Deck 11: Gross Domestic Product

Question 1

Gross domestic product is officially measured by adding together the:

A) quantity of each good and service produced by U.S. residents.
B) market value of all final goods and services produced within the borders of a nation.
C) quantity of goods and services produced by companies owned by U.S. citizens.
D) none of the above.

Answer 1

B

Question 2

Which of the following expenditures would be included in GDP for this year?

A) The purchase of a new car.
B) The purchase of a new tire by General Motors for a new car.
C) The purchase of a used car.
D) All of the above would be included.

Answer 2

A

Question 3

Which of the following best describes gross domestic product (GDP)?

A) The market value of all inputs used to produce all final goods and services in a nation during a period of time.
B) The market value of all final goods and services produced in a nation during a period of time.
C) The quantity of all goods and services produced in a nation during a period of time.
D) The average price of all goods and serviced produced in a nation during a period of time.

Answer 3

B

Question 4

Which of the following is true?

A) GDP is a "flow" concept.
B) The purchase prices of both intermediate goods and final goods are included in GDP.
C) GDP measures economic welfare.
D) GDP is a measure of changes in the general level of prices.

Question 5

Payments to households not in exchange for goods and services currently produced are:

A) transfer payments.
B) government purchases.
C) consumption expenditures.
D) investment expenditures.

Question 6

Which one of the following transactions would be included in GDP?

A) Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale.
B) Mr. Doe donates $500 to his town's junior college scholarship fund.
C) Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident.
D) Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock.

Question 7

Which of the following would be counted as a final good for inclusion in GDP?

A) A piece of glass bought this year by a consumer to fix a broken window.
B) A sheet of glass produced this year by Ford for windows in a new car.
C) A tire produced this year and sold to a car maker for a new car sold this year.
D) None of the above would be counted in GDP.

Question 8

Which of the following purchases would be counted as a final good in the GDP calculation?

A) A family's purchase of a used car.
B) A speculator's purchase of 100 shares of Apple Computer stock.
C) A deli's purchase of bread for making its sandwiches.
D) A business's purchase of new office equipment.

Question 9

GDP measures the economy's production of:

A) final goods and services.
B) intermediate goods.
C) consumer goods and services.
D) capital goods.

Question 10

Intermediate goods are goods and services used:

A) by the ultimate user.
B) by state and local governments.
C) as inputs.
D) both as inputs and final goods.

Question 11

Which of the following spending is larger for U.S.GDP?

A) State and local government.
B) Federal government.
C) Net exports.
D) Change in business inventories.

Question 12

Which of the following items is included in the calculation of GDP?

A) Purchase of 100 shares of General Motors stock.
B) Purchase of a used car.
C) The value of a homemaker's services.
D) Sale of Gulf War military surplus.
E) None of the above would be included.

Question 13

Gross domestic product (GDP)includes:

A) intermediate as well as final goods.
B) foreign goods as well as domestically produced goods.
C) used goods sold in the current time period.
D) only final goods and services.

Question 14

GDP is a measure of:

A) domestic production.
B) changes in the general level of prices.
C) material well-being.
D) social welfare.

Question 15

Which of the following is included in GDP?

A) The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter.
B) The value of unpaid-for volunteer time.
C) The unpaid-for services provided by the natural environment, such as breathable air.
D) Net exports: (value of exports - value of imports).

Question 16

Gross domestic product is the sum of the purchase price multiplied by the quantity of:

A) goods and services exchanged during the period.
B) final goods and services produced domestically during the period.
C) goods and services produced domestically during the period minus the depreciation of productive assets.
D) final goods and services plus intermediate goods produced domestically during the period.

Question 17

Gross domestic product is equal to the market value of all final goods and services:

A) exchanged during a period.
B) produced domestically during a period.
C) produced by the citizens of a nation during a period.
D) produced domestically during a period minus the depreciation of productive assets.

Question 18

The GDP of a country can be derived by summing the:

A) expenditures on final goods and services produced domestically during the year.
B) payments to employees and owners of capital resources and then subtracting depreciation and indirect business taxes.
C) market value of all goods and services produced domestically during the period and then subtracting net exports from that figure.
D) income payments to the resource suppliers and net exports.

Question 19

GDP:

A) is the dollar value of all the final goods and services produced within the borders of a nation.
B) includes intermediate and final goods and services.
C) minus an allowance for depreciation of fixed capital equals GNP.
D) is a less-than-perfect measure of social well-being because it does not include exports and imports.
E) all of the above.

