Deck 6: GDP and the Measurement of Progress

Question 1

What makes a bigger contribution to GDP, 12 million cars sold at $28,000 each or 20 million computers sold at $1,000 each?

A) 12 million cars
B) 20 million computers
C) Both make the same contribution.
D) It is impossible to say without knowing the costs of production.

Answer 1

12 million cars

Question 2

Gross domestic product is the market value of all:

A) goods and services sold within a country in a year.
B) final goods and services produced within a country in a year.
C) goods and services produced within a country in a year.
D) final goods and services produced by a country's permanent residents, wherever located, in a year.

Answer 2

final goods and services produced within a country in a year.

Question 3

The market value of all final goods and services produced by a country's residents in a year, whether at home or abroad, is called:

A) GDP.
B) GNP.
C) GDI.
D) FDI.

Answer 3

GNP.

Question 4

Suppose a doctor spends half of the year in the United States and the other half in Canada and works in both places. How does his production get allocated between U.S. and Canadian GNP?

A) Half of the doctor's income counts toward U.S. GNP and half toward Canadian GNP.
B) It depends on whether the doctor is a permanent resident of the United States or Canada.
C) The full income gets counted in both U.S. GNP and Canadian GNP.
D) The value of the services produced in the United States gets counted in U.S. GNP and the value of the services produced in Canada gets counted in Canadian GNP.

Question 5

The difference between a final good and an intermediate good is that:

A) final goods are not counted as part of GDP.
B) intermediate goods are of lower quality than final goods.
C) an intermediate good is sold for use as a component in a final good.
D) a final good is sold for use as a component of an intermediate good.

Question 6

GDP:

A) is a measure of national wealth.
B) measures the stock of assets, while national wealth measures production in a year.
C) measures production in a year, while national wealth measures a stock of assets.
D) is usually higher than national wealth.

Question 7

Use the following to answer questions: Table: Small-Town GDP $$\begin{array} { c c c } \hline \text { Town } & \text { Real GDP (U.S. dollars) } & \text { Population } \\\hline \text { A } & 4,859,307 & 250 \\\text { B } & 10,000,050 & 175 \\\text { C } & 6,000,000 & 320 \\\text { D } & 3,549,289 & 90 \\\hline\end{array}$$

-(Table: Small-Town GDP) Which of the four towns in this table has the highest standard of living?

A) Town A
B) Town B
C) Town C
D) Town D

Question 8

Which of the following would be included in GDP for the United States?

A) Toyota, a Japanese car company, producing cars in the United States
B) a U.S. professor taking a year off to teach at the London School of Economics
C) a tire manufacturer making and selling tires to Ford to be used in their new cars
D) Jane's purchase of a used car after her old car is destroyed in an accident

Question 9

GDP per capita is GDP divided by:

A) population.
B) the price level.
C) the inflation rate.
D) the unemployment rate.

Question 10

A set of tires installed on a vehicle in an automobile factory is counted as:

A) a final good and its market price is part of GDP.
B) a final good and its market price is not part of GDP.
C) an intermediate good and its market price is part of GDP.
D) an intermediate good and its market price is not part of GDP.

Question 11

Use the following to answer questions: Table: Small-Town GDP $$\begin{array} { c c c } \hline \text { Town } & \text { Real GDP (U.S. dollars) } & \text { Population } \\\hline \text { A } & 4,859,307 & 250 \\\text { B } & 10,000,050 & 175 \\\text { C } & 6,000,000 & 320 \\\text { D } & 3,549,289 & 90 \\\hline\end{array}$$

-(Table: Small-Town GDP) Which of the four towns in this table has the lowest standard of living?

A) Town A
B) Town B
C) Town C
D) Town D

Question 12

Which of the following would NOT be included in GDP for the United States?

A) Toyota, a Japanese car company, producing cars in the United States.
B) an immigrant from Mexico working legally in the United States as a nanny for a U.S. family
C) Chrysler manufacturing cars in the United States that are not sold during the production year
D) Matt purchasing an antique desk for his new home office

Question 13

Suppose a doctor spends half of the year in the United States and the other half in Canada and works in both places. How does his production get allocated between U.S. and Canadian GDP?

