GDP MC practice

Gross domestic product is the market value of all the _______ in a given time period. A. goods and services bought by Americans B. goods and services produced by American companies in all countries C. final goods and services produced by all firms located in the United States D. U.S.-produced goods and services bought in the United States

Answer C is the definition of GDP

The expenditure approach to measuring U.S. GDP equals _________. A. the sum of U.S. consumption expenditure and U.S. investment B. U.S. government expenditure minus taxes paid by Americans C. all expenditure on final goods and services produced in the United States in a given time period D. all expenditure by Americans on goods and services produced in the United States in a given time period

Answer D is effectively the definition of the expenditure approach.

. Saving equals ________. A. income minus consumption expenditure minus net taxes B. income minus net taxes C. total income minus total expenditure D. net taxes minus government expenditure

Answer: A Saving is what is left from income after consumption expenditure and net taxes are paid.

6. The following statements about the business cycle are correct except ______. A. it is a regular predictable cycle in real GDP around potential GDP B. from the peak to the trough, the economy is in a recession C. from the trough to the peak, the economy is in an expansion D. it is a periodic movement in economic activity including employment

Answer: A The business cycle fluctuations around potential GDP are irregular and difficult to predict.

Real GDP per person is not an accurate measure of the standard of living because it ______. A. includes the goods and services that governments buy B. omits the goods and services that people produce for themselves C. includes goods and services bought by firms D. omits the goods and services imported from other countries

Answer: B In less developed nations, GDP is a poor measure of the standard of living because much of a person's consumption is produced by the person themself

. When using the income approach to measure GDP at market prices, in addition to summing all factor incomes it is necessary to ________. A. subtract depreciation because profit is not reported as net profit B. add depreciation because capital depreciates when goods are manufactured C. add indirect taxes less subsidies to convert aggregate income from factor cost to market prices D. add a statistical discrepancy which is the sum of depreciation and indirect taxes less subsidies

Answer: C The discussion on pages 375 and 376 of the text illustrate that answer C is correct.

2. A ________ is a final good and ________ is an intermediate good. A. new car bought by a student; a used SUV bought by a dealer B. new textbook; used textbook C. new iPhone bought by a student; new computer bought by Wal-Mart D. tank of gasoline bought by you; jet fuel bought by Southwest Airlines

Answer: D The gasoline has been purchased by its ultimate user, so it is a final good; the jet fuel purchased by Southwest Airlines will be used to help produce an service, airline flights, so it is an intermediate good