Question 1

During the current quarter, a firm produces consumer goods and adds some of those goods to its inventory rather than selling them. The value of the goods added to inventory is

Accepted Answer

Goods added to inventory are considered as investment because they are added to the firm's stock of capital goods to be used in future production. Investment is a component of GDP, therefore the value of the goods added to inventory is included in the current quarter GDP as investment.

Question 2

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

Accepted Answer

The answer of A Minnesota farmer buys a new tractor...

Question 3

Which of the following is included in the investment component of GDP?

Accepted Answer

Only option B is an example of investment because it is a purchase of a capital good for a business. Option A is consumption (of education) and option C is financial investment, which is not included in GDP's investment component.

Question 4

A good is produced by a firm in 2009, added to the firm's inventory in 2010, and sold to a household in 2010. As a result, on net,

Accepted Answer

GDP measures the value of goods and services produced within a country's borders in a given period. In this scenario, the good was produced in 2009, so it added to the 2009 GDP. In 2010, it was added to the firm's inventory, which is not counted in the GDP until it is sold. When it was sold to a household in 2010, it added to the 2010 GDP. Therefore, 2009 GDP increased and 2010 GDP increased as well, resulting in the best answer choice of D.

Question 5

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarters) is are) GDP higher?

Accepted Answer

The answer of A U.S. firm produces nail guns in...

Question 6

Which of the following items is included in GDP?

Accepted Answer

Only the sale of final goods and services produced within a country's borders during a specific period of time is included in GDP. The sale of stocks and bonds is not included because they do not represent current production. The sale of used goods is also not included because they were already counted in GDP when they were sold as new. However, the sale of services such as those performed by a doctor are included in GDP because they represent current production of a final good or service.

Question 7

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which components) of fourth-quarter GDP?

Accepted Answer

When the firm sells goods from its inventory, consumption increases as these goods are purchased by consumers. However, since the inventory decreases, investment decreases because inventory is considered part of investment in GDP calculations.

Question 8

onsumer goods that are produced, go into inventory, and are not sold during the current period are

Accepted Answer

Consumer goods that are produced and remain unsold go into inventory and are counted as inventory investment in the current period's GDP calculation. They are not counted as intermediate goods and must be sold in future periods to be counted as consumption.

Question 9

Rocket Energy Drink Company buys sugar to produce energy drinks. At the end of a quarter both its inventory of sugar and its inventory of energy drinks has increased. Investment for the quarter will include

Accepted Answer

The answer of Rocket Energy Drink Company buys sugar to...

Question 10

The value of goods added to a firm's inventory in a certain year is treated as

Accepted Answer

The value of goods added to a firm's inventory in a certain year is considered investment because it reflects the production of goods that are intended to be sold in the future. GDP aims to measure the value of the economy's production that year, and hence, the value of goods added to inventory is counted as investment.

Question 11

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarters) doesdo) these transactions raise consumption?

Accepted Answer

The production of sweatshirts in the first quarter does not raise consumption as they are added to the firm's inventory, not consumed by individuals. It is only in the second quarter when the sweatshirts are sold to consumers that consumption is raised. Therefore, the correct answer is C - the second quarter but not the first.

Question 12

Consider two items that might be included in GDP: 1) the estimated rental value of owner-occupied housing and 2) purchases of newly-constructed homes. How are these two items accounted for when GDP is calculated?

Accepted Answer

The estimated rental value of owner-occupied housing is considered as an imputed rental income and is included in the consumption component of GDP. On the other hand, purchases of newly-constructed homes are included in the investment component of GDP as it represents an addition to the stock of capital. Therefore, item (1) is included in the consumption component of GDP, while item (2) is included in the investment component of GDP.

Question 13

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarters) doesdo) these transactions raise investment?

Accepted Answer

The answer of A U.S. firm produces nail guns in...

Question 14

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

Accepted Answer

U.S. investment and GDP increase because the wind farm purchased a generator made in the U.S. However, since the factory is owned by a Swedish company, part of the income generated by the sale goes to Sweden instead of staying within the U.S., reducing the increase in GNP.

Question 15

A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes

Accepted Answer

The purchase of new computers by a U.S. publisher that were manufactured in the U.S. will make a positive contribution both to investment (as the publisher is investing in new equipment) and to GDP (as the purchase contributes to the production of goods and services within the country).

Question 16

A stove is produced by a firm in 2014, added to the firm's inventory in 2014, and sold to a household in 2015. It follows that

Accepted Answer

The answer of A stove is produced by a firm...

Question 17

Which of the following is not included in the investment component of GDP?

Accepted Answer

The answer of Which of the following is not included...

Question 18

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?

Accepted Answer

The unsold televisions will be counted as a change in inventory in the first quarter, and so will be included in first-quarter GDP. This is because changes in inventory are considered a part of GDP. Once the televisions are sold in the second quarter, they will not be counted in second-quarter GDP because they were already counted when they were originally produced in the first quarter.

Question 19

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

Accepted Answer

The payments made by the Carters' for their son's fees and tuition fall under consumption category as it is an expenditure for the purpose of obtaining a service.

Question 20

The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?

Accepted Answer

The answer of The local car dealership has an increase...

Quiz 5: Measuring a Nations Income