Question 1

In a small economy,consumption spending is $6,000,government purchases are $1,200,gross investment is $1,500,exports are $2,000,and imports are $1,000.What is gross domestic product?

Accepted Answer

The answer of In a small economy,consumption spending is $6,000,government...

Question 2

In a small economy,gross investment is $1,500,consumption spending is $6,000,net investment is $200,government purchases are $1,500,exports are $2,000 and imports are $1,000.What is GDP for this economy?

Accepted Answer

The answer of In a small economy,gross investment is $1,500,consumption...

Question 3

Consumption expenditures do not include household purchases of

Accepted Answer

Consumption expenditures include purchases of goods and services, but not the purchase of new houses, which falls under the category of investment. A, B, and D are all categories of consumer spending that are included in consumption expenditures.

Question 4

________ is/are the payment for the factor of production ________.

Accepted Answer

Profit is the payment for the factor of production entrepreneurship. Wages are the payment for the factor of production labor, interest is the payment for the factor of production capital, and rent is the payment for the factor of production land.

Question 5

Which of the following is considered a durable good?

Accepted Answer

A washing machine is considered a durable good because it is a long-lasting item that is not consumed or used up in one use. Medical care, clothing, and food are all examples of non-durable goods because they are typically used up or consumed quickly.

Question 6

The largest component of spending in GDP is

Accepted Answer

Consumption spending, or the spending by households on goods and services, typically accounts for around two-thirds of GDP in most countries. Investment spending, government spending, and net export spending are important components as well, but not as large as consumption spending.

Question 7

Which of the following would not be included in the expenditure category called investment expenditures?

Accepted Answer

Investment expenditures in economic terms refer to spending on capital goods, not financial investments like stocks. Purchases of shares of preferred stock are financial transactions and do not count as investment in the context of GDP calculations.

Question 8

Between 2017 and 2018,if an economy's exports rise by $8 billion and its imports fall by $8 billion,by how much will GDP change between the two years,all else equal?

Accepted Answer

Net exports are equal to exports minus imports. In this scenario, exports increased by $8 billion and imports decreased by $8 billion, resulting in a net export increase of $16 billion ($8 billion + [-$8 billion] = $16 billion). Net exports are a component of GDP, so an increase in net exports will increase GDP. Therefore, GDP will increase by $16 billion.

Question 9

Consumption spending is $4.5 billion,gross private domestic investment is $3 billion,and government purchases are $2 billion.If GDP is $14 billion,which of the following could be true regarding exports and imports in the economy?

Accepted Answer

The answer of Consumption spending is $4.5 billion,gross private domestic...

Question 10

Which of the following would result in GDP for an economy equal to $10 trillion?

Accepted Answer

The answer of Which of the following would result in...

Question 11

Which of the following would increase gross private domestic investment in an economy?

Accepted Answer

Gross private domestic investment includes business investments in equipment and structures, residential construction, and changes in business inventories. An increase in Apple's inventory directly contributes to this measure, reflecting higher investment levels. Choices A and B do not directly affect gross private domestic investment as they involve stock ownership and employment, respectively, rather than investment in physical assets. Choice D involves government spending, not private investment.

Question 12

Which of the following are not considered part of government purchases?

Accepted Answer

Welfare benefits are payments to individuals, not purchases of goods or services by the government. Government purchases refer to goods and services purchased by the government that are used for public purposes such as defense, infrastructure, education, and public safety. Teachers' salaries, tanks, and bridges are examples of government purchases.

Question 13

Investment spending includes spending on

Accepted Answer

Investment spending refers to spending on physical capital such as buildings, machinery, and equipment that are used to produce goods and services. Changes in business inventories also fall under investment spending as they are considered investments in intermediate goods that will be used to produce final goods for sale. Stocks do not count as investment spending as they represent ownership in a company rather than a direct investment in physical capital. Food is not typically considered investment spending as it is a consumption good rather than a capital good. Transfer payments are also not investment spending as they are a form of government spending on social welfare programs and do not contribute to the production of goods and services.

Question 14

Which of the following equations correctly measures GDP in an economy?

Accepted Answer

GDP (Gross Domestic Product) is calculated as the sum of consumption (C), investment (I), government spending (G), and net exports (NX), which is exports (X) minus imports (M). Therefore, the correct formula is GDP = C + I + G + NX.

Question 15

Assuming that the United States is the domestic economy,________ are goods and services produced by ________ and purchased by ________.

Accepted Answer

Imports are goods and services produced by foreign countries and purchased by the United States. Other choices are incorrect because exports are goods and services produced by the United States and purchased by foreign countries, not by the United States itself.

Question 16

Total income in an economy is equal to

Accepted Answer

Total income in an economy is the sum of wages, interest, rent, and profit. This is known as the income approach to measuring GDP. Options A and B are not correct because they are only taking into account a portion of the income generated in an economy. Option D is also incorrect because firm revenues do not necessarily equate to an economy's total income.

Question 17

Table 12-6
 $\begin{array}{|l|r|c|}
\hline {\text { Product }} & \text { Quantity }& \text { Price per Unit } \
\hline \text { Coke } & 10,000 &\$2\
\hline \text { iPhones } & 2,000&150 \
\hline \text { Backpack.s } & 4,000 &25\
\hline \text { Hershey bars } & 8,000&1\
\hline
\end{array}$
-Refer to Table 12-6.Consider the table of production and price statistics for a small economy in 2018.If the economy only produces the four goods listed below,what is GDP for 2018?

Accepted Answer

GDP is calculated by summing the products of quantities and prices for all goods: (10,000 * $2) + (2,000 * $150) + (4,000 * $25) + (8,000 * $1) = $428,000.

Question 18

Which component of consumption spending is the greatest in a typical industrialized economy?

Accepted Answer

In a typical industrialized economy, services are usually the largest component of consumption spending. This is because as economies become more developed, the proportion of income spent on goods tends to decrease and the proportion spent on services increases. This trend is due to factors such as increased income, changing consumer preferences, and advancements in technology that make the production and distribution of services easier and more efficient.

Question 19

To calculate GDP using the value-added method,one would add up

Accepted Answer

The value-added method involves adding up the value added by each firm involved in the production of final goods and services. This means adding up the value of intermediate goods and services at each stage of production, rather than simply adding up the market value of final goods and services. This allows for a more accurate calculation of GDP, as it avoids double-counting and captures the value added by each level of production.

Question 20

Government spending ________ is included in gross domestic product.

Accepted Answer

Government spending at all levels, including federal, state, and local, is included in gross domestic product. This includes spending on items such as infrastructure, education, healthcare, and defense.

Quiz 12: GDP: Measuring Total Production and Income