Econ Chapter 5

Which of the following is included in U.S. GDP? i. the rental value of homes owned by U.S. citizens ii. the production of Suburban SUVs by GM in its plant in Mexico iii. tickets sold by U2 for concerts held in the United States A) i only B) i, ii and iii C) ii and iii D) ii only E) i and iii

i and iii

As measured, GDP omits which of the following? i. Illegal sales of goods and services ii. Changes in the amount of leisure time iii. Household production of goods and services A) i and ii B) i only C) i and iii D) i, ii, and iii E) ii and iii

i, ii, and iii

Government expenditures on goods and services include i. the New York City Library's purchase of new books. ii. Washington D.C.'s purchase of gas for its city buses. iii. California's payment of wages to prison guards. A) i and ii B) i, ii and iii C) i only D) ii and iii E) i and iii

i, ii, and iii

Nominal GDP increases A) only if depreciation decreases. B) only if prices increase. C) only if the productivity of resources increase. D) if either prices and/or total production increase. E) only if total production increases.

if either prices and/or total production increase.

In order to be classified as a recession, a contraction of general economic activity must last at least A) one quarter. B) one year. C) one period. D) six months. E) None of the above because recessions do not have a minimum length.

six months.

Which of the following goods and services are omitted from GDP? A) expenditure on resources used to protect the environment B) capital goods C) household production D) government weather satellites E) services such as hair styling

household production

Net exports of goods and services are defined as the A) income we receive from selling goods to foreigners. B) value of exports plus the income we receive from foreigners. C) value of the goods we sell to foreigners. D) value of exports minus the value of imports. E) value of exports minus the income we receive from foreigners.

value of exports minus the value of imports.

According to the income approach to measuring GDP, the largest income category is A) rent. B) wages. C) consumption expenditure. D) interest. E) profits.

wages

One bag of coffee beans is sold for $7 to a cafe that uses it to brew coffee which it sells to customers for a total of $15. A second bag of coffee is sold directly to Joan for $7, who uses it to brew coffee for her family every morning. What is the contribution to GDP from the purchases of coffee beans and coffee? A) $14 B) $22 C) $15 D) $7 E) $29

$22

The largest expenditure category in the United States is A) net exports of goods and services. B) consumption expenditure. C) government expenditure on goods and services. D) investment. E) wages.

consumption expenditure.

Gross Domestic Product is the market value of all ________ produced within a country in a given period of time. A) final services B) final goods C) intermediate goods D) final goods and services E) intermediate services

final goods and services

Investment is the expenditure done by A) savers. B) firms. C) governments. D) the rest of the world. E) Both answers A and B are correct.

firms.

Bob's Funky T-shirts began the year with 1,000 shirts in inventory, produced 10,000 shirts during the year and ended the year with 1,100 shirts in inventory. The 100 shirts added to his inventory will be classified as A) net exports of goods and services. B) investment. C) exports of goods and services. D) consumption expenditure. E) nondurable consumption goods.

investment.

Adding wages, interest, rent, and profits yields A) total expenditure. B) gross domestic product. C) GNP. D) net domestic product at factor cost. E) gross domestic product at factor cost.

net domestic product at factor cost.

Investment is defined as the purchase of A) new capital goods but not additions to inventories. B) financial assets and inventories only. C) new capital goods and additions to inventories. D) any financial asset only. E) additions to inventories only.

new capital goods and additions to inventories.

If you buy a five-year-old TV from a friend, the amount you paid for the TV is A) added to investment if the TV is expected to last more than 5 additional years and added to consumption if the TV is expected to last less than 5 additional years. B) included in this year's GDP only if the TV set was manufactured in the United States. C) always added to investment but not consumption. D) not included in this year's GDP. E) always added to consumption expenditures but not investment.

not included in this year's GDP.

Although imperfect, which of the following is used as a measure of the standard of living? A) nominal GNP ÷ population B) nominal GNP × population C) real GDP × population D) real GDP ÷ population E) nominal GDP × population

real GDP ÷ population

The business cycle has two phases, A) recession and expansion. B) expansion and peak. C) expansion and trough. D) recession and trough. E) peak and trough.

recession and expansion.

