Question 1

A German citizen buys an automobile produced in the United States by a Japanese company.As a result,

Accepted Answer

When a German citizen buys an automobile produced in the United States by a Japanese company, U.S. net exports increase and U.S. GDP increases because the automobile is considered an export for the U.S. However, Japanese GNP also increases since the Japanese company that produced the car is earning revenue from its sale. German net exports decrease because the purchase counts as an import for Germany. However, neither German GNP nor German GDP are affected since the purchase was made by a private citizen and not a business that would contribute to those measures. Therefore, the best choice is C.

Question 2

Net exports equal

Accepted Answer

Net exports is defined as the value of a country's exports minus the value of its imports. Therefore, net exports equal exports minus imports.

Question 3

Transfer payments

Accepted Answer

Transfer payments are payments made by the government to households or individuals without any exchange of goods or services. These payments alter household income, but they do not reflect the economy's production as they are not payments made in exchange for currently produced goods or services. Therefore, all three statements are correct.

Question 4

A transfer payment is a payment made by

Accepted Answer

Transfer payments are payments made by the government, and they are not made in exchange for a currently produced good or service. They are usually made as a form of income redistribution, such as welfare payments or social security. Choices A, B, and C all involve a transaction between two parties, but transfer payments involve only one party (the government) making a payment to another.

Question 5

Which of the following subcomponents of GDP can be either positive or negative?

Accepted Answer

Inventory investment can be either positive or negative depending on whether firms are accumulating or depleting their inventories. Exports and government purchases are usually positive and cannot be negative.

Question 6

Unemployment compensation is

Accepted Answer

Unemployment compensation is a transfer payment; it is a transfer of income from the government to individuals who are unemployed. Transfer payments are not included in GDP calculations because they do not represent new production of goods or services in the economy.

Question 7

If a U.S.citizen buys a dress made in Nepal by a Nepalese firm,then

Accepted Answer

When a U.S. citizen buys a dress made in Nepal by a Nepalese firm, it increases consumption in the United States. However, since it is an import, it decreases net exports. This means that the value of goods imported exceeds the value of goods exported, which decreases GDP. However, because the dress was not made in the United States and the firm is a Nepalese firm, the impact on the US GDP is insignificant. Therefore, the correct answer is B.

Question 8

Consider the following three items of spending by the government: (i)the federal government pays a $500 unemployment benefit to an unemployed person; (ii)the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii)the city of Bozeman,Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman.Which of these payments contributes directly to government purchases in the national income accounts?

Accepted Answer

The answer of Consider the following three items of spending...

Question 9

To encourage formation of small businesses,the government could provide subsidies;these subsidies

Accepted Answer

Subsidies are considered transfer payments because they are payments for which no goods or services are exchanged directly. They are not counted in GDP as they do not reflect the production of goods or services.

Question 10

After the terrorist attacks on September 11,2001,governments within the United States raised expenditures to increase security at airports.These purchases of goods and services are

Accepted Answer

Government expenditures on goods and services are included in GDP, regardless of whether they are paid for with taxes or borrowed funds. Therefore, the purchases made to increase security at airports following the September 11th attacks would be included in GDP.

Question 11

When a U.S.citizen buys $500 of Chinese-made parts for a motorcycle,

Accepted Answer

The answer of When a U.S.citizen buys $500 of Chinese-made...

Question 12

Transfer payments are

Accepted Answer

Transfer payments are not included in GDP because they are not payments for currently produced goods or services. Transfer payments are payments made by the government or private organizations to individuals or other organizations without the exchange of goods or services. They are not a value-addition to the economy and therefore are not counted in the GDP. Examples of transfer payments include Social Security, unemployment benefits, and welfare payments.

Question 13

If a U.S.citizen buys a television made in Korea by a Korean firm,then

Accepted Answer

The answer of If a U.S.citizen buys a television made...

Question 14

If a U.S.company buys an electrical generator made in Japan by a Japanese firm,and the Japanese firm uses the payment to buy stocks issued by a U.S.company then

Accepted Answer

The U.S. imports increase due to the purchase of the generator from Japan, but U.S. exports do not increase as the transaction only involves the purchase of a good from another country.

Question 15

Which of the following items is counted as part of government purchases?

Accepted Answer

Government purchases refers to the spending by government on goods and services, such as the tree-trimming services in option B. Social Security payments (option A) and assistance payments (option C) are classified as transfer payments and not considered government purchases.

Question 16

Social Security payments are

Accepted Answer

Social Security payments are excluded from GDP because they do not reflect the economy's production. GDP measures the total value of goods and services produced within a country's borders, and Social Security payments are considered transfer payments rather than income earned as a result of productive activity.

Question 17

Which of the following represents a transfer payment?

Accepted Answer

A transfer payment is a payment made by the government to an individual, without any goods or services being exchanged in return. Social Security checks fall under this category. The other options involve the exchange of money for goods or services.

Question 18

A U.S.citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens.In which of the following components of U.S.GDP is this transaction accounted for?

Accepted Answer

The transaction involves consumption (purchase of the tea kettle) and imports (the kettle was manufactured and imported from China), so it is accounted for in both components of U.S. GDP.

Question 19

The U.S.government pays an economist at the U.S.Department of Commerce $50,000 in salary in 2006.The economist then retires.In 2007,the government pays him $30,000 in retirement benefits.Which of the following is correct?

Accepted Answer

The 2006 payment is included in 2006 GDP as government purchases because the economist was still actively working for the government that year. However, the 2007 payment is not included in 2007 GDP because it is a transfer payment, not a purchase of goods or services. Transfer payments are not counted in GDP because they do not represent new production of goods or services.

Question 20

If net exports is a negative number for a particular year,then

Accepted Answer

Net exports represent the difference between the value of goods and services a country exports and the value of goods and services it imports. When net exports are negative, it means that the value of foreign goods purchased (imports) exceeded the value of goods sold to foreigners (exports) during the year.

Quiz 23: Measuring a Nations Income