A) Half of the doctor's income counts toward U.S. GDP and half toward Canadian GDP.
B) The full income is counted in the GDP of the country in which the doctor is a permanent resident.
C) The full income gets counted in both U.S. GDP and Canadian GDP.
D) The value of the services produced in the United States gets counted in U.S. GDP and the value of the services produced in Canada gets counted in Canadian GDP.

Question 14

Gross domestic product (GDP) is the market value of:

A) all final goods and services produced within a country in a year.
B) both intermediate and final goods and services produced within a country in a year.
C) all final goods, but not services produced within a country in a year.
D) both intermediate and final goods, but not services produced within a country in a year.

Question 15

Which of the following is the best measure of a country's standard of living?

A) nominal GDP
B) real GDP
C) nominal GDP per capita
D) real GDP per capita

Question 16

GNP measures:

A) the same things as GDP, but also includes financial assets.
B) production by U.S. citizens wherever they work in the world.
C) the production of both intermediate and final goods and services.
D) goods and services produced by foreign businesses inside U.S. borders.

Question 17

The most common measure of the size of an economy is:

A) its national wealth.
B) its GDP.
C) its GDP per capita.
D) its population.

Question 18

National wealth refers to the value of a nation's entire stock of:

A) assets.
B) savings.
C) gold.
D) currency.

Question 19

Real GDP per capita is calculated as the total real GDP divided by the:

A) GDP deflator.
B) nominal GDP.
C) total population.
D) price level.

Question 20

If a country produced nothing but 20 smartphones and 10 Blu-ray players in 2011, priced at $100 per smartphone and $200 per Blu-ray player, its GDP in 2011 would be:

A) $1,000.
B) $2,000.
C) $4,000.
D) $5,000.

Question 21

Akemi, who is a Japanese citizen, works in the United States as a computer programmer. The value of her output is included in:

A) both U.S. and Japan's GDP.
B) both U.S. and Japan's GNP.
C) U.S. GDP and Japan's GNP.
D) U.S. GNP and Japan's GDP.

Question 22

A tractor built in 2001 and still in operation today is:

A) part of today's national wealth and GDP.
B) part of today's national wealth but not part of today's GDP.
C) part of today's GDP but not part of today's national wealth.
D) not part of today's national wealth nor today's GDP.

Question 23

The market value of all final goods and services produced within a given country in a year divided by the country's population is:

A) GNP.
B) GNP per capita.
C) GDP.
D) GDP per capita.

Question 24

The market value of all final goods and services produced by a country's permanent residents in a year, regardless of where the production takes place, divided by the country's population is:

A) GNP.
B) GNP per capita.
C) GDP.
D) GDP per capita.

Question 25

GDP includes the:

A) current market value of government purchases of goods and services.
B) sales of stocks and bonds at current market prices.
C) current market value of used cars.
D) current market value of all existing homes, regardless of when they were built.

Question 26

When a German firm produces a vehicle in the United States, the production is part of:

A) GDP but not GNP.
B) GNP but not GDP.
C) both GDP and GNP.
D) neither GDP nor GNP.

Question 27

Which of the following would be included in 2011's GDP?

A) the resale of a house built in 2005
B) the sale of bonds
C) the sale of stocks
D) the real estate agent's commission on the resale of a house built in 2005

Question 28

To avoid double accounting, the value of:

A) final goods only are included in GDP.
B) intermediate goods only are included in GDP.
C) both final good and intermediate goods are included in GDP.
D) neither final goods nor intermediate goods are included in GDP.

Question 29

The value of a country's GDP exceeds that of the country's GNP if the value of the:

A) country's exports exceeds the value of its imports.
B) country's imports exceed the value of its exports.
C) output produced by foreign workers in the country exceeds the value of output produced by the country's permanent residents in other countries.
D) output produced by the country's permanent residents produced in other countries exceeds the value of output produced by foreign workers in the country.

Question 30

The value of production by a U.S. worker employed by a firm located in Canada is included in:

A) Canada's GDP only.
B) U.S. GDP only.
C) GDP for both Canada and the United States.
D) neither country's GDP.

