Question 1

Which of the following will NOT be counted in the U.S GDP for 2017?

Accepted Answer

Gross Domestic Product (GDP) measures the value of goods and services produced within a country during a specific period. A car manufactured in 2016 but sold in 2017 does not contribute to the GDP of 2017 because GDP accounts for goods produced within the specific year, which in this case is 2017.

Question 2

Final goods and services are goods and services that are:

Accepted Answer

Final goods and services are those that are purchased by the ultimate consumers for consumption and not for the purpose of resale or further processing.

Question 3

Which of the following is NOT a final good?

Accepted Answer

A final good is a product that is purchased by the end consumer and will not be sold again or transformed into another product. The bread bought by a deli to make sandwiches is not a final good because it is used to make another product (sandwiches) that will be sold to consumers. Choices B, C, and D are examples of final goods because they are purchased by the end consumer for their final use.

Question 4

Which of the following is NOT included in the calculation of a country's GDP?

Accepted Answer

Spending on intermediate goods by firms is not included in the calculation of a country's GDP because it would lead to double counting. GDP measures the market value of all final goods and services produced within a country in a given period, and intermediate goods are used in the production of final goods, so their value is already included in the final goods' value.

Question 5

All the following will be included in a country's GDP EXCEPT:

Accepted Answer

Purchases of government bonds are not included in GDP calculations because they are considered financial transactions rather than expenditures on goods and services. GDP measures the value of goods and services produced within a country, including government spending, business investments, and exports, but not financial investments like bond purchases.

Question 6

Which of the following will NOT be included in the U.S. GDP?

Accepted Answer

Social security payments made by the federal government to U.S citizens are transfer payments and do not reflect the production of goods or services, hence they are not included in the GDP.

Question 7

Suppose that a baker buys flour from a store to bake a wedding cake that has been sold to a couple getting married. In this case, the flour is an example of _____ good, and the cake is an example of _____ good.

Accepted Answer

The flour is an intermediate good because it is used in the production process of another good, the wedding cake. The wedding cake is a final good because it is the end product sold to the consumer, in this case, the couple getting married.

Question 8

Suppose that U.S Metals sells steel to U.S Auto, which uses the steel to manufacture a car that is sold to a college student for personal use. In this case, steel is an example of _____ good, and the car is an example of _____ good.

Accepted Answer

Steel is an intermediate good because it is used in the production of another good (the car), while the car is a final good because it is sold to the end user for consumption.

Question 9

Which one of the following categories of expenditures is included in a country's GDP for a given year?

Accepted Answer

GDP includes all spending on new production of goods and services within a country in a given year. Spending on used goods, intermediate goods (which are used in the production of final goods and are counted in the value of those final goods), and imports (which are produced outside the country) do not count towards the country's GDP.

Question 10

Ford Motors produces a $20,000 car in Detroit in November 2017. This car is sold to a consumer in January 2018 for $20,000, who in turn sells it to a college student in June 2018 for $18,000. Because of these transactions, the 2017 GDP increased by _____, and the 2018 GDP increased by:

Accepted Answer

GDP measures the market value of all final goods and services produced within a country in a given period. The car's production in 2017 adds $20,000 to the 2017 GDP. The subsequent sales in 2018 are merely transfers of ownership and do not contribute to the 2018 GDP, as the car is not a newly produced good in that year.

Question 11

Dell Computers manufactures a $1,000 laptop in December 2017. This laptop is sold to a consumer in March 2018 for $1,000, who in turn sells it on eBay in August 2018 for $800. Because of these transactions, the 2017 GDP increases by _____, and the 2018 GDP increases by:

Accepted Answer

GDP measures the value of goods and services produced within a country in a specific period. The laptop's production in 2017 adds $1,000 to the 2017 GDP. The resale in 2018 does not contribute to the GDP as it is a second-hand sale, not new production.

Question 12

Suppose that a country exports $500 billion worth of goods and services and imports $200 billion worth of goods during a given year. These transactions would result in a _____ in the country's GDP.

Accepted Answer

The country's GDP would increase by the net export value, which is exports minus imports ($500 billion - $200 billion = $300 billion increase).

Question 13

To avoid the problem of _____, the value of ______ goods must be excluded when country's GDP is being calculated.

Accepted Answer

To avoid the problem of double counting, the value of intermediate goods must be excluded when a country's GDP is being calculated. This ensures that only the final value of goods and services is counted, preventing the overestimation of the economy's size.

Question 14

If the net exports of a country are positive, then we can conclude that its imports are:

Accepted Answer

Net exports are calculated as exports minus imports. If net exports are positive, it means that exports exceed imports.

Question 15

If the net exports of a country are zero, then we can conclude that exports:

Accepted Answer

Net exports are calculated as exports minus imports. If net exports are zero, it means that the value of exports is equal to the value of imports.

Question 16

Which one of the following is included in calculating the GDP?

Accepted Answer

Net exports (exports minus imports) are included in the calculation of a country's GDP as part of the expenditure approach. This includes the value of goods and services a country exports minus what it imports. Purchases of stocks are financial transactions and not part of GDP, intermediate goods are excluded to avoid double counting since their value is included in the final goods, and unemployment benefits are transfer payments, not a measure of goods or services produced.

Question 17

Real GDP is the value of GDP obtained after eliminating the:

Accepted Answer

Real GDP is adjusted for changes in the price level, which means it eliminates the effect of inflation or deflation to reflect the true value of goods and services produced.

Question 18

Which one of the following statements is NOT true?

Accepted Answer

Real GDP is adjusted for changes in the price level, meaning it reflects changes in the quantity of goods and services produced, not changes in prices. Thus, it does not change because of changes in prices, only because of changes in production.

Question 19

Real GDP per capita refers to the ratio of real GDP to the total _____ in the economy.

Accepted Answer

Real GDP per capita is calculated by dividing the real GDP by the total population of the economy, providing an average economic output per person.

Question 20

If the nominal GDP of a country increases and the real GDP remains constant, then we can conclude that:

Accepted Answer

If the nominal GDP increases while the real GDP remains constant, it indicates that the increase in nominal GDP is due to an increase in prices rather than an increase in the quantity of goods and services produced. Real GDP is adjusted for inflation and reflects the volume of production, so if it remains constant, production has not changed.

Quiz 13: Measuring an Economys Performance