Question 1

The value added of a producer is the

Accepted Answer

The value added of a producer is the value of its output minus the value of the inputs it purchases from other producers. It represents the value that a firm adds to the economy through its production process. Option A refers to the gross revenue of the firm and does not account for the value of inputs, while option B is not a clear or accurate definition of value added. Option D introduces the concept of commissions which is not relevant to the calculation of value added.

Question 2

Capital goods are

Accepted Answer

Capital goods are goods used to produce other goods, such as machinery or buildings. They are considered intermediate goods and are not counted in GDP as final goods. They are not used up in the same period in which they are produced, but rather have a useful life beyond the period in which they are produced.

Question 3

Intermediate goods are

Accepted Answer

Intermediate goods are goods that are used up in the production of other goods in the same period that they were produced. They are not capital goods, which are used over multiple production periods, nor are they final goods that remain in inventories.

Question 4

Describe the three different approaches to measuring the amount of economic activity that occurs during a period of time and explain why they all give identical measurements.

Accepted Answer

The answer of Describe the three different approaches to measuring...

Question 5

The value of a producer's output minus the value of the inputs it purchases from other producers is called the producer's

Accepted Answer

The value added is the value created by the producer's own resources and efforts, and is calculated by subtracting the cost of purchased inputs from the value of output. It is a measure of the real contribution of the producer to the economy. The producer's surplus is the difference between the price the producer is willing to accept for a good or service and the price actually received. Profit is the difference between total revenue and total costs, including both purchased inputs and other expenses. Gross product is the total value of output produced in an economy.

Question 6

Marvin's Metal Company produces screws that it sells to Ford,which uses the screws as a component of its cars.In the national income accounts,the screws are classified as

Accepted Answer

The screws produced by Marvin's Metal Company are used as a component in Ford's cars, which means they are intermediate goods. Intermediate goods are products that are used in the production of other goods and services, and are not sold directly to the final consumer.

Question 7

Because government services are not sold in markets,

Accepted Answer

The answer of Because government services are not sold in...

Question 8

The fundamental identity of national income accounting is

Accepted Answer

The fundamental identity of national income accounting is that total production (Gross Domestic Product) is equal to total income (Gross National Income) and total expenditure (Gross Domestic Expenditure). This is because all goods and services produced in an economy are either purchased by consumers, government, or businesses (expenditure), or generate income for workers and businesses (income). Therefore, choice C is the correct answer.

Question 9

The Compagnie Naturelle sells mounted butterflies,using butterfly bait it buys from another firm for $20,000.It pays its workers $35,000,pays $1,000 in taxes,and has profits of $3,000.What is its value added?

Accepted Answer

The answer of The Compagnie Naturelle sells mounted butterflies,using butterfly...

Question 10

The three approaches to measuring economic activity are the

Accepted Answer

The three approaches to measuring economic activity are the product approach (measuring economic activity through the value of goods and services produced), the income approach (measuring economic activity by summing up all the incomes earned in producing goods and services), and the expenditure approach (measuring economic activity by adding up all the spending on goods and services by households, firms, government, and foreigners). These are also known as the product, income, and expenditure approaches. Thus, choice B is the correct answer.

Question 11

Capital goods are

Accepted Answer

Capital goods are considered final goods because they are not consumed in the production process within a single year, but rather provide value over multiple years through their use in producing other goods and services.

Question 12

Government statisticians adjust GDP figures to include estimates of

Accepted Answer

Government statisticians adjust GDP figures to include estimates of the underground economy, which includes economic activities that are not recorded in official statistics, such as unreported income and illegal activities. The other options (A, C, and D) are not included in GDP calculations as they are difficult to quantify and measure accurately.

Question 13

The accounting framework used in measuring current economic activity is called

Accepted Answer

The national income accounts are used to measure current economic activity by tracking the income and production of a country over a specific time period. This includes measuring Gross Domestic Product (GDP), which is the total value of goods and services produced within the country's borders. The other options listed, such as the U.S. expenditure accounts and balance of payments accounts, are specific subsets of the broader national income accounts framework.

