Question 1

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

Accepted Answer

Goods that are produced but not sold are considered inventory investment and are thus included in current period GDP. Option A is incorrect because intermediate goods are goods that are used in the production of other goods and services, and so are not included in GDP. Option B is incorrect because the sale of goods from one firm to another is not counted in GDP until those goods are sold to final consumers. Option D is incorrect because consumption refers to the purchase of goods and services by final consumers, and inventory investment is not included in consumption.

Question 2

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 by the U.S. publisher contributes to investment because they are spending money to acquire a capital asset. Additionally, because the computers were manufactured in the U.S., their purchase contributes to U.S. GDP, making choice A the best answer.

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

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 unsold televisions will be treated as a change in inventory, and therefore included in the first-quarter GDP calculations. They will not be counted as consumption until they are sold to consumers in a later quarter.

Question 5

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 6

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 answer of A good is produced by a firm...

Question 7

Which of the following items is included in GDP?

Accepted Answer

GDP includes the sale of final goods and services produced within a country's borders during a given period of time, so the sale of services such as those performed by a doctor is included. The sale of stocks and bonds are not included in GDP as they represent financial transactions and not the production of goods and services. The sale of used goods is also not included in GDP as the value of those goods was already included in GDP in the year they were originally produced.

Question 8

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 component(s) of fourth-quarter GDP?

Accepted Answer

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

Question 9

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 quarter(s) is (are) GDP higher?

Accepted Answer

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

Question 10

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), the estimated rental value of owner-occupied housing, is not actually a market transaction, so it is not included directly in GDP. However, it is included indirectly through imputed rent, which is a measure of the value of the housing services that homeowners consume. Imputed rent is included in the consumption component of GDP.

Item (2), purchases of newly-constructed homes, is a market transaction and is included in GDP as part of the investment component, which includes spending on business equipment, structures, and residential construction.

Question 11

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 quarter(s) does(do) these transactions raise investment?

Accepted Answer

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

Question 12

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

Accepted Answer

The value of goods added to a firm's inventory is considered as investment because GDP measures the value of the economy's production in a specific time period. This includes investments made by firms in their own inventory, as they are adding to their stock of goods aimed at generating future sales.

Question 13

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 added to inventory are considered investment and are included in the current quarter GDP as part of Gross Private Domestic Investment (GPDI).

Question 14

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 tuition and fees by the Carters for their son's education is considered consumption of education services, which is a component of personal consumption expenditures (C) in GDP calculation. It is not considered investment (A) because it does not add to the stock of capital goods or inventories, nor is it government spending (B) because it is not financed by taxes or government borrowing. It is also not consumption of durable goods (D) because the son's education cannot be classified as a durable good (which lasts more than one year).

Question 15

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 16

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 17

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

Accepted Answer

Investment in GDP refers to the purchase of new capital goods or additions to inventories, such as a new computer for a business. Paying for college tuition or buying a bond is not considered investment in GDP.

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

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

The purchase of the turbine generator counts as investment and increases U.S. investment. Additionally, the wind farm's purchase contributes to U.S. GDP since it is a final product produced within the country. However, because the factory is Swedish-owned, some of the profits from the sale will leave the U.S., meaning that the increase in GNP will be smaller than the increase in GDP.

Question 20

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 quarter(s) does(do) these transactions raise consumption?

Accepted Answer

Consumption is defined as the purchase of goods and services by households. The production of sweatshirts in the first quarter and adding them to inventory does not count as consumption because they have not been purchased by households. In the second quarter, when the firm sells the sweatshirts to consumers, the transaction counts as consumption. Therefore, only the second quarter raises consumption.

Quiz 23: Measuring a Nations Income