Question 1

Which of the following is not included in the investment component of GDP?

Accepted Answer

The answer of Which of the following is not included...

Question 2

Which of the following is included in the investment component of GDP?

Accepted Answer

The investment component of GDP involves purchases of new machinery, equipment, buildings, and inventory. Buying a computer for a business (as in option B) would fall under this category, while paying college tuition (as in option A) would not. Buying a bond (as in option C) represents a loan, but it does not involve the purchase of new physical assets, so it also would not be included in the investment component of GDP.

Question 3

The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?

Accepted Answer

The answer of The local car dealership has an increase...

Question 4

Consider two items that might be included in GDP: 1) the estimated rental value of owner-occupied housing and 2) purchases of newly-constructed homes. How are these two items accounted for when GDP is calculated?

Accepted Answer

Item 1) is included in the consumption component of GDP because it represents the imputed rent that the homeowner would have to pay if they were renting their own home. This imputed rent is considered a personal consumption expenditure.

Item 2) is included in the investment component of GDP because it represents the purchase of a newly-constructed asset, namely a house. This purchase is considered an investment because it represents a long-term addition to the economy's stock of productive assets.

Question 5

The value of goods added to a firm's inventory in a certain year is treated as

Accepted Answer

Adding goods to a firm's inventory counts as investment because it represents the firm's commitment of resources to produce more goods in the future. This is consistent with GDP's aim of measuring the value of new production in a given year. Therefore, it is not considered consumption or intermediate goods, and it does not depend on whether the goods are durable or not.

Question 6

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Accepted Answer

The answer of A Minnesota farmer buys a new tractor...

Question 7

A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes

Accepted Answer

The purchase of new computers represents investment spending and is also included in GDP as it adds to the production of a good within the country. Therefore, it makes a positive contribution to both investment and GDP.

Question 8

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

Accepted Answer

U.S. investment increases due to the purchase of the turbine generator, and GDP increases because the purchase adds to domestic production. However, since the turbine generator is produced in a Swedish-owned factory, the revenues from the sale do not all go to U.S. citizens, and the increase in GNP is therefore smaller.

Question 9

A good is produced by a firm in 2009, added to the firm's inventory in 2010, and sold to a household in 2010. As a result, on net,

Accepted Answer

The production of the good in 2009 contributes to 2009 GDP, and the addition of the good to the firm's inventory in 2010 does not affect GDP. When the good is sold to the household in 2010, it contributes to 2010 GDP. Therefore, 2009 GDP increases and 2010 GDP does not change.

Question 10

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarters) doesdo) these transactions raise consumption?

Accepted Answer

Consumption is the purchase of goods and services by households, and occurs when the goods are received and used by the consumer. In this scenario, the production of sweatshirts in the first quarter does not raise consumption because they are not yet purchased or used by consumers. The sale of the sweatshirts to consumers in the second quarter does raise consumption because the goods are now being received and used by the consumers. Therefore, choice C is the best answer.

Question 11

Which of the following items is included in GDP?

Accepted Answer

Only the sale of final goods and services produced within a country's borders during a given time period is included in GDP. The sale of stocks and bonds are financial transactions and not included in GDP. The sale of used goods is not included in GDP because they were already counted in a previous period's production. However, the sale of services such as those performed by a doctor are included in GDP as they are final services produced during the given time period.

Question 12

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarters) doesdo) these transactions raise investment?

Accepted Answer

The answer of A U.S. firm produces nail guns in...

Question 13

onsumer goods that are produced, go into inventory, and are not sold during the current period are

Accepted Answer

Consumer goods that are produced, go into inventory, and are not sold during the current period are included in current period GDP as inventory investment. This is because the value of the goods produced is added to the inventory investment component of GDP, which reflects the amount of goods that businesses add to their stock to meet future demand. However, they are not counted as consumption because they have not been purchased by consumers yet.

Question 14

During the current quarter, a firm produces consumer goods and adds some of those goods to its inventory rather than selling them. The value of the goods added to inventory is

Accepted Answer

Goods that are added to inventory rather than being sold are considered investment and are included in the current quarter GDP as investment. Option A is incorrect because inventory is considered a part of investment, which is a component of GDP. Option C is incorrect because consumption refers to the purchase of final goods and services by households, and goods added to inventory are not yet sold to households. Option D is incorrect because inventory additions are not considered a statistical discrepancy.

Question 15

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which components) of fourth-quarter GDP?

Accepted Answer

The answer of During the third quarter of this year...

Question 16

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

Accepted Answer

The payment of fees and tuition by the Carters and their son for his education is considered consumption of services, as it is payment for the use of a service provided by the university. It is not considered investment, government spending, or consumption of durable goods.

Question 17

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?

Accepted Answer

The 100,000 unsold televisions will be counted as a change in inventory in the first quarter and will be included in the first-quarter GDP calculation. This is because they were produced in the first quarter and were intended for sale but were not sold yet, so they are considered part of the inventory of the manufacturer. When the televisions are eventually sold in the second quarter, the sale will not be counted in the second-quarter GDP because they were already included in the first-quarter GDP as a change in inventory.

Question 18

Rocket Energy Drink Company buys sugar to produce energy drinks. At the end of a quarter both its inventory of sugar and its inventory of energy drinks has increased. Investment for the quarter will include

Accepted Answer

The answer of Rocket Energy Drink Company buys sugar to...

Question 19

A stove is produced by a firm in 2014, added to the firm's inventory in 2014, and sold to a household in 2015. It follows that

Accepted Answer

The answer of A stove is produced by a firm...

Question 20

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarters) is are) GDP higher?

Accepted Answer