Question 1

The reason only newly produced goods and services are counted in GDP is that ________.
A) it is very difficult to input a value to used goods
B) most expenditures on used goods and services take place outside the market
C) it does not help economists make better economic predictions because second-hand goods rarely have any residual value
D) it allows economists to avoid double counting the production of goods and services
E) none of the above

Accepted Answer

Only newly produced goods and services are counted in GDP to avoid double counting the production of goods and services. If used goods and services were also counted, it would lead to inflation of the GDP.

Question 2

Which of the following will be counted as an investment expenditure in the measurement of GDP?
A) purchase of a tractor by a farmer from his neighbor
B) purchase of preferred stock in ABC Corporation
C) purchase of a newly built tractor by a college fraternity for hay rides at their charity fair
D) purchase of an apartment in a newly-built building
E) purchase of newly built computers by a municipal government

Accepted Answer

D

Question 3

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.
A) we spend twice as much on services as we do on goods consumption
B) consumption of nondurable goods is twice that of durables
C) private investment is the smallest of the main domestic components of GDP
D) all of the above
E) none of the above

Accepted Answer

D

Question 4

Which of the following is a valid characteristic of the U.S. economy over the last sixty years?
A) Investment is more volatile than other components of GDP.
B) Government spending has remained around 20% of GDP over much of the postwar period.
C) The U.S. has, for the most part, been running a trade deficit which has trended upward to over 5% of GDP.
D) all of the above
E) none of the above

Accepted Answer

All choices (A, B, and C) correctly describe characteristics of the U.S. economy over the last sixty years. Investment is indeed more volatile than other GDP components, government spending has hovered around 20% of GDP, and the U.S. has generally run a trade deficit that has increased over time.

Question 5

Which government entity calculates GDP in the United States on a quarterly basis?
A) the Treasury Department
B) the Commerce Department
C) the Federal Reserve
D) all of the above
E) none of the above

Accepted Answer

The Bureau of Economic Analysis (BEA), an agency in the United States Department of Commerce, is responsible for calculating the GDP of the United States on a quarterly basis. Therefore, choice B is the correct option.

Question 6

The fundamental identity of national income accounting implies ________.
A) Expenditure = Production + Income
B) Expenditure = Production = Income
C) Income =Expenditure - Production
D) Income =Expenditure/ Production
E) None of the above

Accepted Answer

The fundamental identity of national income accounting states that in an economy, total expenditure equals total production, which also equals total income. This identity is crucial for understanding the flow of money and goods in an economy.

Question 7

In a two-good economy, the price of video games is $40 and the price of energy drinks is $2. If the annual output of this economy is 100 video games and 500 drinks, the GDP is ________.
A) $50,080
B) $25,200
C) $5,000
D) $20,200
E) none of the above

Accepted Answer

The answer of In a two-good economy, the price of...

Question 8

The statistic most often used by economists to measure the value of economic activity is ________.
A) GDP
B) the CPI
C) labor-force participation rate
D) the nominal interest rate
E) the real interest rate

Accepted Answer

GDP (Gross Domestic Product) is the most commonly used statistic to measure economic activity. It measures the total value of goods and services produced within a country's borders in a specific period of time, typically a year. It is a comprehensive measure of economic activity and is used by policymakers, businesses, and individuals to track and analyze economic growth and performance. The CPI (Consumer Price Index) measures changes in the prices of a basket of goods and services consumed by households, while labor-force participation rate measures the percentage of working-age individuals who are employed or actively seeking employment, and interest rates measure the cost of borrowing or lending money.

Question 9

State the fundamental identity of national income accounting. Why is it not possible for this identity to be violated?

Accepted Answer

The answer of State the fundamental identity of national income...

Question 10

Which of the following will be counted as an expenditure in the measurement of GDP? (Assume that none of the transactions is concealed from the relevant authorities.)
A) the value of a used automobile that remains unsold on the dealer's lot
B) purchase of a lamp at a neighborhood garage sale
C) purchase, using foodstamps, of a loaf of bread
D) payment by a parent to her child for doing household laundry
E) purchase of flour by a bakery

Accepted Answer

The answer of Which of the following will be counted...

Question 11

Who helps calculate GDP in the United States?
A) the Bureau of Economic Analysis
B) the Census Bureau
C) the Bureau of Labor Statistics
D) all of the above
E) none of the above

Accepted Answer

The answer of Who helps calculate GDP in the United...

Question 12

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.
A) federal defense spending is twice that of non-defense spending
B) federal spending is twice as large as that of the states and local governments
C) government spending constitutes about 40% of GDP
D) all of the above
E) none of the above

Accepted Answer

The statement cannot be accurately determined without seeing the actual data in Table 2.1. Each of the options provided makes a specific claim about the breakdown of GDP, but without the actual figures from Table 2.1, it's impossible to verify any of these claims.

