Question 1

Which of these goods will not be counted in GDP

Accepted Answer

GDP measures the value of goods and services produced within a country's borders in a specific time period. The Ford manufactured in Mexico and sold in Mexico does not contribute to the US GDP because it is produced and sold outside the US.

Question 2

The reason that only final sales count in GDP is to

Accepted Answer

Only final sales are counted in GDP in order to avoid double counting. If all intermediate sales were included, the value of goods and services would be counted multiple times, resulting in an overinflated GDP figure. By only counting final sales, the value of goods and services is only counted once, leading to a more accurate representation of economic output. Answer A, C, and D are incorrect as they do not accurately explain why final sales are used in GDP calculation.

Question 3

The expenditures approach to GDP equals

Accepted Answer

The expenditures approach to GDP is calculated as the sum of Consumption (C), Gross Investment (I), Government Purchases (G), and Net Exports (X - M), which is represented by the formula GDP = C + I + G + (X - M).

Question 4

Suppose a Boeing 777 is sold to a Chinese company for $250 million and resells it to a Hong Kong airline for $251 million. GDP will count this as

Accepted Answer

GDP counts the value of final goods and services produced within a country. The initial sale of the Boeing 777 for $250 million is counted in GDP as it is the final sale of a product produced in the country. The resale does not count towards GDP as it is not a new production.

Question 5

Gross Domestic Product is counted using two methods: one which counts all the ways people _____ money and another which counts all the ways people _____ money.

Accepted Answer

The first method, known as the income approach, counts all the ways people earn money, including wages, salaries, interest, and profits. The second method, known as the expenditure approach, counts all the ways people spend money, including consumption, investment, government spending, and net exports. Therefore, choice A, which includes both earning and spending money, is the best answer.

Question 6

How does GDP deal with a Ford produced in Mexico?

Accepted Answer

GDP (Gross Domestic Product) measures the value of all goods and services produced within a country's borders. Since a Ford produced in Mexico is manufactured outside the United States, it is not counted in the U.S. GDP. It would be counted in Mexico's GDP.

Question 7

The reason that only final sales are counted in GDP is

Accepted Answer

Only final sales are counted in GDP to avoid double counting goods that are sold with the intention of being resold. Including intermediate sales would overstate the true value of the final output and thus the overall GDP.

Question 8

Suppose an apple pie sells at a grocery store is for $5. Suppose that the grocery store purchased it from a baking company for $4. Suppose the baking company paid $2 for ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the pie?

Accepted Answer

The GDP contribution of the pie is its final selling price, which is $5. GDP measures the market value of all final goods and services produced within a country in a given period, so only the final sale price to the consumer is counted to avoid double counting the intermediate costs.

Question 9

If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $11,000 to purchase those identical goods in 2015, then the base year is

Accepted Answer

The base year is the year used as a reference point to compare prices in other years. Since the market basket was defined and priced in 2014, that year serves as the base year.

Question 10

The income approach to GDP equals

Accepted Answer

The income approach to GDP calculates GDP by adding up all the incomes earned by households and firms in an economy. This includes employee compensation, profit, net property income, indirect business taxes, and depreciation while subtracting income earned abroad. Therefore, option A is the correct answer.

Question 11

One subject of study for macroeconomics is

Accepted Answer

Inflation is a key macroeconomic concept that involves the overall increase in prices in an economy over time. Understanding the causes and consequences of inflation is an important area of study for macroeconomists.

Question 12

GDP can be calculated using

Accepted Answer

GDP can be calculated using either the way people earn money (i.e., through production, wages, profits, and other forms of income) or the way people spend money (i.e., on consumption, investments, government spending, and net exports). Both approaches should yield the same result since every dollar spent is also earned by someone else. Therefore, GDP = C + I + G + NX = W + I + R + PR + I + PI + DV.

Question 13

Suppose a DVR is bought from China for $200 and sold in the US for $250. GDP will count this

Accepted Answer

GDP counts the value added in the economy, which in this case is the difference between the sale price in the US ($250) and the cost of importing it from China ($200), resulting in a net contribution of $50 to the GDP.

Question 14

How does GDP deal with a Toyota produced in Kentucky?

Accepted Answer

GDP includes the total value of all goods and services produced within a country's borders, regardless of the nationality of the company producing those goods. Therefore, a Toyota produced in Kentucky is fully counted in the U.S. GDP.

Question 15

Suppose a 1 pound steak sells at a grocery store is for $7. Suppose that the grocery store purchased it from a butcher for $4. Suppose the butcher bought cattle from farmers for $2 per sellable pound and paid their labor approximately $1 for pound of sellable beef labor, and made $1 in profit. What is the GDP contribution of the steak?

Accepted Answer

GDP measures the final value of goods and services produced within a country. In this case, the final sale price of the steak is $7, which is the value added to the GDP.

Question 16

Inflation is measured using _________ in a price index.

Accepted Answer

Inflation is best measured using the percentage year-to-year increase in a price index. This measures the change in price levels from one period to the next, giving a more accurate representation of the rate of inflation than simply considering the absolute or weighted average increases. The logarithm adjusted absolute increase is not commonly used as a measure of inflation.

Question 17

One subject of study for macroeconomics is

Accepted Answer

Macroeconomics studies the overall performance of the economy, which includes topics such as economic growth, inflation, and unemployment. Therefore, the best choice is A, economic growth. B and C refer to market structures, while D refers to microeconomics, which studies individual behavior and decision-making.

Question 18

In measuring Gross Domestic Product, goods produced by foreign firms in the United States are

Accepted Answer

Gross Domestic Product (GDP) measures the value of goods and services produced within a country's borders, regardless of the nationality of the producers. Therefore, it includes goods produced by foreign firms within the United States but excludes goods produced by American firms in foreign countries.

Question 19

One subject of study for macroeconomics is

Accepted Answer

Macroeconomics studies the performance and behavior of the entire economy, including measures of unemployment such as the overall rate of joblessness and the factors that contribute to it. B and C are examples of microeconomic concepts, and D is specifically focused on an individual's behavior, rather than the economy as a whole.

Question 20

How does GDP account for something that was produced for sale in one year and sold in the next year?

Accepted Answer

When something is produced for sale in one year and sold in the next year, it is counted as an addition to inventory (which is in business investment) in the year it was produced, and the markup is counted in the year in which it is sold. This allows for a more accurate representation of the value of goods produced and sold over time.

Quiz 6: Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

Which of these goods will not be counted in GDP

The reason that only final sales count in GDP is to

The expenditures approach to GDP equals

Suppose a Boeing 777 is sold to a Chinese company for $250 million and resells it to a Hong Kong airline for $251 million. GDP will count this as

Gross Domestic Product is counted using two methods: one which counts all the ways people _ money and another which counts all the ways people _ money.

How does GDP deal with a Ford produced in Mexico?

The reason that only final sales are counted in GDP is

Suppose an apple pie sells at a grocery store is for $5. Suppose that the grocery store purchased it from a baking company for $4. Suppose the baking company paid $2 for ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the pie?

If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $11,000 to purchase those identical goods in 2015, then the base year is

The income approach to GDP equals

One subject of study for macroeconomics is

GDP can be calculated using

Suppose a DVR is bought from China for $200 and sold in the US for $250. GDP will count this

How does GDP deal with a Toyota produced in Kentucky?

Inflation is measured using _________ in a price index.

One subject of study for macroeconomics is

In measuring Gross Domestic Product, goods produced by foreign firms in the United States are

One subject of study for macroeconomics is

How does GDP account for something that was produced for sale in one year and sold in the next year?