Question 1

Undistributed profits_{-------------}counted as part of GDP because_{-------------} A)are; they can be used to buy other goods. B)are; firms are required to pay corporate income taxes on them. C)are ; they are considered income paid to households and loaned back to firms. D)are not; they are considered an intermediate good. E)are not; households are not paid by the firms.

Accepted Answer

Undistributed profits are counted as part of GDP because they are considered income paid to households and then loaned back to firms, reflecting the income generated by production.

Question 2

Janet calculated the GDP growth rates for France between 2012 and 2013. Using 2012 prices for both years, GDP increased 5 percent. Using 2013 prices for both years, GDP increased 1 percent. hence the chained-price method will calculate that between these years, real GDP increased by
A)5 percent.
B)4 percent.
C)1 percent.
D)6 percent.
E)3 percent.

Accepted Answer

The chained-price method averages the growth rates calculated using different base years. Here, it averages the 5% growth rate using 2012 prices and the 1% growth rate using 2013 prices, resulting in a 3% increase.

Question 3

Real GDP measures the value of goods and services produced in a given year using
A)prices of that same year.
B)base year prices.
C)government approved prices.
D)no prices.
E)future prices.

Accepted Answer

Real GDP measures the value of goods and services produced in a given year using base year prices to account for inflation and provide a more accurate reflection of an economy's size and how it's growing over time.

Question 4

Which of the following is true regarding the measurement of GDP?
A)Consumption and investment are used in the income approach to GDP.
B)Investment and wages are expenditures , and are therefore are used in the expenditure approach to GDP.
C)Wages and consumption are used in the expenditure approach to GDP.
D)Government expenditure is only counted in the income approach to GDP.
E)Wages and profit income are used in the income approach to GDP.

Accepted Answer

The income approach to GDP includes wages and profit income as it calculates GDP by summing all incomes earned in the production of goods and services.

Question 5

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players Produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals
A)$1,050,000.
B)$900,000.
C)$945,000.
D)$1,000,000.
E)an amount that cannot be determined without information about nominal GDP in 2008.

Accepted Answer

The answer of The base year is 2011. A country...

Question 6

How are final goods and services valued when measuring nominal GDP?
A)at producer cost
B)at base year prices
C)at factor market prices
D)at foreign exchange parity
E)at current market prices

Accepted Answer

Nominal GDP is measured using the current market prices of final goods and services produced within a country during a specific period.

Question 7

Which of the following goods and services are omitted from GDP?
A)capital goods
B)expenditure on resources used to protect the environment
C)government weather satellites
D)household production
E)services such as hair stylings

Accepted Answer

Household production is not included in GDP because it involves goods and services produced and consumed within the home, without any market transaction.

Question 8

In calculating GDP, we must
A)add the market value of imports and subtract the market value of exports.
B)add the market value of exports and subtract the market value of imports.
C)exclude net exports of goods and services (NX).
D)subtract the market value of imports, because these goods are produced in a country other than the United States, and subtract the market value of exports, because these goods are consumed in a country other than the United States.
E)add the value of the goods produced outside of the United States by American firms.

Accepted Answer

GDP is calculated by adding the market value of exports and subtracting the market value of imports to account for net exports, which reflects the value of goods and services produced domestically.

Question 9

$\begin{array}{lllll}&\text { Data for } 2009&&\text { Data for } 2010\
\hline\text { Item}&\text{ Quantity}&\text{  Price}&\text{  Quantity }&\text{ Price }\
\hline\text { Bread } & 50 & \$ 4.00 & 70 & \$ 3.00 \
\text { Soda } & 50 & \$ 5.00 & 50 & \$ 6.00 \
\hline
\end{array}$
The table above gives the production and prices for a small nation that produces only bread and soda. 
-The base year is 2010. What is real GDP in 2010?
A)$1080
B)$530
C)$210
D)$510
E)$300

Accepted Answer

The answer of \(\begin{array}{lllll}&\text { Data for } 2009&&\text {...

Question 10

U.S. real GDP
A)is not as accurate as nominal GDP when measuring standard of living changes over time.
B)precisely measures the improving standard of living in the United States.
C)measures the change in the price level over time.
D)includes the value of underground production but excludes the value of leisure time.
E)excludes the value of underground production and leisure time.

Accepted Answer

Real GDP excludes the value of underground production and leisure time, focusing on the value of goods and services produced in the economy, adjusted for inflation.

Question 11

In 2009 in the United States, net domestic product at factor cost was $11,091 billion. Additionally, rent was $2,000 billion, profits were $1,000 billion, and interest was $358 billion. Hence wages were
A)$9,091 billion.
B)$12,091 billion.
C)$10,091 billion.
D)$8,091 billion.
E)$7,733 billion.

Accepted Answer

Net domestic product at factor cost is the sum of all factor incomes: rent, profits, interest, and wages. Therefore, wages = $11,091 billion - ($2,000 billion + $1,000 billion + $358 billion) = $7,733 billion.