Question 20

Which of the following expenditures would not be included in GDP?

A) Purchase of a new lawnmower.
B) Purchase of a silver cup previously sold new in 1950.
C) Purchase of a ticket to the latest movie.
D) All of the above would be counted in GDP.

Question 21

When net exports are negative,

A) exports are greater than investment.
B) depreciation is greater than net investment.
C) imports are greater than investment.
D) exports are greater than imports.
E) imports are greater than exports.

Question 22

Gross domestic product (GDP)does not include:

A) used goods sold in the current time period.
B) foreign produced goods.
C) intermediate as well as final goods.
D) None of the above would be included.

Question 23

The largest component of GDP is:

A) personal consumption expenditures.
B) government spending.
C) durable goods.
D) net exports.
E) gross private domestic investment.

Question 24

The unreported or illegal production of goods and services in the economy that is not counted in GDP is termed:

A) money laundering.
B) the underground economy.
C) disposable personal income.
D) indirect national income.
E) unreported capital

Question 25

The market value of all final goods and services in an economy produced by resources owned by people of that economy:

A) personal income.
B) national income.
C) capital income.
D) gross national product.
E) gross domestic product.

Question 26

Which of the following activities would be calculated as part of GDP accounts?

A) Drug trafficking.
B) Money laundry.
C) Prostitution.
D) Purchasing plastic surgery.
E) Burglary.

Question 27

Which of the following would be classified as a personal consumption expenditure?

A) All of the following.
B) Your purchase of a newly constructed house
C) Your purchase of a preowned house.
D) Your purchase of one share of Microsoft stock.
E) Your purchase of this economics course.

Question 28

Depreciation or consumption of fixed capital depreciation measures:

A) net investment less gross investment.
B) the loss of productive ability due to capital intensive production.
C) capital that is wasted in the production process.
D) the value of existing capital stock used up in the production process.
E) the decline in the value of inventories caused by inflation.

Question 29

Gross domestic product (GDP)is defined as:

A) the market value of all final goods and services produced within the borders of a nation.
B) incomes received by all a nation's households.
C) the quantity of each good and service produced by U.S. residents.
D) none of the above.

Question 30

Gross private domestic investment or simply business investment spending (I):

A) excludes all investment in the United States by foreign firms.
B) includes all capital in the United States.
C) includes net additions to the capital stock plus all new corporate stocks and bonds.
D) includes business expenditures on new factories, tools, and machinery.

Question 31

Personal consumption expenditures include:

A) all commodities that business firms buy.
B) the purchase prices paid for stocks and bonds by individual households.
C) the construction of residential housing.
D) all goods and services bought by households.
E) the corrected value of housewives' services.

Question 32

Gross private domestic investment includes business:

A) purchases of capital goods, all new construction, and purchases of consumer durable goods.
B) purchases of capital goods, all new construction, and inventory investment.
C) purchases of capital goods, all new commercial construction, and inventory investment.
D) purchases of capital goods, all new residential construction, and inventory investment.
E) purchases of all types of durable goods, all new construction, and inventory investment.

Question 33

The largest component of household consumption spending is expenditures on:

A) services.
B) durable goods.
C) nondurable goods.
D) food.
E) transportation.

Question 34

Consumption spending includes:

A) durable goods, nondurable goods, and housing.
B) durable goods, nondurable goods, and imports.
C) durable goods, services, and housing.
D) durable goods, nondurable goods, and services.
E) nondurable goods, services, and housing.

Question 35

Payments to households not in exchange for goods and services currently produced are:

A) transfer payments.
B) government purchases.
C) consumption expenditures.
D) investment expenditures.

Question 36

Net exports:

A) will increase if exports of goods decline.
B) will increase if imports of goods rise.
C) in our GDP accounts permit estimation of foreign ownership of American businesses.
D) include budgetary outlays of the federal government.
E) is the net effect of the foreign trade sector on GDP.

Question 37

GDP includes:

A) the negative attributes from erosion and deforested landscape.
B) all quality improvements resulting from higher quality goods replacing inferior goods.
C) the cleaning-up expenses associated with pollution.
D) the value of leisure time.
E) the illegal activities related to the underground economy.

Question 38

Activities that are directly included in GDP accounts include:

A) the value of housework done by householders.
B) the selling of illegal drugs.
C) unreported labor in sweatshops.
D) buying a ticket to a Dodgers-Expos game on your day off.

Question 39

Personal consumption expenditures:

A) represent close to two-thirds of GDP.
B) are equal to personal income minus individual taxes.
C) include durable good purchases but not nondurable good purchases.
D) do not include any intangible consumption items.
E) include all goods and services bought by the government.

