Quiz 7

Gross Domestic Product is computed by using a. current-year prices. b. previous-year prices. c. wholesale prices. d. base-year prices.

(a) current-year prices.

Gross Domestic Product (GDP) is the total market value of all a. final goods and services produced annually within a country's borders. b. final and intermediate goods and services produced annually within a country's borders. c. intermediate goods and services produced annually within a country's borders. d. final goods produced every month within a country's borders.

(a) final goods and services produced annually within a country's borders.

An example of income received but not earned is a. rental income. b. government transfer payments. c. compensation of employees. d. undistributed profits.

(b) government transfer payments.

In 1820 the country with the highest per capita GDP was ______________________. In 1900 the country that ranked #1 in terms of per capita GDP was ___________________ and fifty years later the top ranking was held by _________________________. a. the Netherlands; Australia; Switzerland. b. the Netherlands; New Zealand; the United States. c. Austria; Australia; New Zealand. d. the United States; the United States; the United States.

(b) the Netherlands; New Zealand; the United States.

The sum of durable goods, nondurable goods, and services equals a. fixed investment. b. net exports. c. consumption. d. government purchases. e. investment.

(c) consumption

An economy produces 10X, 20Y, and 30Z in a year. Base-year prices for these goods are $1, $2, and $3, respectively. Current-year prices for these goods are $2, $3, and $4, respectively. What is Real GDP? a. $200 b. $240 c. $180 d. $140

(d) $140

Suppose you have data on durable goods, nondurable goods, fixed investment, government purchases, exports, and imports. Can you compute GDP? a. Yes, all of the necessary components of GDP are given. b. No, since data on services and dividends are missing. c. No, since data on inventory investment and profits are missing. d. No, since data on inventory investment and services are missing. e. No, since data on services and profits are missing.

(d) No, since data on inventory investment and services are missing.

In the business cycle, what is the difference between the recovery phase and the expansion phase? a. The expansion phase occurs in the falling portion of the business cycle, while the recovery phase occurs in the rising portion of the business cycle. b. The expansion phase must always come before the recovery phase. c. The expansion phase occurs in the rising portion of the business cycle, while the recovery phase occurs in the falling portion of the business cycle. d. The expansion phase is the period when Real GDP increases beyond the recovery phase.

(d) The expansion phase is the period when Real GDP increases beyond the recovery phase.

An example of income earned but not received is corporate dividends. a. True b. False

false

Compensation of employees is the largest component of GDP when using the expenditure approach to calculate GDP. a. True b. False

false