Question 31

Which of the following is a final good and should be included in GDP?

A) antivirus software preloaded on computers
B) computer chips
C) notebook computers
D) power cords packaged with new computers

Question 32

What data are needed to calculate GDP?

A) only the quantities of goods and services produced
B) only the prices of goods and services produced
C) both quantities and prices of goods and services produced
D) only the costs of producing goods and services

Question 33

The value of a car produced and sold in 2005 and sold again in 2011 is included in:

A) 2005's GDP only.
B) 2011's GDP only.
C) both 2005's GDP and 2011's GDP.
D) neither 2005's nor 2011's GDP.

Question 34

Use the following to answer question 40:
Table: Prices and Quantities in a 4-Good Economy $$\begin{array} { l c c } \hline \text { Product } & \text { Price } & \text { Quantity } \\\hline \text { Shovels } & \$ 20 & 50 \\\text { Books } & 50 & 100 \\\text { Tomatoes } & 1 & 500 \\\text { Pizzas } & 10 & 120 \\\hline\end{array}$$

-(Table: Prices and Quantities in a 4-Good Economy) Suppose an economy produces only the four goods listed in this table. What is the GDP in this country?

A) $6,200
B) $6,700
C) $7,200
D) $7,700

Question 35

Suppose you spent $10,000 in 2010 remodeling your house, which you originally built for $200,000 in 2000. As a result, GDP in 2010 would:

A) not change.
B) increase by $10,000.
C) increase by $200,000.
D) increase by $210,000.

Question 36

GNP is the market value of all final goods and services produced:

A) within a country's borders in a year.
B) within a country's borders over time.
C) by a country's permanent residents within the country's borders in a year.
D) by a country's permanent residents, wherever they are located, in a year.

Question 37

The value of production by a U.S. worker employed by a firm located in Canada is included in:

A) both Canada's GDP and Canada's GNP.
B) both U.S. GDP and U.S. GNP.
C) Canada's GDP and U.S. GNP.
D) U.S. GDP and Canada's GNP.

Question 38

National wealth refers to the value of a nation's entire stock of:

A) physical assets accumulated over time.
B) physical assets produced in a given year.
C) financial assets accumulated over time.
D) financial assets sold in a given year.

Question 39

When GDP is calculated, goods are valued using:

A) the cost of all inputs used in the production.
B) the consumer price index.
C) the producer price index.
D) the current market price.

Question 40

GDP is calculated by:

A) adding the quantities of all goods and services in an economy.
B) adding the prices of all goods and services in an economy.
C) dividing the quantity of all goods and services by their prices and adding together the results.
D) multiplying the quantity of all goods and services by their prices and adding together the results.

Question 41

A sound system produced by a supplier to Ford Motor Company is an example of:

A) an inferior good.
B) a final good.
C) a public good.
D) an intermediate good.

Question 42

Use the following to answer question 53:
Table: Prices and Quantities in a 4-Good Economy $$\begin{array} { l c c } \hline \text { Product } & \text { Price } & \text { Quantity } \\\hline \text { Shovels } & \$ 20 & 50 \\\text { Books } & 50 & 100 \\\text { Tomatoes } & 1 & 500 \\\text { Pizzas } & 10 & 120 \\\hline\end{array}$$

-(Table: Prices and Quantities in a 4-Good Economy) Suppose an economy produces only the four goods listed in this table. All of the country's tomatoes are used in the production of pizzas. What is the GDP in this country?

A) $6,200
B) $6,700
C) $7,200
D) $7,700

Question 43

Which transaction will be included in GDP?

A) the purchase of a used bicycle on Ebay
B) the purchase of a home built in 1957
C) the purchase of a real estate agent's services
D) the purchase of 1,000 shares of IBM stock

Question 44

The sale of sugar will contribute to GDP when the buyer is:

A) Krispy Kreme Doughnuts.
B) a mother who is baking cookies at home.
C) a Mexican food restaurant.
D) a grocery store chain.

