Question 1

In 2016,Ford Motor Company's sales were rising.These events were caused by

Accepted Answer

Sales were rising in 2016, indicating an increase in demand. In turn, this suggests that the economy was expanding, as consumers had more disposable income to spend on cars. The other options (A, C, and D) do not provide a plausible explanation for the increase in sales.

Question 2

In calculating gross domestic product,the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced.This means that the BEA

Accepted Answer

The Bureau of Economic Analysis uses the market value approach to calculating GDP, which means that they value goods and services at their market prices, multiply them by the quantity produced, and then add them up. This approach is used to account for inflation and changes in prices over time. The sum includes the final goods and services produced, which means that only finished products are included in the calculation, and intermediate products or inputs are not.

Question 3

Macroeconomics seeks to understand

Accepted Answer

Macroeconomics focuses on the broader aspects of the economy, such as economic growth, business cycles, and inflation. The other options listed are more related to microeconomics, which focuses on individual markets and firms.

Question 4

The nominal GDP of the U.S.in 2016 was approximately $18.6 trillion.This means that

Accepted Answer

Nominal GDP represents the total value of output produced in an economy, but it can also be calculated as the total income earned by firms and households, or the total spending on goods and services. Therefore, all three statements (A, B, and C) are true.

Question 5

Which of the following transactions represents the purchase of a final good?

Accepted Answer

A final good is a good that is purchased by the end-consumer and is not used for further production. In this case, your father buying a John Deere riding lawn mower is a purchase of a final good as he is buying it for personal use and not for further production.

Question 6

Macroeconomics,as opposed to microeconomics,includes the study of what determines the level of

Accepted Answer

Macroeconomics deals with the broad aspects of the economy as a whole, including overall employment levels, inflation, and national economic growth. Therefore, the study of what determines the level of employment in the economy would be a part of macroeconomics.

Question 7

Value added equals the market price of the firm's product minus

Accepted Answer

Value added is the difference between the market price of the firm's product and the cost of intermediate goods used in its production. It does not include wages and salaries, all factors of production, or depreciation on plant and equipment.

Question 8

Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?

Accepted Answer

Macroeconomists study the overall performance of the economy, including indicators such as GDP, unemployment rates, and inflation. The headline "Real GDP grows by 2.3% in the second quarter" is a macroeconomic indicator, and would be more closely related to macroeconomics than microeconomics. The other headlines are more specific to individual markets or industries, and would be studied more by microeconomists.

Question 9

Table 12-1
 $\begin{array}{|l|c|c|}
\hline {\text { Product }} & \text { Quantity } & \text { Price } \
\hline \text { Sweatshirts } & 50 & \$ 35.00 \
\hline \text { Dental examinations } & 40 & 75.00 \
\hline \text { Coffee drinks } & 1,000 & 4.00 \
\hline \text { Coffee beans } & 2,000 & 0.50 \
\hline
\end{array}$
-Refer to Table 12-1.Suppose that a simple economy produces only four goods and services: sweatshirts,dental examinations,coffee drinks,and coffee beans.Assume all of the coffee beans are used in the production of the coffee drinks.Using the information in the above table,nominal GDP for this simple economy equals

Accepted Answer

Nominal GDP is calculated as the sum of the prices times the quantities of all goods and services produced.

Nominal GDP = (Quantity of sweatshirts x Price of sweatshirts) + (Quantity of dental examinations x Price of dental examinations) + (Quantity of coffee drinks x Price of coffee drinks) + (Quantity of coffee beans x Price of coffee beans)

Substituting the given values:

Nominal GDP = (50 x $35.00) + (40 x $75.00) + (1,000 x $4.00) + (2,000 x $0.50)

= $1,750 + $3,000 + $4,000 + $1,000

= $8,750

Therefore, the answer is (C) $8,750.

Question 10

Table 12-2
 $\begin{array}{|c|c|r|}
\hline \text { Product } & \text { Quantity } & \text { Price } \
\hline \text { Shoes } & 40 & \$ 60.00 \
\hline \text { DVDs } & 100 & 18.00 \
\hline \text { Tomatoes } & 2,000 & 1.00 \
\hline \text { Ketchup } & 300 & 4.00 \
\hline
\end{array}$
-Refer to Table 12-2.Suppose that a simple economy produces only four goods and services: shoes,DVDs,tomatoes,and ketchup.Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households.Using the information in the above table,nominal GDP for this simple economy equals

Accepted Answer

To calculate nominal GDP, we multiply the quantity of each good or service produced by its price and sum the values.

