Question 1

Which of the following transactions will be included in this year's GDP?

Accepted Answer

GDP includes the market value of all final goods and services produced within a country in a given period. The purchase of a Nissan automobile produced in Tennessee counts as it is a final good produced domestically.

Question 2

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

Accepted Answer

When a mother buys sugar to bake cookies, it is considered a final consumption, contributing to GDP. The other options involve intermediate goods used in production.

Question 3

Which of the following choices shows a good or service (produced in the current period) that is NOT counted in GDP for this year?

Accepted Answer

Intermediate goods like wood used for making furniture are not counted in GDP to avoid double counting, as their value is included in the final product.

Question 4

Real GDP per capita is calculated as the total

Accepted Answer

Real GDP per capita is calculated as the real GDP divided by the population. This measure takes into account both changes in the overall economy and changes in population growth, providing a more accurate representation of the standard of living for individuals in a given country or region. Option A is incorrect because using nominal GDP would not account for changes in the general price level. Option B is incorrect because it does not account for changes in the population. Option D is incorrect because it does not take population into account.

Question 5

If a country's GDP per capita rises, this means that I. the country has fewer poorer people. II. some people in the country have more wealth. III. the country's standard of living is rising.

Accepted Answer

If a country's GDP per capita rises, it means that on average each person in the country is producing and earning more than before. This does not necessarily indicate that everyone in the country is better off, but it does suggest that some people are likely to have more wealth. As the country's GDP per capita rises, it is reasonable to assume that its standard of living is also improving. However, it is worth noting that there may be outliers or inequality within the country that could limit the benefits of this growth to certain segments of the population.

Question 6

What data are used to calculate GDP?

Accepted Answer

GDP is calculated by multiplying the quantities of goods and services produced by their respective market prices. Therefore, both quantities and prices of goods and services are used to calculate GDP. Costs of producing goods, while important for individual businesses, are not used in the calculation of GDP.

Question 7

GDP can be defined as the

Accepted Answer

GDP is defined as the market value of all final goods and services produced within a country in a given year. This means that only final goods and services are included in the calculation, and that it is limited to the production that occurs within a country's borders over a specific time period.

Question 8

Reference: Ref 6-1 (Table: Small Town GDP) Which of the four towns in this table has the highest standard of living?

Accepted Answer

Town B has the highest GDP per capita, indicating a higher standard of living compared to the other towns.

Question 9

A car engine produced by a supplier to Ford Motor Company is an example of

Accepted Answer

A car engine produced by a supplier to Ford Motor Company is an intermediate good, as it is used in the production of the final good, which is the car that Ford produces and sells to the consumer.

Question 10

Adam, Jill, and Sasha volunteered to paint at their community center. The center had already purchased the painting materials for the project from the local hardware store last year. The value of the community center's painting project

Accepted Answer

The painting materials were purchased last year, so they are not part of this year's GDP. Additionally, volunteer work does not have a market transaction, so it is not included in GDP calculations.

Question 11

Which of the definitions below best defines Gross Domestic Product?

Accepted Answer

Gross Domestic Product (GDP) is the measure of a country's economic output. It represents the market value of all final goods and services produced within a country in a given period of time, typically a year. Option B best defines GDP as it specifies that the goods and services are produced within the country, while also including only the final goods and services, rather than intermediate goods which are used in the production of final goods. Option A is incorrect as it includes goods and services sold, whereas GDP is based on production. Option C is incorrect as it does not specify that only final goods and services are included. Option D is incorrect as it includes production by a country's permanent residents wherever located, while GDP only includes production within a country's geographical borders.

Question 12

GDP per capita is GDP divided by

Accepted Answer

GDP per capita is calculated by dividing GDP by the population of a country.

Question 13

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 and all of its shovels are purchased by foreign firms that produce landscaping services only in their country. What is the value of GDP in this country?

Accepted Answer

The answer of  Suppose an economy produces only the...

Question 14

Which of the following services does NOT count towards GDP?

Accepted Answer

Only services which are produced for sale in the market are included in GDP. Painting your own garage does not involve a market transaction and hence does not count towards GDP.

Question 15

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?

Accepted Answer

The $15,000 commission paid to Mary, the real-estate agent, is the only value added to GDP in 2011 from this transaction, as it represents the service provided in the current year. The sale of the house itself does not add to GDP because it is not a new good or service produced in 2011.

Question 16

Reference: Ref 6-1 (Table: Small Town GDP) Refer to the table. Which of the four towns has the lowest standard of living?

Accepted Answer

The answer of   Reference: Ref 6-1 (Table: Small...

Question 17

GDP is the market value of all

Accepted Answer

GDP is the measure of the total value of final goods and services produced within a given country's borders in a particular time period, usually a year. Only final goods and services are considered in GDP because intermediate goods have already been counted in the production of the final good.

Question 18

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

Accepted Answer

Real GDP per capita is the best measure of a country's standard of living as it takes into account the size of the population and adjusts for inflation, providing a more accurate reflection of the average income and purchasing power of individuals within the country. Nominal GDP does not take into account inflation while nominal GDP per capita does not account for population size, both of which can distort the picture of a country's standard of living.

Question 19

All of the following transactions occurred in 2011. Which of the following contributes to GDP for 2011?

Accepted Answer

GDP only includes goods and services produced within the current year. Since all options involve transactions of goods produced or used in previous years, none contribute to GDP for 2011.

Question 20

Gross Domestic Product uses __________ to account for differences in the ________ final goods and services.

Accepted Answer

Gross Domestic Product uses market prices to account for differences in the value of final goods and services. Market prices take into account supply and demand, as well as quality measures, to determine the value of a good or service in a particular market. Quality measures and demand for goods and services are important factors that influence market prices, but they are not used directly in calculating GDP.

Quiz 24: Asymmetric Information: Moral Hazard and Adverse Selection