Question 45

The calculation of GDP includes:

A) neither final goods nor intermediate goods.
B) only intermediate goods.
C) only final goods.
D) both intermediate and final goods.

Question 46

Intermediate goods are goods:

A) used to produce other goods.
B) consumed or held in personal inventories.
C) used up in the production process.
D) that cannot be exported.

Question 47

Final goods are goods:

A) used to produce other goods.
B) consumed or held in personal inventories.
C) used up in the production process.
D) that cannot be exported.

Question 48

Imagine that Jack and Jill buy $500 worth of milk and $200 worth of crayons and coloring books each year for use in their day-care business. Jack and Jill also hire a day-care attendant at a salary of $14,000 per year. If Jack and Jill sell $100,000 worth of day care to parents each year, what is the contribution to GDP by Jack and Jill's Day Care?

A) $700
B) $100,000
C) $100,700
D) $114,700

Question 49

Since 1950, the portion of U.S. GDP created by services has:

A) remained relatively constant.
B) fallen by a half.
C) more than doubled.
D) increased slightly.

Question 50

Which of these goods is a final good that would be counted in GDP in the year it is produced?

A) tomatoes used by an Italian restaurant
B) wood used for making furniture
C) an oven for installation in a bakery
D) a computer chip used in a laptop computer

Question 51

The value of a car produced and sold in 2000 and sold again to a second owner in 2008 would be included in GDP for:

A) 2000 only.
B) 2008 only.
C) both 2000 and 2008.
D) either 2000 or 2008, but not both.

Question 52

An increase in the price you pay for a haircut will:

A) contribute to GDP as a purchase of a good.
B) contribute to GDP as a purchase of a service.
C) not contribute to GDP.
D) contribute to GDP only if your hair stylist is a U.S. citizen.

Question 53

The calculation of GDP includes:

A) both goods and services.
B) goods, but not services.
C) services, but not goods.
D) neither goods nor services.

Question 54

Orrin mines iron ore, which he sells to Thorin, who turns iron ore into steel. The steel is sold to Gorin, who turns the steel into battle axes. The battle axes are sold by a merchant in the city to adventurers. Which of the following would be considered a final good?

A) the iron ore
B) the steel
C) the battle axes sold to the merchant
D) the battle axes sold to the adventurers

Question 55

A computer chip sold to Dell is an example of:

A) a final good.
B) an intermediate good.
C) a service.
D) an inferior good.

Question 56

Services involve production that provides:

A) a benefit along with the production of a tangible physical product.
B) a benefit without the production of a tangible physical product.
C) no benefit to the producer.
D) no benefit to the consumer.

Question 57

Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. How much is added to GDP?

A) $1,000,000
B) $1,500,000
C) $2,500,000
D) $2,800,000

Question 58

Which of these goods is an intermediate good that would NOT be counted in GDP in the year it is produced?

A) a tractor
B) wood used for making furniture
C) an oven for installation in a bakery
D) flour sold in a grocery store

Question 59

A computer chip that you purchase to repair your home computer is an example of:

A) a final good.
B) an intermediate good.
C) a service.
D) an inferior good.

Question 60

Which of these transactions occurring in 2011 would contribute to GDP for 2011?

A) A contractor sells a new house which was built in 2009.
B) Mario sells his used car for a profit.
C) Sally buys $10,000 worth of U.S. government bonds as an investment.
D) Boeing sells a 787 aircraft produced in 2011 to a Korean airline.

Question 61

If you accept a job in Mexico after college, your income will be part of GDP in:

A) Mexico only.
B) the United States only.
C) both Mexico and the United States.
D) neither Mexico nor the United States.

Question 62

Which of the following would be included in U.S. GNP?

A) The purchase of stocks and bonds by a retiree living in Florida.
B) Wages earned by a Canadian teaching at an American university.
C) Cars produced in a Honda (a Japanese Company) plant in Marysville, Ohio.
D) Cars produced in a Ford plant located in Canada.

Question 63

This summer you have a paid internship at the South Korean carmaker Kia Motors at their offices located in Canada. For which nation, or nations, are you contributing to GDP? Assume you are a U.S. citizen.