Question 13

To avoid double counting in the calculation of GDP, which types of goods are typically excluded from the calculation?
A) intermediate goods
B) capital goods
C) inventory goods
D) nonmarket goods
E) value-added goods

Accepted Answer

The answer of To avoid double counting in the calculation...

Question 14

If C is consumption, I is investment, G is government purchases and NX is net exports, according to the expenditure approach, Y would stand for ________; and the national income identity could be written as ________.
A) transfers; Y = C + I + G - NX
B) CPI; Y = C + I + G + NX
C) GDP; Y - C - I = G + NX
D) income; Y = C - I - G + NX
E) the real interest rate; Y = C + I + G + NX

Accepted Answer

According to the expenditure approach, Y (gross domestic product) is the sum of consumption (C), investment (I), government purchases (G), and net exports (NX). Therefore, the national income identity can be written as Y = C + I + G + NX. Option A is incorrect as transfers are not a part of Y, and the sign for NX is positive. Option B is incorrect as CPI (Consumer Price Index) is a measure of inflation, not a component of Y. Option D has the wrong signs, as investment must be added to Y, not subtracted. Option E is also incorrect as the real interest rate is a measure of cost of borrowing and not a component of Y.

Question 15

Which of the following is typically not counted in GDP?
A) any nonmarket good and services
B) income generated from apartment rentals
C) illegal drug sales
D) all of the above
E) none of the above

Accepted Answer

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

Question 16

The difference between inventories and inventory investment is that typically ________.
A) the first one is a stock of unfinished or unsold goods; the second one is a flow that indicates productive activity
B) the first one denotes the change in holdings of capital; the second one includes most final goods
C) the first one is measured at the beginning of the year; the second one is measured at the end of the year
D) all of the above
E) none of the above

Accepted Answer

Inventories refer to the stock of unsold or unfinished goods while inventory investment refers to the increase or decrease in inventories, thus indicating the level of productive activity. The other options do not accurately describe the difference between inventories and inventory investment.

Question 17

The production approach to measuring GDP requires ________.
A) that the market value of a given good is a reasonable approximation of its economic value
B) that all goods and services be added up before assigning a market value
C) that no good or service rendered outside the market be included in GDP
D) all of the above
E) none of the above

Accepted Answer

The answer of The production approach to measuring GDP requires...

Question 18

Consider a firm whose final output (and sales) in a particular year has a value of $1,200. To produce these goods, the firm used $500 worth of intermediate goods it had purchased in previous years plus $200 worth of newly-purchased intermediate goods. In the subsequent year, this same firm again sells $1,200 worth of final goods, but in this year has purchased $700 worth of intermediate goods, of which $100 is not used in current production but, rather, added to the firm's inventory. For each of these two years, calculate the value added by this firm. For each of these two years, calculate the contribution of this firm to the economy's GDP.

Accepted Answer

The answer of Consider a firm whose final output (and...

Question 19

Capital goods are typically purchased to ________. They get included in GDP ________.
A) replace raw materials; in the year they are produced
B) enable the investor to produce other goods and services; in each year they are utilized
C) enable the investor to consume less in the current period; as they are used up in the stages of production
D) enable the investor to produce other goods and services; in the year they are produced
E) none of the above

Accepted Answer

Capital goods are typically purchased to enable the investor to produce other goods and services. They are included in GDP in the year they are produced as they are considered investment spending by firms.

Question 20

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.
A) we spend twice as much on goods consumption as we do on services
B) consumption of durable goods is twice that of nondurables
C) government purchases is the largest main component of GDP
D) all of the above
E) none of the above

Accepted Answer

The answer of 
-Assuming that the GDP breakdown shown in...

Quiz 2: Measuring Macroeconomic Data

The reason only newly produced goods and services are counted in GDP is that ________.

Which of the following will be counted as an investment expenditure in the measurement of GDP?

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.

Which of the following is a valid characteristic of the U.S. economy over the last sixty years?

Which government entity calculates GDP in the United States on a quarterly basis?

The fundamental identity of national income accounting implies ________.

In a two-good economy, the price of video games is $40 and the price of energy drinks is $2. If the annual output of this economy is 100 video games and 500 drinks, the GDP is ________.

The statistic most often used by economists to measure the value of economic activity is ________.

State the fundamental identity of national income accounting. Why is it not possible for this identity to be violated?

Which of the following will be counted as an expenditure in the measurement of GDP? (Assume that none of the transactions is concealed from the relevant authorities.)

Who helps calculate GDP in the United States?

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.

To avoid double counting in the calculation of GDP, which types of goods are typically excluded from the calculation?

If C is consumption, I is investment, G is government purchases and NX is net exports, according to the expenditure approach, Y would stand for ; and the national income identity could be written as .

Which of the following is typically not counted in GDP?

The difference between inventories and inventory investment is that typically ________.

The production approach to measuring GDP requires ________.

Capital goods are typically purchased to . They get included in GDP .

-Assuming that the GDP breakdown shown in Table 2.1 is typical of a given year in the U.S. we can say that ________.