Econ Final Review
A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1 million of the value of the cars was due to U.S-owned equipment located in Mexico and U.S. managers working in Mexico. How much did this production contribute to U.S. GDP?
A $0
A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer's sales will be included as apples in GDP?
A $25,000
Which of the following is a correct way to measure productivity?
A Divide the number of hours worked by the quantity of output
In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?
A Private saving is equal to government expenditures
The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?
A The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP
When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,
A U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000
A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,
A U.S. investment and GDP increase, but German GDP is unaffected
In the equation Y = C + I + G + NX
A Y represents the economy's total expenditure
A form of government spending that is not made in exchange for a currently produced good or service is called
A a transfer payment
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
A both Mexican GDP and U.S. GDP
Trade enhances the economic well-being of a nation in the sense that
A both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question.
Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,
A consumer surplus increases for consumers of coats in Iceland
If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes
A exactly one-third as much to GDP as does a dress
A statistical discrepancy
A exists because data sources are not perfect, so measures of expenditures and income are not equal
Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership or the purchase of an antique rocking chair by a person at a yard sale, are
A included in current GDP because GDP measures the value of all goods and services sold in the current year
In the GDP accounts production equals
A income
Gross domestic product measures
A income and expenditures
Which of the following is included in GDP?
A marijuana purchased legally in Colorado
The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between
A personal income and personal disposable income
Nominal GDP will definitely increase when
A prices increase and output increases
The one variable that stands out as the most significant explanation of large variations in living standards around the world is
A productivity
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
A raises GDP
Which of the following is a good measure of economic prosperity?
A the level of real GDP
GDP is defined as
A value of all final goods and services produced within a country in a given period of time
Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests
B Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantage over Russia in producing coffee
If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?
B $10 trillion
In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?
B $1450
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
B $250 to GDP
Ryan lives in an apartment where he pays $7,000 a year in rent. Sarah lives in a house that could be rented for $21,000 a year. How much do these housing services contribute to GDP?
B $28,000
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?
B Only Joe's and Jim's grocery store purchases are included in GDP.
Which of the following is included in Singapore's GDP?
B The value of production by an American working in Singapore
If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.
B These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower
If foreign citizens earn less income in the U.S. than U.S. citizens earn in foreign countries
B U.S. net factor payments from abroad are positive, and its GNP is larger than its GDP
In the actual economy, households
B divide their income among spending, taxes, and saving
The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began
B exporting almonds and the price per pound in Uruguay increased to $4.50
Grapes are considered intermediate goods
B if the purchaser uses them to make wine to sell others but not if the purchaser eats them
U.S. GDP
B includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.
In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,
B market prices
A closed economy does not engage in international trade, therefore
B net exports (NX) are zero
National income differs from net national product because
B of a statistical discrepancy
Real GDP will increase
B only when output increases
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
B producer surplus increases and total surplus decreases in the market for that good
When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study
B real GDP
Estimates of the values of which of the following non-market goods or services are included in GDP?
B the rental value of owner-occupied homes but not unpaid housework
With which of the Ten Principles of Economics is the study of international trade most closely connected
B trade can make everyone better off
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
B are included in GDP for this year, but prior to this year the value of his vegetables was not included in GDP
A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer's inventory. How much is added to GDP?
C $17,000
Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it used to bake bread that customers purchased. In which case will the flour be counted as a final good?
C Janet's purchase but not ABC Bakery's purchase
Rachel cuts her sister's hair for free. When she cuts the hair of her customers in her shop, she charges $10. When is Rachel's haircutting included in GDP?
C When she cuts her customers' hair, but not her sister's.
Which of the following is a way to compute GDP?
C add up the market values of all final goods and services
Which of the following is included in GDP?
C both the market value of rental housing services and the market value of owner-occupied housing services
Trade among nations is ultimately based on
C comparative advantage
Household spending on education is counted in which component or subcomponent of GDP?
C consumption of services
If total spending rises from one year to the next, then
C either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being
C gross domestic product
Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is
C included in U.S. GNP, but it is not included in U.S. GDP
For an economy as a whole,
C income must equal expenditure
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has
C increased measured GDP by the value of the restaurant meals
The value of goods added to a firm's inventory in a certain year is treated as
C investment, since GDP aims to measure the value of the economy's production that year
The primary economic function of the financial system is to
C match one person's consumption expenditures with another person's capital expenditures
Which of the following is a good gauge of economic progress?
C the growth rate of real GDP per person, but not the level of real GDP per person
If a country is an exporter of a good, then it must be the case that
C the world price is greater than its domestic price
Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,
C their investments are being financed by someone else's saving
U.S. GDP and U.S. GNP are related as follows
D GNP=GDP-income earned by foreigners in the US + income earned by US citizens abroad
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?
D The 2014 sale affected neither 2014 GDP nor 2011 GDP
Suppose that the U.S. has a comparative advantage in the production of spreadsheet software. As a result of opening up the market to international trade,
D U.S. producers benefit from higher software prices, increasing producer surplus in the market
The identity that shows that total income and total expenditure are equal is
D Y=C+I+G+NX
GDP is equal to
D all of the above
In a simple circular-flow diagram, firms use the money they get from a sale to
D all of the above
When a nation first begins to trade with other countries and the nation becomes an exporter of soybeans
D all of the above
Which of the following is included in the consumption component of GDP?
D all of the above
Which of the following is included in the investment component of GDP?
D all of the above
Which of the following tools and concepts is useful in the analysis of international trade?
D all of the above
The basic tools of supply and demand are
D central to macroeconomic analysis as well as to microeconomic analysis
Social Security payments are
D excluded from GDP because they do not reflect the economy's production
Institutions that help to match one person's saving with another person's investment are collectively called the
D financial system
If an economy's GDP falls, then it must be the case that the economy's
D income and expenditure both fall
A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
D intermediate goods
Which of the following is not included in the investment component of GDP?
D none of the above
The inflation rate is the
D percentage change in the price level from one period to another
Productivity is the amount of goods and services
D produced for each hour of a worker's time. It is linked to a nation's economic policies
