Question 1

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

Accepted Answer

The answer of Which of the following would result in...

Question 2

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 3

Investment spending includes spending on

Accepted Answer

Investment spending refers to the purchase of physical capital goods, such as machinery and equipment, and changes in business inventories. Therefore, the correct answer is C. Stocks are not included in investment spending as they are financial securities and not physical goods. Food and transfer payments are also not included as they are not related to investment spending.

Question 4

Total income in an economy is equal to

Accepted Answer

Total income in an economy is the sum of wages, interest, rent, and profit earned by households and firms within the economy. GDP is a measure of the total output of goods and services produced within an economy and includes income from net exports, but it does not account for taxes and other transfers. Firm revenues alone do not reflect the income earned by individuals and households in an economy.

Question 5

Consumption expenditures do not include household purchases of

Accepted Answer

Consumption expenditures refer to the purchases made by households on goods and services for immediate or current use. New houses are considered investment expenditures rather than consumption expenditures because they are not bought for immediate use but for long-term investment purposes. Hence, option C is the correct answer. Medical care, education, and durable goods are all examples of consumption expenditures.

Question 6

In a small economy,gross investment in 2013 is $1,500,consumption spending is $6,000,net investment is $200,government spending is $1,500,exports are $2,000 and imports are $1,000.What is GDP for this economy in 2013?

Accepted Answer

To calculate GDP using the expenditures approach, we add the components of GDP: consumption, gross investment, government spending, and net exports. 
GDP = C + I + G + NX 
where 
C = consumption spending = $6,000 
I = gross investment + net investment = $1,500 + $200 = $1,700 
G = government spending = $1,500 
NX = exports - imports = $2,000 - $1,000 = $1,000

Plugging in the values, we get: 
GDP = $6,000 + $1,700 + $1,500 + $1,000 = $10,200

Therefore, the correct answer is D) $10,000.

Question 7

The largest component of spending in GDP is

Accepted Answer

Consumption spending includes all the purchases made by households on goods and services, such as food, clothing, housing, and health care. This makes up the majority of the spending in GDP, as individuals and families generally spend more than businesses, governments or foreigners.

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

Welfare benefits are transfer payments, not government purchases.

Question 10

Which of the following is considered a durable good?

Accepted Answer

The washing machine is considered a durable good because it is a product that is expected to last for a significant amount of time and is not quickly consumed or worn out like food or clothing. Medical care is a service and not a good.

Question 11

Government spending ________ is included in gross domestic product.

Accepted Answer

Government spending at all levels (federal, state, and local) is included in the calculation of gross domestic product. This includes spending on goods and services such as infrastructure, education, healthcare, and public safety, among others. Defense goods are just one component of government spending and do not represent the entirety of government expenditure.

Question 12

Consumption spending is $4.5 billion,gross private domestic investment is $3 billion,and government expenditures 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 domestic...

Question 13

Article Summary
For only the second time in the previous 10 quarters, China's GDP grew at a faster rate than from the same period a year earlier. From July through September 2013, China's GDP increased 7.8 percent, but a decline in exports, growing inflation, and slowing growth in factory production all suggest that growth will be slowing down. China has recently been attempting to restructure its economy by moving toward increasing consumption and relying less on exports and investments as a means to achieving more sustainable economic growth. In the first nine months of 2013, 46 percent of growth was due to consumption, 56 percent was due to investment, and exports accounted for negative 1.7 percent.
Source: Aileen Wang and Kevin Yao, "China's third-quarter GDP growth fastest this year, but outlook dim," Reuters, October 18, 2013.

-Refer to the Article Summary.The decline in export growth will hurt China's GDP because

Accepted Answer

A decrease in exports will decrease net exports, assuming no change in imports. Net exports are a component of GDP calculation, and a decrease in net exports will lead to a decrease in GDP growth.

Question 14

Table 8-6
 
-Refer to Table 8-6.Consider the table of production and price statistics for a small economy in 2013.If the economy only produces the four goods listed below,what is GDP for 2013?

Accepted Answer

To calculate the GDP for 2013, we need to sum the total value added of all goods produced. We can calculate the value added of each good by subtracting the intermediate inputs (the value of the goods used in production) from the final price. 
For Good A: 
Value added = ($30 x 1,500) - $10,000 = $35,000 
For Good B: 
Value added = ($20 x 2,000) - $8,000 = $32,000 
For Good C: 
Value added = ($10 x 1,500) - $6,000 = $9,000 
For Good D: 
Value added = ($3 x 1,000) - $2,000 = $1,000 
Total value added = $35,000 + $32,000 + $9,000 + $1,000 = $77,000 
Therefore, the GDP for 2013 is $77,000 x 5.6 = $428,000.

Question 15

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 16

Between 2013 and 2014,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

When exports rise by $8 billion and imports fall by $8 billion, we see a $16 billion increase in net exports (exports minus imports). Since net exports are part of the calculation for GDP, an increase in net exports will increase GDP by the same amount, therefore GDP will increase by $16 billion.

Question 17

Article Summary
For only the second time in the previous 10 quarters, China's GDP grew at a faster rate than from the same period a year earlier. From July through September 2013, China's GDP increased 7.8 percent, but a decline in exports, growing inflation, and slowing growth in factory production all suggest that growth will be slowing down. China has recently been attempting to restructure its economy by moving toward increasing consumption and relying less on exports and investments as a means to achieving more sustainable economic growth. In the first nine months of 2013, 46 percent of growth was due to consumption, 56 percent was due to investment, and exports accounted for negative 1.7 percent.
Source: Aileen Wang and Kevin Yao, "China's third-quarter GDP growth fastest this year, but outlook dim," Reuters, October 18, 2013.

-Refer to the Article Summary.In China,________ is (are)the main driver of economic growth,while in the United States,________ is the main driver of economic growth.

Accepted Answer

In China, investment is the main driver of economic growth, as indicated by the 56 percent contribution to growth. In the United States, consumption is typically the main driver of economic growth.

Question 18

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 19

In a small economy,consumption spending in 2013 is $6,000,government spending is $1,200,gross investment is $1,500,exports are $2,000,and imports are $1,000.What is gross domestic product in 2013?

Accepted Answer

GDP = C + G + I + (X - M) = 6000 + 1200 + 1500 + (2000 - 1000) = 9700

Question 20

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

Accepted Answer

Services make up the greatest component of consumption spending in a typical economy, as they include things like healthcare, education, utilities, and transportation, which are essential for day-to-day living. While durable goods and nondurable goods are also important components of consumption spending, they typically make up smaller portions of total spending. New housing is not typically included in consumption spending, as it falls under investment spending instead.

Quiz 8: GDP: Measuring Total Production and Income