Question 1

In a small economy, consumption spending is $6,000, government purchases are $1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is gross domestic product?

Accepted Answer

The answer of In a small economy, consumption spending is...

Question 2

Between 2017 and 2018, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?

Accepted Answer

Exports are a component of GDP and an increase in exports will increase GDP by the same amount, which is $8 billion. Similarly, imports are a component of GDP and a decrease in imports will increase GDP by the same amount, which is $8 billion. Therefore, net exports will increase GDP by $16 billion, as the economy is exporting more goods and services and importing less.

Question 3

________ is/are the payment for the factor of production ________.

Accepted Answer

The answer of ________ is/are the payment for the factor...

Question 4

Which of the following would not be included in the expenditure category called investment expenditures?

Accepted Answer

Investment expenditures in economic terms refer to spending on capital goods, not financial investments like stocks. Purchases of shares of preferred stock are financial transactions and do not count as investment in the context of GDP calculations.

Question 5

Consumption expenditures do not include household purchases of

Accepted Answer

Consumption expenditures are the purchases made by households for goods and services. While medical care, education, and durable goods are included in consumption expenditures, new houses fall under the category of investment expenditures.

Question 6

Which of the following equations correctly measures GDP in an economy?

Accepted Answer

GDP (Gross Domestic Product) is calculated as the sum of consumption (C), investment (I), government spending (G), and net exports (NX), which is exports (X) minus imports (M). Therefore, the correct formula is GDP = C + I + G + NX.

Question 7

Table 19-6
 
-Refer to Table 19-6. Consider the table of production and price statistics for a small economy in 2018. If the economy only produces the four goods listed below, what is GDP for 2018?

Accepted Answer

GDP is calculated by summing the products of the quantities and prices of all goods produced. The correct calculation results in $428,000.

Question 8

Total income in an economy is equal to

Accepted Answer

Total income in an economy is the sum of wages, interest, rent, and profit. This is known as factor income and is the income earned by individuals as a result of their involvement in the factors of production. GDP (A) includes both factor income and net exports, but it is not equivalent to total income. Income minus taxes (B) only represents the income available to individuals after taxes have been deducted, not total income. Firm revenues (D) represent the total sales revenue of a company and do not necessarily represent the total income of an economy.

Question 9

Which of the following is considered a durable good?

Accepted Answer

A durable good is a product that lasts for a long time and is used repeatedly. Medical care, clothing, and food are all considered non-durable goods because they are consumed fairly quickly and are not used repeatedly. A washing machine, on the other hand, is a product that is designed to last for several years and is used repeatedly, making it a durable good.

Question 10

Investment spending includes spending on

Accepted Answer

Investment spending refers to the purchase of capital goods, such as machinery, equipment, and tools, as well as changes in business inventories. Therefore, the correct answer is C. Stocks are financial assets and do not count as investment spending. Food and transfer payments are not related to investment spending.

Question 11

Which of the following would result in GDP for an economy equal to $10 trillion?

Accepted Answer

GDP is calculated as C + I + G + NX. For option C: $5T + $5T + $2T - $2T = $10T.

Question 12

Assuming that the United States is the domestic economy, ________ are goods and services produced by ________ and purchased by ________.

Accepted Answer

Imports are goods and services produced by foreign countries and purchased by the United States.

Question 13

Which component of consumption spending is the greatest in a typical industrialized economy?

Accepted Answer

In a typical industrialized economy, the largest component of consumption spending is services. This includes things like healthcare, education, entertainment, and transportation. Durable goods (like cars and appliances) and nondurable goods (like food and clothing) are also important components, but services tend to make up the largest share of consumer spending. New housing is not considered part of consumption spending, as it is typically classified as investment spending.

Question 14

Which of the following are not considered part of government purchases?

Accepted Answer

Welfare benefits are transfer payments, not government purchases. The other options involve actual government purchases.

Question 15

Government spending ________ is included in gross domestic product.

Accepted Answer

Government spending at all levels (federal, state, and local) is included in gross domestic product, not just spending on defense goods.

Question 16

To calculate GDP using the value-added method, one would add up

Accepted Answer

The value-added method involves adding up the value added by each firm involved in the production of final goods and services. This means adding up the value of the final product minus the value of any intermediate goods or services used in its production. By adding up the value added at each stage of production, we can avoid double-counting the value of intermediate goods and services.

Question 17

In a small economy, gross investment is $1,500, consumption spending is $6,000, net investment is $200, government purchases are $1,500, exports are $2,000 and imports are $1,000. What is GDP for this economy?

Accepted Answer

The answer of In a small economy, gross investment is...

Question 18

The largest component of spending in GDP is

Accepted Answer

Consumption spending, which includes spending by households on goods and services, is the largest component of spending in GDP. This is because consumer spending makes up a significant portion of the overall economy, as people purchase necessities such as food, clothing, and housing, as well as discretionary items like entertainment and travel. Investment spending (B), government spending (C), and net export spending (D) also contribute to GDP, but to a lesser extent than consumption spending.

Question 19

Which of the following would increase gross private domestic investment in an economy?

Accepted Answer

Gross private domestic investment includes business investments in equipment and structures, residential construction, and changes in business inventories. An increase in Apple's inventory directly contributes to this measure, reflecting higher investment levels. Choices A and B do not directly affect gross private domestic investment as they involve stock ownership and employment, respectively, rather than investment in physical assets. Choice D involves government spending, not private investment.

Question 20

Consumption spending is $4.5 billion, gross private domestic investment is $3 billion, and government purchases are $2 billion. If GDP is $14 billion, which of the following could be true regarding exports and imports in the economy?

Accepted Answer

The answer of Consumption spending is $4.5 billion, gross private...

Quiz 19: Gdp: Measuring Total Production and Income