Question 1

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The final value of a model airplane is _____.
A) $5
B) $21
C) $56
D) $77

Accepted Answer

The answer of Table 6-3 shows data relating to the...

Question 2

The value of GDP differs from the value of GNP because:
A) net exports are excluded from GDP but included in GNP.
B) production in a country usually employs factors of production owned by residents of other countries.
C) production in a country employs only factors of production owned by its residents.
D) government purchases are excluded from GDP but included in GNP.

Accepted Answer

GNP includes the value of production using factors of production owned by a country's residents, whether that production takes place within the country or abroad. Therefore, GNP is higher than GDP, as GDP only considers production within a country's borders.

Question 3

Double counting in GDP accounting:
A) refers to the fact that accountants check their figures twice.
B) refers to the inclusion of both intermediate goods and final goods in GDP.
C) is the method of using both income and expenditures in measuring GDP.
D) is the method of calculating the GDP by including the net incomes received by residents of a nation living abroad.

Accepted Answer

Double counting in GDP accounting refers to the inclusion of both intermediate goods and final goods in GDP, which can result in counting the same value multiple times.

Question 4

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The total value added in the production of a model airplane is _____.
A) $16
B) $17
C) $21
D) $77

Accepted Answer

To calculate the total value added, we need to add up the value added at each stage.

For stage 1: $4 - $2 = $2 (value added)
For stage 2: $6 - $4 = $2 (value added)
For stage 3: $8 - $6 = $2 (value added)
For stage 4: $3 - $8 = -$5 (value added)

Note that for stage 4, there is a negative value added because the cost of materials increased by $8 but the production value only increased by $3, resulting in a loss.

Therefore, the total value added is $2 + $2 + $2 - $5 = $1, which is answer choice C.

Question 5

Value added is defined as:
A) the value of productivity gains that arise when a firm increases its capital-labor ratio.
B) the difference between the total cost of production of a product and the total revenues earned from the sale of the product.
C) the amount by which the value of a firm's final output exceeds the total value of the intermediate goods and services used to produce the good.
D) the cost savings that a firm enjoys when it reduces the cost of its resources by employing a more efficient production method.

Accepted Answer

Value added is the difference between the total value of a product and the cost of intermediate goods and services used in its production. It represents the value that a firm adds to the production process, and can be a measure of the firm's contribution to the economy. Option A refers to productivity gains, but does not specifically relate to value added. Option B refers to profit margin, but does not take into account the value of the inputs used in production. Option D refers to cost savings, which are not necessarily related to value added.

Question 6

China's gross national product can be calculated from China's GDP by:
A) adding the value of output produced by China's residents and sold abroad.
B) adding the income earned by China's residents from the rest of the world and subtracting payments made by China's residents to the rest of the world.
C) subtracting the value of output produced by China's residents and sold abroad.
D) subtracting the income earned by China's residents from the rest of the world and adding payments made by China's residents to the rest of the world.

Accepted Answer

Gross national product (GNP) is the total value of goods and services produced by a country's residents, regardless of their location, while GDP only includes the value of goods and services produced within a country's borders. Therefore, to calculate GNP, we need to add the income earned by a country's residents from the rest of the world (such as wages, profits, and dividends) and subtract payments made by a country's residents to the rest of the world (such as interest on debts, royalties, and foreign aid). This is represented by choice B.

Question 7

Pfeister Inc., a firm located in New York, is a German manufacturer of heavy-duty glass doors. It uses glass-cutting machinery imported from Germany in production. The firm's output of glass doors will be counted in:
A) U.S. GDP.
B) U.S. domestic private investment.
C) Germany's GDP.
D) Germany's net exports.

Accepted Answer

The output of Pfeister Inc. will be counted in the U.S. GDP since the firm is located in the United States and is producing goods within the country's borders. It does not qualify as domestic private investment since it is not an investment in the form of machinery, buildings, or other physical capital made by a domestic firm within the country. It would also not be counted in Germany's GDP since the firm is located outside of Germany. It would only count towards Germany's net exports if the firm were exporting its products to Germany.

Question 8

The gross domestic product of an economy is defined as the:
A) total value of all industrial goods produced and sold during a given period.
B) total value of all final goods and services produced during a given period.
C) value of all noneconomic transactions made among consumers during a particular period.
D) value of all non-monetary transactions between consumers and firms during a given period.

Accepted Answer

Gross domestic product (GDP) is a measure of the total economic output of a country. It is calculated as the total value of all final goods and services produced within a country's borders during a given period of time, typically a year. Option A is only focused on industrial goods, while options C and D are not related to the calculation of GDP.

Question 9

Which of the following statements about GNP is correct?
A) It measures the market value of all goods and services, both final and intermediate, produced by resources located within a nation regardless of who owns those resources.
B) It measures the market value of all goods and services, both final and intermediate, produced by residents and firms regardless of the location of production.
C) It measures the market value of all final goods and services produced by residents and firms of a nation regardless of the location of production.
D) It measures the market value of all final goods and services produced by resources located within a nation regardless of who owns those resources.

Accepted Answer

The answer of Which of the following statements about GNP...

Question 10

If we sum up the value added at every stage of production of a good, we will get:
A) the total cost of the labor used to produce the good.
B) the prices of the factors of production used to produce the good.
C) the final value of the good.
D) the capital-labor ratio.

Accepted Answer

Summing up the value added at every stage of production of a good gives us the final value of the good. This is because value added refers to the increase in the value of the good at each stage of production, which ultimately results in the final value of the good.

