Question 1

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 overstate the true value of output. This is why only final goods are counted in GDP to avoid double counting. The other answer choices do not accurately describe double counting in GDP accounting.

Question 2

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 3

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 totaling the market values of all final goods and services or the value added at all stages of production. Option B correctly captures both these methods of GDP calculation. Option A is incorrect because it includes intermediate goods which are not included in GDP calculation. Option C is incorrect because it only includes intermediate goods and not final goods and services. Option D is incorrect because it only includes labor and not all factors of production that contribute to GDP.

Question 4

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 will give us the final value of the good. This is because value added refers to the increase in value that is created at each stage of production. Thus, adding up the value added at every stage will give us the total value of the final product.

Question 5

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 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 gross domestic product (GDP) only measures the production within a country's borders. Therefore, to calculate GNP, we need to add the income earned by China's residents from the rest of the world and subtract payments made by China's residents to the rest of the world from its GDP.

Question 7

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

GNP measures the market value of all final goods and services produced by residents and firms of a nation regardless of the location of production. It does not include intermediate goods and services, and it only counts goods and services produced by residents and firms of a nation, regardless of their location.

Question 8

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

GDP measures the production that takes place within a country's borders regardless of who owns the factors of production, while GNP measures the production of the factors of production owned by a country's residents, regardless of where it occurs in the world. This means that GNP will include income earned by a country's residents from their investments or work abroad, while GDP will not.

Question 9

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

The definition given in the question accurately describes value added, which is calculated by subtracting the cost of intermediate goods and services from the total value of a firm's output. Profit is what remains after subtracting all expenses, not just intermediate costs. The markup rate is the percentage by which a firm increases the cost of goods sold to set the selling price. The marginal product is the change in output resulting from one additional unit of input.

Question 10

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

Pfeister Inc. is located in the United States, so its output will be counted in the U.S. GDP, regardless of the fact that it uses machinery imported from Germany.

Question 11

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

An intermediate good or service is a good or service that is used as an input in the production of final goods or services. Lumber is an example of an intermediate good as it is used by a construction company to produce a final product (like a building or a house). The purchase of a new yacht by a boating enthusiast (A) is an example of a final good or service. Salaries paid to military personnel (C) and the salary earned by a construction worker (D) are examples of factor payments.

Question 12

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

Question 13

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 14

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

The total value added in the production of a model airplane can be calculated by adding up the value added at each stage:
Stage 1: $5
Stage 2: $3
Stage 3: $4
Stage 4: $9
Total value added = $5 + $3 + $4 + $9 = $21. Therefore, the best choice is C.

Question 15

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 the total value of all final goods and services produced within a country's borders during a given period (usually a year). Option A refers only to industrial goods and option C refers to noneconomic transactions, neither of which are included in GDP. Option D refers to non-monetary transactions, which are also not included in GDP.

Question 16

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions 57-60.
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, indicating a trade deficit.

Question 17

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 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. In other words, it is the value that a firm adds to its inputs through its production process. Option A talks about productivity gains from increasing capital-labor ratio, which is related to productivity, but not value added. Option B is the definition of profit, not value added. Option D talks about cost savings from an efficient production method, which is related to cost, but not value added.

Question 18

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 the production of U.S. citizens and companies working abroad, as well as foreign-owned companies operating in the U.S. It is different from the gross domestic product (GDP), which measures the market value of final goods and services sold in a country regardless of the nationality of the factors of production used to produce them.

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 value added by the sale of a model airplane to the customer is _____.
A) $2
B) $3
C) $4
D) $5

Accepted Answer

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

Question 20

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...

Quiz 6: Measuring Total Output and Income

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 value added by the extraction of the crude oil is _____.

GDP can be calculated by totaling either the:

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

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 _____.

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

Which of the following statements about GNP is correct?

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

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 _____.

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:

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

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 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 value added in the production of a model airplane is _____.

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

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions 57-60. Table 6-2 -Refer to Table 6-2. Net exports are negative. This would mean that:

Value added is defined as:

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

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 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 _____.