Question 40

The three components of personal consumption expenditures are:

A) durable goods, nondurable goods, and services.
B) durable goods, food, and housing.
C) durable goods, nondurable goods, and housing.
D) durable goods, services, and food.
E) durable goods, services, and transportation.

Question 41

The circular flow of economic activity is a model of the:

A) flow of goods, resources, payments, and expenditures between the sectors of the economy.
B) influence of government on business behavior.
C) influence of business on consumers.
D) role of unions and government in the economy.

Question 42

Economic values that are measured in units per period of time are referred to as:

A) stocks.
B) flows.
C) unit values.
D) dollars.

Question 43

In the circular flow model,money flows from the business sector to the household sector through the:

A) product market.
B) capital market.
C) goods market.
D) services market.
E) resource market.

Question 44

In the circular flow model,who is a seller in the factor markets and a buyer in the product markets?

A) Businesses.
B) Transnational corporations.
C) Foreign producers who export final goods and services into the U.S.
D) Households.

Question 45

In the circular flow model,which of the following is true?

A) Household spending flows into the factor markets.
B) Household spending flows back to households.
C) Household spending flows into product markets.
D) Dollar payments for factors of production flow into households.

Question 46

Resources that flow through the circular flow model include all of the following except:

A) land.
B) labor.
C) capital.
D) final goods.

Question 47

Gross domestic product is a measure of both the:

A) market value of a nation's capital assets (physical capital).
B) expenditures on and sales revenues derived from all goods and services exchanged during a period.
C) market value of the output produced during a period.
D) asset holdings of people and the happiness that they derived from the ownership of those assets.

Question 48

The lower portion of the circular flow model contains factor markets in which households provide:

A) labor, money, and machines.
B) savings, spending, and investment.
C) natural resources, labor, and capital.
D) output of all final goods and services produced.

Question 49

The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:

A) product market.
B) factor market.
C) savings market.
D) financial market.

Question 50

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

A) Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms.
B) The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets.
C) Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms.
D) The firms in the factor markets pay to households in the form of wages, interest, rent and profit-for resources demanded.
E) The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand.

Question 51

The circular flow model represents the establishment of market value for:

A) goods and services.
B) wages and salaries.
C) profits and rents.
D) all of the above.

Question 52

Which one of the following statements is true?

A) Money flows from households to firms for resources.
B) Money flows from households to foreign economies for exports.
C) Money flows from government to firms for resources.
D) Money flows from foreign economies to firms for imports.
E) Money flows from firms to households for resources.

Question 53

If Lacy buys a smoothie at the corner store,which of the following best relates this transaction to the circular flow model?

A) Goods flow from firms and money flows from households through the product markets.
B) Resources (land, labor, or capital) flows from households, and money flows from business in the product markets.
C) Income flows from the factor markets, and goods flow into the factor markets.
D) Resources flow into households, and back into the goods and services markets.

Question 54

In the circular flow model,

A) money flows from the firms to the households through the product market.
B) money flows from the households to the firms through the product market.
C) money flows from the households to the firms through the resource market.
D) money flows from the households to the firms through both the product market and the resource market.
E) resources flow to the households from the firms through the product market.

Question 55

Which one of the following statements is true in the four-sector circular model?

A) Money flows from government to households for taxes.
B) Money flows from foreign economies to households for exports.
C) Money flows from government to firms for goods and services.
D) Money flows from firms to foreign economies for exports.
E) Money flows from households to foreign economies for resources.

Question 56

Based on the circular flow model,money flows from households to businesses in:

A) factor markets.
B) product markets.
C) neither factor nor product markets.
D) both factor and product markets.

Question 57

Which one of the following statements is true?

A) Resources flow from the government to households.
B) Resources flow from firms to households.
C) Taxes flow from firms to the government.
D) Resource payments flow from firms to households
E) Imports flow from firms to foreign economies.

Question 58

The circular flow model assumes:

A) businesses and households own the factors of production.
B) businesses own the factors of production.
C) government owns the factors of production.
D) households own the factors of production.
E) firms, households, and the government own the factors of production.

Question 59

The lower portion of the circular flow model contains factor markets in which households provide:

A) output of all final goods and services produced.
B) savings, spending, and investment.
C) labor, money, and machines.
D) none of the above.

Question 60

Based on the circular flow model,goods and services flow from:

A) households to businesses in product markets.
B) businesses to households in product markets.
C) households to businesses in factor markets.
D) businesses to households in factor markets.

