Economics Chapter 7

Which of the following is an example of a final good or service? a. Chocolate a bakery purchases to make cakes. b. coffee beans that are purchased by a restaurant owner from a wholesale food distributor. c. an economics textbook you purchase with the intent of selling after your course is over. d. the lumber purchased by a construction company that will be used by the company to build a model house to show to its clients.

C

If in a year there is a negative inventory investment, the final sales

EXCEED GDP

T/F : Examples of stock variables include the inflation rate and items found on a company's income statement

False; a stock variable is measured at one point in time, such as the interest rate, stock prices, and unemployment.

T/F : When calculating gross domestic product (GDP), it doesn't matter whether you use the income or expenditure approach because they will always equal each other

False; due to measurement problems stated in the chapter, it is more efficient to use the expenditure approach

T/F : The growth rate of an economy is calculated by looking at the ratio of real to nominal GDP.

False; growth rate is calculated by taking the change in real GDP from two time periods and dividing that difference by the value of real GDP in the first time period

T/F : Two measurement problems with GDP discussed in the chapter include the underground economy and household activities; including both of these would decrease the overall value of GDP

False; if the underground economy and household activities were included, the value of GDP would be higher

T/F : If a car produced and first sold in 2007 is traded in and resold in 2008, the sale is counted as part of GDP in 2007 and 2008

False; it is only counted as part of GDP in the year in which it was produced

T/F : The difference between GDP and NDP is indirect business taxes

False; the difference between the two is that depreciation is subtracted from GDP to calculate NDP

T/F : If McDonalds buys a bun for 10¢ and beef for 30¢, and sells a hamburger for $1, the contribution to GDP is $1.40 as each of these goods are final goods

False; the hamburger was the final good, the rest are intermediate goods and therefore are not factored into GDP.

Profits earned in the United States by foreign-owned companies are included in

GDP but not GNP

The Total market value of all final goods and services produced within a given period by factors of production located within a country is

Gross domestic product

T/F : By measuring and adding only the value added of goods, we can avoid multiple counting and get a better estimate of GDP

True

T/F : National income accounting is important because it provides economists with detailed information that can be used to track the health of an economy and to forecast future growth and development

True

T/F :. Firms produce a certain number of goods and services within a period of time, usually per week, month, quarter or year. This is an example of a flow

True

In 1994 the change in business inventories is -$20 billion and the GDP is $ 190 billion. Final sales in 1994

are $210 billion

In 1994 final sales equal $120 billion and the change in business inventories is -$10 billion. GDP in 1994

is $110 billion

The value of net exports is

exports minus imports

4. Which of the following is not included in 1977's GDP? a. the value of a car produced in the U.S.A. and exported to England. b. The profit earned in 1994 from selling a stock that you purchased in 1990. c. The value of a computer chip that is used in the production of a personal computer. d. the commission earned by an employment counselor when she locates a job for a client.

B

3. Which of the following is an example of an intermediate good? a. the wood you purchase to build yourself bookshelves in your room. b. the chocolate you buy to make yourself some cookies. c. the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to. d. all of the above.

C

Gross National Product is...

the total market value of all final goods and services produced within a given period by factors of production owned by a country's citizens, regardless of where output is produced