S. GDP and U.S. GNP.

C

Of the following which is the best single measure of a country's economic well-being? A. investment per business firm. B. government expenditures per person. C. real GDP per person. D. nominal GDP per person.

C

Real GDP will decrease A. when prices decrease or output decreases. B. only when production of goods and services and prices decrease. C. only when production of goods and services decreases. D. only when prices decrease.

C

In a simple circular-flow diagram, firms A. purchase the output produced by households. B. receive income by selling resources to households. C. purchase resources from households. D. All of the above are correct.

C. purchase resources from households.

Rajiv and Simone Redondo live in Swarthmore, PA. Their son, Yakov, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Simone gets a new refrigerator made in the United States. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. Yakov buys a new set of tools to use in his plumbing business. Rajiv's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. Rajiv buys a bottle of Italian wine.

C G C,I X C,M

Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion? A. GDP necessarily decreases. B. GDP is unaffected because neither the rent nor the estimate of the value owner-occupied housing services is included in GDP. C. GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services. D. GDP necessarily increases.

C. GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services.

Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S. The end result of these two transactions is A. U.S. consumption purchases increase by $10,200 and U.S. GDP increases by $10,200. B. U.S. consumption purchases increase by $200 and U.S. GDP increases by $10,000. C. U.S. consumption purchases increase by $200 and U.S. GDP increases by $200. D. U.S. consumption purchases increase by $10,000 and U.S. GDP increases by $10,200.

C. U.S. consumption purchases increase by $200 and U.S. GDP increases by $200.

If foreign citizens earn less income in the U.S. than U.S. citizens earn in foreign countries, A. U.S. net factor payments from abroad are negative, and its GDP is larger than its GNP. B. U.S. net factor payments from abroad are positive, and its GDP is larger than its GNP. C. U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP. D. U.S. net factor payments from abroad are negative, and its GNP is larger than its GDP.

C. U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP.

In a simple circular-flow diagram, total income and total expenditure are A. equal only when the government purchases no goods or services. B. never equal because total income always exceeds total expenditure. C. always equal because every transaction has a buyer and a seller. D. seldom equal because of the ongoing changes in an economy's unemployment rate.

C. always equal because every transaction has a buyer and a seller.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily, A. values of goods and services based on surveys of consumers. B. quantities purchased by a typical urban household. C. market prices. D. profits from producing goods and services.

C. market prices.

Darnell and Eleanor Cohen live in Swarthmore, PA. Eleanor's father, Jacques, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Eleanor gets a new refrigerator made in the United States

Consumption

Lorenzo and Neha Strong live in Swarthmore, PA. Their son, Sam, is an artist living in New York City. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Neha gets a haircut

Consumption

Sam and Teresa Lacoste live in Swarthmore, PA. Their son, Andrew, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Teresa gets a new video camera made in the United States

Consumption

Darnell and Eleanor Cohen live in Swarthmore, PA. Eleanor's father, Jacques, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Darnell buys a sweater made in Guatemala

Consumption Imports

Lorenzo and Neha Strong live in Swarthmore, PA. Their son, Sam, is an artist living in New York City. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Lorenzo buys a bottle of Italian wine

Consumption Imports

Sam and Teresa Lacoste live in Swarthmore, PA. Their son, Andrew, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Teresa buys a new BMW, which was assembled in Germany

Consumption Imports

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP A. increases by $40. B. increases by $280. C. increases by $1500. D. increases by $220.

D

GDP does not reflect A. the value of goods and services produced at home. B. the quality of the environment. C. the value of leisure. D. All of the above are correct.

D

GDP is equal to A. Y. B. the market value of all final goods and services produced within a country in a given period of time. C. C + I + G + NX. D. All of the above are correct.

D

Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of A. statistical estimates of the value of goods and services to consumers. B. prices based on the assumption that producers make no profits. C. the maximum amount consumers would be willing to pay. D. market prices.

D

International data on GDP and socioeconomic variables indicate that in countries with low levels of real GDP per person, socioeconomic variables indicating a better quality of life are A. significantly higher about as often as they are significantly lower for those countries with higher levels of real GDP person. B. mostly similar to those in countries with higher levels of real GDP per person. C. generally significantly higher than in countries with higher levels of real GDP per person. D. generally significantly lower than in countries with higher levels of real GDP per person.

D

Last year was the base year, this year inflation was 5%. What is this year's GDP deflator? A. .95 B. 1.05 C. 95 D. 105

D

Which of the following is included in the consumption component of GDP? A. household purchases of food. B. household purchases of medical care. C. household purchases of appliances. D. All of the above are included in the consumption component of GDP.

D

Which of the following is included in the government purchases component of GDP? A. a state government repairs highways, a local government pays its police, but not the federal government buys fighter jets. B. the federal government buys fighter jets, a local government pays its police, but not a state government repairs highways. C. the federal government buys fighter jets, a state government repairs highways, but not a local government pays its police. D. the federal government buys fighter jets, a state government repairs highways, a local government pays its police

D

Figure 23-1. Refer to Figure 23-1. Which of the following correctly identifies the flow of dollars? A. W, X, Y and Z B. K, M, L and N C. C, K, M and D D. A, L, N and B

D. A, L, N and B

Which of the following is not included in GDP? A. the services of an exterminator B. a can of bug spray C. the honey produced and sold by a beekeeper D. All of the above are included in GDP.

D. All of the above are included in GDP.

Which of the following is included in the investment component of GDP? A. spending to build new houses B. spending to build new factories C. spending on business equipment such as welding equipment D. All of the above are included in the investment component of GDP.