Question 14

Sam's Semiconductors produces computer chips,which it sells for $10 million to Carl's Computer Company (CCC).CCC's computers are sold for a total of $16 million.What is the value added of CCC?

Accepted Answer

Value added is the difference between the revenue of a company and the cost of the inputs it has purchased from other firms. In this case, CCC's revenue is $16 million and the cost of the chips it purchased from Sam's Semiconductors is $10 million. Therefore, CCC's value added is $6 million ($16 million - $10 million).

Question 15

The measurement of GDP includes

Accepted Answer

GDP includes estimated values of activity in the underground economy, which includes illegal activities such as drug trade and prostitution. However, it does not include nonmarket goods such as homemaking and child-rearing (A), the benefits of clean air and water (B), or purchases and sales of goods produced in previous periods (D).

Question 16

To what extent are homemaking and child-rearing accounted for in the government's GDP accounts?

Accepted Answer

Homemaking and child-rearing are only included in the government's GDP accounts to the extent that these services are provided for pay, such as through daycare services or paid home care. Unpaid domestic work is not counted in GDP calculations.

Question 17

Which of the following is included in U.S.GDP?

Accepted Answer

The answer of Which of the following is included in...

Question 18

To ensure that the fundamental identity of national income accounting holds,changes in inventories are

Accepted Answer

Changes in inventories are treated as part of expenditure in the national income accounting formula to ensure that the fundamental identity of the formula holds true. This is because changes in inventories can represent a discrepancy between production and consumption, and including them as part of expenditure helps to accurately account for total output and income.

Question 19

The equation total production = total income = total expenditure is called

Accepted Answer

The equation "total production = total income = total expenditure" is known as the fundamental identity of national income accounting. This identity forms the basis of measuring a country's Gross Domestic Product (GDP) and understanding its economic performance.

Question 20

The Bigdrill company drills for oil,which it sells for $200 million to the Bigoil company to be made into gas.The Bigoil company's gas is sold for a total of $600 million.What is the total contribution to the country's GDP from companies Bigdrill and Bigoil?

Accepted Answer

The total contribution to the country's GDP is $600 million because GDP measures the final value of goods and services produced, which in this case is the value of the gas sold by Bigoil. The sale from Bigdrill to Bigoil is an intermediate step and not counted separately in GDP.

Quiz 2: The Measurement and Structure of the National Economy

The value added of a producer is the

Capital goods are

Intermediate goods are

Describe the three different approaches to measuring the amount of economic activity that occurs during a period of time and explain why they all give identical measurements.

The value of a producer's output minus the value of the inputs it purchases from other producers is called the producer's

Marvin's Metal Company produces screws that it sells to Ford,which uses the screws as a component of its cars.In the national income accounts,the screws are classified as

Because government services are not sold in markets,

The fundamental identity of national income accounting is

The Compagnie Naturelle sells mounted butterflies,using butterfly bait it buys from another firm for $20,000.It pays its workers $35,000,pays $1,000 in taxes,and has profits of $3,000.What is its value added?

The three approaches to measuring economic activity are the

Capital goods are

Government statisticians adjust GDP figures to include estimates of

The accounting framework used in measuring current economic activity is called

Sam's Semiconductors produces computer chips,which it sells for $10 million to Carl's Computer Company (CCC) .CCC's computers are sold for a total of $16 million.What is the value added of CCC?

The measurement of GDP includes

To what extent are homemaking and child-rearing accounted for in the government's GDP accounts?

Which of the following is included in U.S.GDP?

To ensure that the fundamental identity of national income accounting holds,changes in inventories are

The equation total production = total income = total expenditure is called

The Bigdrill company drills for oil,which it sells for $200 million to the Bigoil company to be made into gas.The Bigoil company's gas is sold for a total of $600 million.What is the total contribution to the country's GDP from companies Bigdrill and Bigoil?