Question 61

The expenditure approach to GDP accounting includes:

A) wages and salaries.
B) net exports.
C) net interest.
D) corporate profit.
E) proprietors' income.

Question 62

Which one of the following would count as investment in the GDP accounts?

A) Purchase of a new airplane by an airline.
B) Purchase of a U.S. government bond.
C) Purchase of 100 shares of Wal-Mart stock.
D) Purchase of an existing house.

Question 63

Which one of the following statements is true?

A) Resources flow from the government to firms.
B) Taxes flow from foreign economies to the government.
C) Goods and services flow from households to foreign economies.
D) Resources flow from households to firms.
E) Resource payments flow from households to the government.

Question 64

Using the expenditure approach,"gross private domestic investment" is the sum of:

A) newly produced capital goods.
B) fixed investment.
C) changes in business inventories.
D) all of the above.

Question 65

The expenditure approach for the calculation of GDP includes spending on:

A) consumption, investment, durable goods and exports.
B) consumption, gross private domestic investment, government spending for goods and services, and exports.
C) consumption, gross private domestic investment, government spending for goods and services, and net exports.
D) consumption, net private domestic investment, government spending for goods and services, and net exports.
E) consumption, gross private domestic investment, all government spending including transfer payments, and net exports.

Question 66

All final goods and services that make up GDP can be expressed in the form:

A) GDP = C + I - G + (X + M).
B) GDP = C + I + G + (X + M).
C) GDP = C + I + G + (X - M).
D) GDP = C + I + (X - M).
E) GDP = C + I + G.

Question 67

Using the expenditure approach,total spending by households for durable goods,nondurable goods,and services is a category called:

A) gross private domestic investment.
B) capital consumption allowance.
C) personal consumption expenditures.
D) household investment.

Question 68

The largest component of GDP as measured by the expenditure approach is:

A) wages and salary earnings.
B) personal consumption.
C) net profits of corporations.
D) gross private investment.

Question 69

Your purchase of a Gucci purse made in Italy would be classified as:

A) both c and d
B) an investment good.
C) a durable good.
D) an import.
E) an export.

Question 70

Which of the following would count as an investment expenditure in the GDP expenditures approach?

A) General Motors hires 10 electrical engineers.
B) Boeing purchases a new metal stretching machine used to produce airplane wings.
C) Ms. Quantum buys 100 shares of Microsoft stock.
D) A large corporation spends $10,000 per month on long-distance phone charges.

Question 71

If net exports are a negative number,then:

A) we are not buying enough exports.
B) we are buying too many exports.
C) GDP will underestimated when measured using the expenditure approach.
D) we are exporting more than we are importing.
E) we are exporting less than we are importing.

Question 72

Gross private domestic investment does not include:

A) spending for new houses.
B) spending to build up inventories.
C) unintentional inventory investment.
D) spending on employee salaries.
E) spending for office supplies.

Question 73

Which of the following would be included in the government expenditures component of GDP?

A) The export of 100 fighter jets to Japan
B) Construction costs of a new public school building
C) Food stamps used by the Smith family
D) A $1,000 check issued by the federal government as part of the Pell Grant program to help college students pay for school

Question 74

Exhibit 11-1

Refer to Exhibit 11-1.What is this country's net exports?

A) $35.
B) $-35.
C) $379.
D) $-379.

Question 75

In the four-sector circular flow model,households will use their incomes to do all but which one of the following?

A) Save.
B) Pay taxes.
C) Buy domestic goods and services.
D) Buy imported goods and services.
E) Invest.

Question 76

Which one of the following is not a component of GDP,as measured using the expenditure approach?

A) Personal consumption.
B) Exports.
C) Durable goods.
D) Government spending.
E) Interest.

Question 77

GDP does count:

A) state and local government purchases.
B) spending for new homes.
C) changes in inventories.
D) none of the above.
E) all of the above.

Question 78

To construct GDP,exports:

A) and imports must be subtracted.
B) and imports must be included.
C) must be included and imports must be ignored.
D) must be included and imports must be subtracted.

Question 79

Exhibit 11-1

Refer to Exhibit 11-1.What is this country's gross domestic product?

A) $1,225.
B) $1,305.
C) $1,365.
D) $1,440.

Question 80

Durable and nondurable goods and services lumped together in the expenditure approach to measuring GDP are called:

A) Personal consumption.
B) Gross private domestic investment.
C) Government spending.
D) Inventory.
E) Employee compensation.