Question 12

Consumption expenditure includes spending
A)by governments when they are buying goods and services that consumers also buy.
B)by households.
C)on intermediate goods and services by firms.
D)by households and spending on office supplies by firms.
E)on office supplies by firms.

Accepted Answer

Consumption expenditure refers to the spending by households on goods and services for their own use.

Question 13

Economists define investment to include purchases of
A)capital goods, such as tools, instruments, and buildings.
B)capital goods, household durable goods, and inventories.
C)capital goods and inventories.
D)capital goods, equity stocks, and inventories.
E)capital goods, equity stocks, and bonds.

Accepted Answer

Economists define investment as the purchase of capital goods and inventories, which are used to produce goods and services in the future. This definition does not include financial investments like stocks and bonds.

Question 14

Which of the following is NOT included in the expenditure approach to calculating GDP?
A)consumption expenditure
B)net exports of goods and services
C)government expenditures on goods and services
D)investment
E)wages

Accepted Answer

Wages are not included in the expenditure approach; they are part of the income approach to calculating GDP.

Question 15

A business cycle has two turning points, which are the
A)peak and recession.
B)recession and trough.
C)peak and expansion.
D)trough and peak.
E)expansion and recession.

Accepted Answer

The two turning points in a business cycle are the peak, where the economy transitions from expansion to contraction, and the trough, where it transitions from contraction to expansion.

Question 16

The value of leisure time is
A)directly included in GDP but, in recent years, has become a decreasing large part of GDP.
B)zero.
C)included in GDP and, in recent years, has become an increasing large part of GDP.
D)excluded from GDP.
E)directly included in GDP and, in recent years, has not changed much as a fraction of GDP.

Accepted Answer

Leisure time is not directly included in GDP calculations because GDP measures the market value of all final goods and services produced, and leisure time does not have a market transaction or price associated with it.

Question 17

Last year in Candamica, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion. Hence total expenditure was
A)$34.5 billion.
B)$36.5 billion.
C)$34 billion.
D)$24.5 billion.
E)undetermined without information about imports.

Accepted Answer

The answer of Last year in Candamica, consumption expenditure was...

Question 18

Real GDP measures the value of goods and services produced in a given year valued using
A)base year prices.
B)prices that prevail the same year.
C)real rather than nominal prices.
D)future prices.
E)no prices.

Accepted Answer

Real GDP measures the value of goods and services produced in a given year using prices from a base year to account for inflation and provide a more accurate reflection of an economy's size and how it's growing over time.

Question 19

In one year, a firm increases its production by $9 million and increases sales by $8 million. All other things in the economy remaining the same, which of the following is true?
A)GDP increases by $8 million and inventory investment decreases by $1 million.
B)Inventory investment decreases by $1 million.
C)GDP increases by $9 million and inventory investment increases by $1 million.
D)GDP increases by $17 million.
E)GDP increases by $8 million and investment increases by $1 million.

Accepted Answer

GDP increases by the total production, which is $9 million. The unsold production ($1 million) is added to inventory, thus increasing inventory investment by $1 million.

Question 20

Depreciation is
A)part of net domestic product at factor cost.
B)the decrease in the purchasing power of a dollar because of inflation.
C)fall in the value of an exchange rate.
D)part of consumption expenditure.
E)the decrease in the value of capital resulting from its use and obsolescence.

Accepted Answer

Depreciation refers to the decrease in the value of capital assets over time due to wear and tear, usage, and obsolescence.

Quiz 5: GDP: a Measure of Total Production and Income

Undistributed profits-------------counted as part of GDP because-------------

Janet calculated the GDP growth rates for France between 2012 and 2013. Using 2012 prices for both years, GDP increased 5 percent. Using 2013 prices for both years, GDP increased 1 percent. hence the chained-price method will calculate that between these years, real GDP increased by

Real GDP measures the value of goods and services produced in a given year using

Which of the following is true regarding the measurement of GDP?

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players Produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

How are final goods and services valued when measuring nominal GDP?

Which of the following goods and services are omitted from GDP?

In calculating GDP, we must

U.S. real GDP

In 2009 in the United States, net domestic product at factor cost was $11,091 billion. Additionally, rent was $2,000 billion, profits were $1,000 billion, and interest was $358 billion. Hence wages were

Consumption expenditure includes spending

Economists define investment to include purchases of

Which of the following is NOT included in the expenditure approach to calculating GDP?

A business cycle has two turning points, which are the

The value of leisure time is

Last year in Candamica, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion. Hence total expenditure was

Real GDP measures the value of goods and services produced in a given year valued using

In one year, a firm increases its production by $9 million and increases sales by $8 million. All other things in the economy remaining the same, which of the following is true?

Depreciation is

Undistributed profits_{-------------}counted as part of GDP because_{-------------}