Chapter 10

In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investments was $400. What was Talikastan's GDP in 2015?

$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

$250 to GDP

GDP is defined as

value of all final goods and services produced within a country in a given period of time

Which of the following items is counted as part of government purchase

- The federal government pays the salary of a Navy Officer. - The state of Nevada pays a private firm to repair a Nevada state highway. - The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.

GDP is equal to

- the market value of all final goods and services produced within a country in a given period of time. - Y. - C + I + G + NX.

When an American household purchases a bottle of Italian wine for $100,

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,

U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is

included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. The change in behavior, by itself, has

increased measure GDP by the value of the restraints meal

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP

increases

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

market prices

Transaction 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

not included in the current GDP because GDP only measures the value of goods and services

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?

$30 million

One bag of flour is sold for $1 to a bakery, which uses the flour to bake bread that is sold for $3 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2. Taking these four transactions into account, what is the effect on GDP?

GDP increases by $5

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

Mexican GDP, but it is not included in U.S. GDP.

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

Social Security Payments are

excluded from GDP because they do not reflect the economy's production.

Government purchases include spending on goods and services by

federal, state, and local governments

If you buy a burger and fries at your favorite fast food restaurant,

then both GDP and consumption spending will be higher