ECO CHAPTER 23- Sec02 (1-30)

A

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. necessarily raises GDP. b. necessarily decreases GDP. c. doesn't change GDP because gambling is never included in GDP. d. doesn't change GDP because in either case his income is included.

B

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 a. $150 to GDP. b. $250 to GDP. c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. d. $400 to GDP.

C

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP? a. $1 million b. $3 million c. $4 million d. $5 million

D

GDP adds together many different kinds of products into a single measure of the value of economic activity by using prices determined by a. banks. b. economists. c. the government. d. markets.

C

Estimates of the values of which of the following non-market goods or services are included in GDP? a. the value of unpaid housework b. the value of vegetables and other foods that people grow in their gardens c. the estimated rental value of owner-occupied homes d. All of the above are included in GDP.

B

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because a. the quality of these items is not high enough to contribute value to GDP. b. measuring them is so difficult. c. the government wants to discourage the production and consumption of these items. d. these items are not reported on income tax forms.

C

GDP is defined as a. the market value of all goods and services produced within a country in a given period of time. b. the market value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. c. the market value of all final goods and services produced within a country in a given period of time. d. the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

C

Gasoline is considered a final good if it is sold by a a. gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles. b. pipeline operator to a gasoline station in San Francisco. c. gasoline station to a motorist in Los Angeles. d. All of the above are correct.

B

Grapes are a. always counted as an intermediate good. b. counted as an intermediate good only if they are used to produce another good, such as wine. c. counted as an intermediate good only if they are consumed. d. counted as an intermediate good, whether they are used to produce another good or consumed.

A

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. market prices. b. prices that government economists believe reflect the true value of goods and services to society. c. the assumption that quantities of goods and services produced are unchanged from year to year. d. the assumption that prices of goods and services are unchanged from year to year.

C

Gross domestic product is defined as a. the quantity of all final goods and services demanded within a country in a given period of time. b. the quantity of all final goods and services supplied within a country in a given period of time. c. the market value of all final goods and services produced within a country in a given period of time. d. Both (a) and (b) are correct.

B

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself, then GDP a. necessarily rises. b. necessarily falls. c. will be unaffected because the same service is produced in either case. d. will be unaffected because car maintenance is not included in GDP.

B

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP a. necessarily decreases. b. necessarily increases. c. doesn't change because both legal and illegal production are included in GDP. d. doesn't change because these activities are never included in GDP.

C

If the price of a DVD player is three times the price of a CD player, then a DVD player contributes a. more than three times as much to GDP as does a CD player. b. less than three times as much to GDP as does a CD player. c. exactly three times as much to GDP as does a CD player. d. to GDP but a CD player does not contribute to GDP.

B

In computing GDP, market prices are used to value final goods and services because a. market prices do not change much over time, so it is easy to make comparisons between years. b. market prices reflect the values of goods and services. c. if market prices are out of line with how people value goods, the government sets price ceilings and price floors. d. None of the above is correct; market prices are not used in computing GDP.

B

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. market prices. c. consumer and producer surpluses. d. costs of producing goods and services.

D

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent by doing so. How much do the housing services provided by the two houses contribute to GDP? a. $0 b. $10,000 c. $12,000 d. $22,000

C

Marijuana is an illegal good and broccoli is a legal good. Which of the following statements is true? a. Darin grows and sells marijuana to Lisa. When Darin and Lisa get married, GDP falls. b. Darin grows and sells marijuana to Lisa. When Darin and Lisa get married, GDP rises. c. Darin grows and sells broccoli to Lisa. When Darin and Lisa get married, GDP falls. d. Darin grows and sells broccoli to Lisa. When Darin and Lisa get married, GDP rises.

C

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 to a consumer in a grocery store for $2.00. Taking these three transactions into account, what is the effect on GDP? a. GDP increases by $2.00. b. GDP increases by $3.00. c. GDP increases by $5.00. d. GDP increases by $6.00.

D

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 a. reduced measured GDP. b. not affected measured GDP. c. increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home. d. increased measured GDP by the full value of the restaurant meals.

C

Over time, people have come to rely more on market-produced goods and less on goods that 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. caused measured GDP to fall. b. not caused any change in measured GDP. c. caused measured GDP to rise. d. 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.

A

Ralph pays someone to mow his lawn, while Mike mows his own lawn. Regarding these two practices, which of the following statements is correct? a. Only Ralph's payments are included in GDP. b. Ralph's payments as well as the estimated value of Mike's mowing services are included in GDP. c. Neither Ralph's payments nor the estimated value of Mike's mowing services is included in GDP. d. Ralph's payments are definitely included in GDP, while the estimated value of Mike's mowing services is included in GDP only if Mike voluntarily provides his estimate of that value to the government.

D

Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called a. an inventory good. b. a transitory good. c. a preliminary good. d. an intermediate good.

D

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 increases. b. GDP necessarily decreases. c. GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP. d. 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 housing services.

A

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

C

To compute GDP, we a. add up the wages paid to all workers. b. add up the costs of producing all final goods and services. c. add up the market values of all final goods and services. d. take the difference between the market values of all final goods and services and the costs of producing those final goods and services.

C

Which of the following is correct? a. The market value of rental housing services is included in GDP, but the market value of owner-occupied housing services is not. b. The market value of owner-occupied housing services is included in GDP, but the market value of rental housing services is not. c. The market values of both owner-occupied housing services and rental housing services are included in GDP. d. Neither the market value of owner-occupied housing services nor the market value of rental housing services is included in GDP.

A

Which of the following is included in GDP? a. medical marijuana purchased from a government-run pharmacy by a glaucoma patient b. recreational marijuana purchased from a drug dealer by a college student c. recreational marijuana produced and consumed by a man in his attic d. All of the above are included in GDP.

A

Which of the following is not included in GDP? a. carrots grown in your garden and eaten by your family b. carrots purchased at a farmer's market and eaten by your family c. carrots purchased at a grocery store and eaten by your family d. More than one of the above is not included in GDP.

C

Which of the following statements is correct? a. The value of intermediate goods is always included in GDP. b. The value of intermediate goods is included in GDP only if those goods were produced in the previous year. c. The value of intermediate goods is included in GDP only if those goods are added to firms' inventories to be used or sold at a later date. d. The value of intermediate goods is never included in GDP.