A) United States
B) Canada
C) South Korea
D) Canada, South Korea, and the United States.

Question 64

What is the term for the value of a nation's entire stock of assets?

A) gross domestic product
B) gross national product
C) national wealth
D) real gross domestic product

Question 65

GDP in the United States was $14,119 billion in 2009, and grew to $14,660.4 billion in 2010. This represents an annual growth rate of:

A) $541.4 billion.
B) 1.04%.
C) 3.7%.
D) 3.8%.

Question 66

If you accept a job in Mexico after college, your income will be part of GNP in:

A) Mexico only.
B) the United States only.
C) both Mexico and the United States.
D) neither Mexico nor the United States.

Question 67

The growth rate of GDP tells how rapidly the country's level of _____ is rising or falling over time.

A) spending
B) trade activity
C) investment
D) production

Question 68

Gross domestic product (GDP) differs from gross national product (GNP) in that:

A) GNP measures the production of a country's permanent residents and property wherever in the world they are located.
B) GNP measures the production of both permanent residents and foreign workers within a country's borders.
C) GNP measures the production of a country's permanent residents and property within a country's borders.
D) GNP measures only the production of foreign workers within a country's borders.

Question 69

In general, during any given year:

A) GDP in the United States will exceed wealth in the United States.
B) wealth in the United States will exceed GDP in the United States.
C) U.S. wealth and U.S. GDP will be approximately equal.
D) U.S. wealth and U.S. GDP will be unrelated.

Question 70

GDP is calculated by the:

A) Council of Economic Advisors.
B) Federal Reserve Board.
C) Bureau of Economic Analysis.
D) U.S. Treasury.

Question 71

A country's GDP (in billions) was $5,690 in 2010 and $5,899 in 2011. What is the growth rate of GDP?

A) 1.03%
B) 3.54%
C) 3.67%
D) 9.64%

Question 72

Which of the following would be included in U.S. GDP?

A) The purchase of stocks and bonds by a retiree living in Florida.
B) Wages earned by an American working on an oil rig in Mexico.
C) Cars produced in a Honda (a Japanese Company) plant in Marysville, Ohio.
D) Cars produced in a GM plant located in Canada.

Question 73

You sell your old bedroom set to your roommate for $1,800 and buy new custom-built furniture for $6,000. How much is added to GDP?

A) $1,800
B) $4,200
C) $6,000
D) $7,800

Question 74

A car produced by the Japanese company Honda in a plant located in Ohio would be included in:

A) U.S. GDP, but not U.S. GNP.
B) U.S. GNP, but not U.S. GDP.
C) both U.S. GDP and U.S. GNP.
D) neither U.S. GDP nor U.S. GNP.

Question 75

How often is GDP reported for the U.S. economy?

A) weekly
B) monthly
C) quarterly
D) annually

Question 76

Tim buys a house from Betty in 2011 for $200,000. Betty receives $185,000 and $15,000 goes to Mary, the real-estate agent. Betty originally purchased the house in 2007 for $240,000. What value is added to GDP in 2011 for this transaction?

A) -$40,000
B) $15,000
C) $185,000
D) $200,000

Question 77

A country has a 2008 growth rate of 4.2% and a 2007 GDP of $8,222 (in billions). What was the GDP in 2008?

A) $7,876
B) $8,355
C) $8,567
D) $8,635

Question 78

A car produced by the American company GM in a plant located in Canada would be included in:

A) U.S. GDP, but not U.S. GNP.
B) U.S. GNP, but not U.S. GDP.
C) both U.S. GDP and U.S. GNP.
D) neither U.S. GDP nor U.S. GNP.

Question 79

GDP tells us:

A) how much the nation produced in a year.
B) how much wealth the nation has accumulated in its entire history.
C) the value of the nation's entire stock of assets, excluding financial assets.
D) the value of the nation's entire stock of assets, excluding natural resources.

Question 80

If nominal GDP in 2007 is $5.43 (in trillions) and in 2008 the level of nominal GDP rises to $6.11 (in trillions), what is the growth rate of nominal GDP?

A) -11.1%
B) -12.5%
C) 11.1%
D) 12.5%