Which of the following is likely to be an unreported economic activity? A) the minimum wage paid to a teenager working at a McDonald's B) the purchase of shares of stock in Walgreen's Pharmacy C) a $250,000 bonus paid to the CEO of a company D) tips paid to a taxi driver E) the brokerage fees paid to a broker at Merrill Lynch

tips paid to a taxi driver

A business cycle has two turning points, which are the A) recession and trough. B) peak and recession. C) peak and expansion. D) trough and peak. E) expansion and recession.

trough and peak.

In order to measure gross domestic product, we can follow A) three approaches: the expenditure approach, the income approach, and the market-based approach. B) three approaches: the expenditure approach, the income approach, and the production approach. C) only one approach: the circular flow approach. D) only one approach: the national accounts approach. E) two approaches: the expenditure approach and the income approach.

two approaches: the expenditure approach and the income approach.

In the circular flow, how are the "value of production," "income," and "expenditures" related? A) Once tax payments are subtracted at each stage, they are equal. B) They have no relationship to each other. C) Value of production always equals income but expenditures is smaller because households save some of their income and do not spend it. D) Expenditures on GDP equals the value of production which equals income. E) Once net exports of goods and services are subtracted from GDP, all three are equal.

Expenditures on GDP equals the value of production which equals income.

The total production within an economy is measured as A) Total Annual Output. B) Annual Production Value. C) Gross Home Product. D) Gross Domestic Product. E) Total Domestic Output.

Gross Domestic Product.

Gross Domestic Product equals A) Y = C + I + G - NX. B) Y = C - I + G + NX. C) Y = C + I + G + NX. D) Y = C - I - G - NX. E) Y = C + I - G + NX.

Y = C + I + G + NX.

A country with a real GDP per person similar to real GDP per person in the United States but with limited political freedom is generally considered to have A) a lower standard of living than the United States. B) an overstated nominal GDP. C) a larger Human Development Index because the other country still needs to develop more political freedom. D) an understated GDP. E) the same standard of living as the United States.

a lower standard of living than the United States.

To measure GDP by using the income approach, we must add all incomes and then ________ depreciation and ________ net taxes less subsidies. A) add; subtract B) neither add nor subtract; add C) add; neither add nor subtract D) subtract; add E) add; add

add;add

A restaurant buys fish to offer as a daily menu special. The purchase of the fish by the restaurant is A) part of net exports if the fish was caught beyond the U.S. border. B) a consumption expenditure. C) an investment. D) an intermediate good. E) an example of government expenditures on goods and services.

an intermediate good.

Total expenditure equals total income A) only if net taxes equals government expenditures on goods and services. B) only if firms sell all the goods they produce in a given time period. C) if firms do not save for future investment. D) if firms earn zero profit. E) because firms pay out everything they receive as income to the factors of production.

because firms pay out everything they receive as income to the factors of production.

Consumption expenditure includes spending A) on office supplies by firms. B) by households and spending on office supplies by firms. C) by governments when they are buying goods and services that consumers also buy. D) on intermediate goods and services by firms. E) by households.

by households

Economists define investment to include purchases of A) capital goods and inventories. B) capital goods, such as tools, instruments, and buildings. C) capital goods, equity stocks, and inventories. D) capital goods, household durable goods, and inventories. E) capital goods, equity stocks, and bonds.

capital goods and inventories.

Which of the following is included in Germany's GDP? i. BMWs produced in a German-owned factory in South Carolina ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange iii. china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany A) i and ii B) iii only C) i and iii D) ii only E) None of the above answers is correct.

iii only

In 1961, real GDP totaled $575 billion and in 2011 it totaled $1,255 billion. Between 1961 and 2011, the population increased from 50 million to 100 million. Between 1961 and 2011, the standard of living based on real GDP per person A) increased by about 118 percent. B) increased by over 300 percent. C) increased from $11,500 to $12,550. D) decreased from $125,500 to $28,750. E) decreased by 9 percent.

increased from $11,500 to $12,550.

The business cycle is defined as A) irregular ups and downs in production and jobs. B) changes in financial markets. C) persistent growth in potential GDP. D) the period of time during which the unemployment rate is rising. E) changes in the stock market.

irregular ups and downs in production and jobs.

GDP is best defined as the ________ in a given time period. A) number of goods and services produced within a country B) market value of the final goods and services produced within a country C) market value of all the goods and services produced within a country D) market value of the final goods and services consumed by a nation's citizens E) number of final goods and services produced within a country

market value of the final goods and services produced within a country