For shoes, the nominal GDP contribution is $60.00 x 40 = $2,400. 
For DVDs, the nominal GDP contribution is $18.00 x 100 = $1,800. 
For ketchup, the nominal GDP contribution is $4.00 x 300 = $1,200. 
For tomatoes, half are used in making ketchup, so the contribution is 0.5 x $1.00 x 2000 = $1,000. The other half are purchased by households, so the contribution is 0.5 x $1.00 x 2000 = $1,000.

Total nominal GDP for the simple economy is $2,400 + $1,800 + $1,200 + $1,000 + $1,000 = $6,400. Therefore, the answer is B, $6,400.

Question 11

In 2016,Ford's sales were rising,but in early 2017,Ford's sales declined.Ford and the U.S.automobile industry were experiencing the effects of

Accepted Answer

The business cycle refers to the recurring periods of growth and decline in the economy, including in industries such as the automobile industry. The fact that Ford's sales were rising in 2016 but then declined in early 2017 suggests that they were experiencing a downturn in the business cycle, which could be influenced by factors such as changes in consumer demand, economic policies, or global market conditions.

Question 12

During a business cycle expansion,total production ________ and total employment ________.

Accepted Answer

During a business cycle expansion, total production increases as companies experience growth in demand for their products or services. As a result, companies typically hire more workers to keep up with the increased demand, leading to an increase in total employment.

Question 13

Macroeconomics,as opposed to microeconomics,includes the study of what determines the

Accepted Answer

Macroeconomics deals with the economy as a whole, including factors that affect the average price levels of goods and services in the economy. The other options (B, C, and D) all pertain to specific aspects of a single firm and are therefore microeconomic concerns.

Question 14

Which of the following goods is directly counted in GDP?

Accepted Answer

Only the purchase of the 12-inch Subway sandwich by a student is directly counted in GDP as it represents final output sold to a consumer. The purchase of lettuce, bread, and plastic bags by Subway are considered intermediate goods or inputs, which are not directly counted in GDP but are included in the production costs of Subway, which are then reflected in the final price of the sandwich.

Question 15

Which of the following would be directly counted in GDP in 2018?

Accepted Answer

Only A would be directly counted in GDP in 2018 as it involves the purchase of new goods. B and C involve the use of old goods which are not considered in GDP.

Question 16

Gross domestic product is calculated by summing up

Accepted Answer

Gross domestic product (GDP) is calculated by summing up the total market value of final goods and services produced in the economy during a period of time (usually a year). It is important to note that only final goods and services are included in GDP, as intermediate goods and services are already accounted for in the production of final goods and services.

Question 17

In the circular flow model,the value of total income for an economy ________ the value of total production.

Accepted Answer

In the circular flow model, total income and total production are measured as two sides of the same coin, with the flow of income representing the value of goods and services produced in the economy. Therefore, the value of total income for an economy is equal to the value of total production.

Question 18

Suppose in 2018,you purchase a house built in 2003.Which of the following would be included in the gross domestic product for 2018?

Accepted Answer

The value of a house purchased in a previous year is not included in the gross domestic product for the current year. However, the services provided by the real estate agent in the transaction are a part of the service sector and will be included in the GDP.

Question 19

Which of the following is not directly counted in GDP?

Accepted Answer

Intermediate goods are not directly counted in GDP because they are used to produce final goods, and the value of final goods is already accounted for in GDP. Investment expenditures, government purchases, and consumer goods are all directly counted in GDP.

Question 20

In the circular flow model,the value of total production for an economy ________ the value of total expenditures on final goods and services.

Accepted Answer

The circular flow model assumes that all goods and services produced in an economy are eventually purchased by households, firms, government, or foreign entities. Therefore, the total value of production for an economy must equal the total expenditures on final goods and services, as the two are essentially opposite sides of the same coin. In other words, every dollar spent on a final good or service is a dollar of income earned by someone in the economy. Thus, the value of total production and total expenditures are equal in the circular flow model.

Quiz 12: GDP: Measuring Total Production and Income