D. All of the above are included in the investment component of GDP.

Which of the following is not an example of a durable good? A. a furnace. B. an automobile. C. a refrigerator. D. a business suit

D. a business suit

GDP includes the value of all A. final goods and services produced within a country using primarily a survey of consumers to measure the value of goods and services. B. goods and services produced within a country using primarily a survey of consumers to measure the value of goods and services. C. goods and services produced within a country using primarily market prices to measure the value of goods and services. D. final goods and services produced within a country using primarily market prices to measure the value of goods and services.

D. final goods and services produced within a country using primarily market prices to measure the value of goods and services.

The value of the housing services provided by the economy's owner-occupied houses is: A. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. B. excluded from GDP since these services are not sold in any market. C. excluded from GDP since the value of these housing services cannot be estimated with any degree of precision. D. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services

D. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

If an economy's GDP rises, then it must be the case that the economy's A. income rises and expenditure falls. B. income rises and saving falls. C. income and saving both rise. D. income and expenditure both rise.

D. income and expenditure both rise.

Total income from the domestic production of final goods and services equals A. only household and business expenditures for these goods. B. only household expenditures for these goods. C. only household and government expenditures for these goods. D. the expenditures for these goods whoever buys them.

D. the expenditures for these goods whoever buys them.

Based on this definition, indicate which of the following transactions will be included in (that is, directly increase) the GDP of the United States in 2014. Scenario Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 14, 2014. Athleticus imports the pair of sneakers into the United States on May 17, 2014. Rotato, a U.S. tire company, produces a set of tires at a plant in Michigan on September 25, 2014. It sells the set of tires to Speedmaster for use in the production of a two-door coupe that will be made in the United States in 2014. (Note: Focus exclusively on whether production of the set of tires increases GDP directly, and ignore the effect of production of the two-door coupe on GDP.) You chop down a cherry tree on your property in California and make a dining room table in 2014. A similar table sells for $800 in a local furniture store. Sofaland, a Swedish furniture company, produces a table at a plant in Virginia on December 1, 2014. It sells the table to a college student on December 20. Awake Cafe, a U.S. coffee company, produces a latte at its location in Minneapolis on January 8, 2014. It sells the latte to a customer immediately.

Excluded Excluded Excluded Included Included

Darnell and Eleanor Cohen live in Swarthmore, PA. Eleanor's father, Jacques, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Eleanor's father in Sweden orders a bottle of Vermont maple syrup from the producer's website

Exports

Lorenzo and Neha Strong live in Swarthmore, PA. Their son, Sam, is an artist living in New York City. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Sam paints a landscape and sells it to an art collector in Japan

Exports

Sam and Teresa Lacoste live in Swarthmore, PA. Their son, Andrew, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Sam's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing faculty in China

Exports

Expenditure Approach Equation

GDP = C + I + G + (Ex - Im)

Suppose Megan earns $650 per week working as a doctor for the Medical Clinic. She uses $10 to get her car washed at Spotless Car Wash. Spotless Car Wash pays Larry $375 per week to wash cars. Larry uses $350 to purchase medical services from the Medical Clinic. Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services. Event: Market for Factors of Production OR Market for Goods and Services Megan spends $10 to get her car washed. Larry spends $350 to purchase medical services from the Medical Clinic. Larry earns $375 per week working for Spotless Car Wash.

Goods and services Goods and services Factors of Production

Darnell and Eleanor Cohen live in Swarthmore, PA. Eleanor's father, Jacques, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore

Government Purchase

Lorenzo and Neha Strong live in Swarthmore, PA. Their son, Sam, is an artist living in New York City. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. The Federal Aviation Administration expands the runways at Philadelphia International Airport, which is just a few miles from Lorenzo and Neha's house

Government Purchases

Sam and Teresa Lacoste live in Swarthmore, PA. Their son, Andrew, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. The town of Swarthmore puts on a fireworks display for the Fourth of July

Government Purchases

Darnell and Eleanor Cohen live in Swarthmore, PA. Eleanor's father, Jacques, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Darnell's employer grades all of its computer systems using U.S.-made parts

Investment

Lorenzo and Neha Strong live in Swarthmore, PA. Their son, Sam, is an artist living in New York City. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. The Strongs build an addition on their house

Investment

Sam and Teresa Lacoste live in Swarthmore, PA. Their son, Andrew, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Andrew buys a new set of tools to use in his plumbing business.

Investment

When a U.S. company purchases and imports wood from Brazil to use to build new houses within the United States, this purchase increases the ________ component of GDP while also ________ net exports by the same amount. Therefore, the purchase of wood from Brazil causes _______ in U.S. GDP

Investment Decreasing No Overall Change

The gross domestic product (GDP) of the United States is defined as the _______ all ___________ ___________ in a given period of time.

Market value of, Final goods and services produced, within the united states

GDP Deflator Equation

Nominal GDP/Real GDP x 100

Nominal GDP Equation

Price (year t) x Quantity

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

Real GDP is not influenced by price changes, but nominal GDP is

GDP is the market value of all final goods and services produced within a country in a given period of time. T/F?

TRUE

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700. T/F?

TRUE

GDP measures both an economy's production and its expenditures. True False

True

In the circular-flow diagram there are two markets one for goods and one for factors of production. True False

True

True or False: For the economy as a whole, expenditures must equal income

True

Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply. The $350 Larry spends to purchase medical services from the Medical Clinic The $375 per week Larry earns working for Spotless Car Wash The car wash Megan receives

Yes No No

If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125. a. TRUE b. FALSE

a. TRUE

If Brazil buys $100 million of tractors from the U.S., then U.S. net exports will decrease. a. TRUE b. FALSE

b. FALSE

Nominal GDP uses constant base-year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services. a. TRUE b. FALSE

b. FALSE

Net Exports Equation

exports - imports

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income when _______ purchase __________in markets for factors of production.

firms, Labor and capital