Question 11

GDP can be calculated by totaling either the:
A) market values of all final goods and services or the total volume of all intermediate goods at all stages of production.
B) market values of all final goods and services or the value added at all stages of production.
C) total sales values of all intermediate goods at all stages of production or the value added at all stages of production.
D) market values of all final goods and services or the values added by labor at all stages of production.

Accepted Answer

GDP is calculated by either adding up the market values of all final goods and services or the value added at all stages of production. Option B correctly states this as one of the options. The other options either include intermediate goods, which are not included in GDP calculations, or focus solely on labor, which is just one factor in the value added at each stage of production.

Question 12

A resident of San Diego, California, owns and operates a garage across the U.S.-Mexican border in Tijuana, Mexico. The value of the garage services produced at the shop would be counted in _____.
A) U.S. GNP
B) Mexico's GNP
C) U.S. GDP
D) U.S.'s net exports

Accepted Answer

The answer of A resident of San Diego, California, owns...

Question 13

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The value added by the extraction of the crude oil is _____.
A) $2
B) $3
C) $4
D) $5

Accepted Answer

The answer of Table 6-3 shows data relating to the...

Question 14

The gross national product (GNP) of the U.S. measures:
A) the market value of final goods and services sold in the U.S. during a particular period.
B) the market value of final goods and services produced using factors of production owned by U.S. residents during a particular period.
C) the market value of goods and services produced anywhere in the world, by U.S. citizens and foreigners residing in the U.S. during a particular period.
D) the market value of goods and services produced in the U.S. by foreigners residing in the U.S. during a particular period.

Accepted Answer

The gross national product (GNP) of the U.S. measures the market value of final goods and services produced using factors of production owned by U.S. residents during a particular period. This includes production that takes place both domestically and abroad.

Question 15

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions .
Table 6-2
 
-Refer to Table 6-2. Net exports are negative. This would mean that:
A) imports are larger than exports and there is a trade surplus.
B) exports are larger than imports and there is a trade surplus.
C) imports are larger than exports and there is a trade deficit.
D) exports are larger than imports and there is a trade deficit.

Accepted Answer

Net exports being negative means that exports are smaller than imports, which is a trade deficit.

Question 16

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The value added by the sale of a model airplane to the customer is _____.
A) $2
B) $3
C) $4
D) $5

Accepted Answer

The value added is calculated as the final sale price minus the cost of intermediate goods. If the model airplane is sold for $10 and the intermediate goods cost $6, the value added is $10 - $6 = $4.

Question 17

Which of the following is an example of an intermediate good or service?
A) The purchase of a new yacht by a boating enthusiast
B) The purchase of lumber by a construction company
C) The salaries paid to military personnel
D) The salary earned by a construction worker

Accepted Answer

The purchase of lumber by a construction company is an example of an intermediate good or service because the lumber is not the final product being sold to consumers. It is being used as a component to build a final product, such as a house or building. The other options are either final goods/services (purchase of a yacht) or factor payments (salaries earned/paid).

Question 18

The total volume of sales in an economy is much larger than the value of GDP because:
A) GDP understates the value of total output.
B) the output approach to measuring GDP excludes intermediate transactions.
C) GDP includes transfer payments.
D) total sales include sales to foreign countries but GDP excludes sale of output to foreign countries.

Accepted Answer

The answer of The total volume of sales in an...

Question 19

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The total sales value of all transactions involved in the production of a model airplane is _____.
A) $5
B) $21
C) $56
D) $77

Accepted Answer

The total sales value is the sum of all transactions in the production process, which is $77.

Question 20

The amount by which the value of a firm's output exceeds the value of the goods and services that the firm purchases from other firms is called _____.
A) profit
B) value added
C) the markup rate
D) the marginal product

Accepted Answer

Value added is the difference between the value of a firm's output and the cost of the intermediate goods and services purchased from other firms. It represents the contribution of the firm to the economy and is used to measure a firm's productivity. A firm's profit is the revenue earned minus all costs, including intermediate goods, so it does not exclusively represent the amount by which the firm's output exceeds the value of intermediate goods. The markup rate is the percentage by which the price of a good exceeds its cost, and the marginal product is the additional output that is produced when one additional unit of input is added. Neither of these concepts represents the difference between the value of a firm's output and the cost of intermediate goods.

Quiz 6: Measuring Total Output and Income

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The final value of a model airplane is _____.

The value of GDP differs from the value of GNP because:

Double counting in GDP accounting:

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The total value added in the production of a model airplane is _____.

Value added is defined as:

China's gross national product can be calculated from China's GDP by:

Pfeister Inc., a firm located in New York, is a German manufacturer of heavy-duty glass doors. It uses glass-cutting machinery imported from Germany in production. The firm's output of glass doors will be counted in:

The gross domestic product of an economy is defined as the:

Which of the following statements about GNP is correct?

If we sum up the value added at every stage of production of a good, we will get:

GDP can be calculated by totaling either the:

A resident of San Diego, California, owns and operates a garage across the U.S.-Mexican border in Tijuana, Mexico. The value of the garage services produced at the shop would be counted in _____.

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The value added by the extraction of the crude oil is _____.

The gross national product (GNP) of the U.S. measures:

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions . Table 6-2 -Refer to Table 6-2. Net exports are negative. This would mean that:

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The value added by the sale of a model airplane to the customer is _____.

Which of the following is an example of an intermediate good or service?

The total volume of sales in an economy is much larger than the value of GDP because:

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The total sales value of all transactions involved in the production of a model airplane is _____.

The amount by which the value of a firm's output exceeds the value of the goods and services that the firm purchases from other firms is called _____.