Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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When
a firm sells a good or a service, the sale contributes to the nation’s income a. | only if the
buyer of the good or service is a household. | b. | only if the
buyer of the good or service is a household or another firm. | c. | whether the
buyer of the good or a service is a household, another firm, or the
government. | d. | We have to know whether the item being sold is a good or a
service in order to answer the question. | | |
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2.
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Gross
domestic product is defined as a. | the market value of all final goods and services produced
within a country in a given period of time. | b. | the market value
of all tangible goods produced within a country in a given period of time. | c. | the quantity of
all final goods and services supplied within a country in a given period of
time. | d. | the quantity of all final goods and services demanded within a
country in a given period of time. | | |
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3.
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The
value of the housing services provided by the economy's owner-occupied houses is a. | included in GDP
and the estimated rental values of the houses is used to place a value on these housing
services. | b. | included in GDP and the actual mortgage payments made on the
houses is used to estimate the value of these rental services. | c. | excluded from
GDP since these services are not sold in any market. | d. | excluded from
GDP since the value of these housing services cannot be estimated with any degree of precision.
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4.
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The
total sales of all firms in the economy for a year a. | equals GDP for
the year. | b. | is larger than GDP for the year. | c. | is smaller than
GDP for the year. | d. | equals GNP for the year. | | |
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5.
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The
local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007 it sells all 25
cars. Which of the following statements is correct? a. | The full value
of the increased inventory will be counted as part of GDP in 2006, and the value of the cars sold in
2007 will not cause 2007 GDP to increase. | b. | The value of the increased inventory will not affect 2006 GDP;
instead, the full value of the inventory will be counted as part of 2007
GDP. | c. | The value of the
increased inventory will be counted as part of 2006 GDP and the value of the cars sold in 2007
will increase 2007 GDP. | d. | One-half of the value of the increased inventory will be
counted as part of 2006 GDP and the other one-half of the value will be counted as part of 2007
GDP. | | |
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6.
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Darla, a Canadian citizen, works only in the United States. The value that her labor
contributes to U.S. output is a. | included in both U.S. GDP and U.S.
GNP. | b. | included in U.S.
GDP, but it is not included in U.S. GNP. | c. | included in U.S. GNP, but it is not included in U.S.
GDP. | d. | included in
neither U.S. GDP nor U.S. GNP. | | |
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7.
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Which
of the following items is included in GDP? a. | the sale of stocks and bonds | b. | the estimated
rental value of owner-occupied housing | c. | unpaid production of goods and services at
home | d. | All of the above
are included in GDP. | | |
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8.
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Which
government entity prepares the U.S. national income accounts? a. | the Federal
Reserve System | b. | the Department of Treasury | c. | the Department
of Commerce | d. | the Council of Economic Advisers | | |
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9.
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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? a. | Both item (1) and item (2) are included in the consumption
component of GDP. | b. | Item (1) is included in the consumption component, while item
(2) is included in the investment component. | c. | Item (1) is
included in the investment component, while item (2) is included in the consumption
component. | d. | Only item (2) is included in GDP and it is included in the
investment component. | | |
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10.
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The
U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a
result, a. | U.S. government
purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP and GNP are
unaffected. | b. | U.S. government purchases increase by $30,000; U.S. GNP
increases by $30,000; and U.S. GDP and U.S. net exports are unaffected. | c. | U.S. government
purchases; and U.S. net exports, GDP, and GNP are unaffected. | d. | U.S. government
purchases increase by $30,000; U.S. net exports decrease by $30,000; U.S. GNP increases by $30,000;
and U.S. GDP is unaffected. | | |
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11.
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In a
certain economy in 2005, households spent $1,000 on goods and services; purchases of capital
equipment, inventories, and structures amounted to $350; government spent $450 on goods and services;
and the value of imports exceeded the value of exports by $50. It follows that 2005 GDP for this
economy was a. | $1,750. | b. | $1,850. | c. | $1,950. | d. | $2,100. | | |
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Table 23-2. The information in the table pertains to the country of
Ophir.
Year | Nominal
GDP | GDP
Deflator | 2004 | $4000 | 100 | 2005 | $4100 | 105 | 2006 | $4200 | 110 | | | |
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12.
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Refer to Table 23-2. Which of the following statements do we know to be
correct? a. | Total spending
in Ophir increased throughout the period. | b. | Household spending in Ophir increased throughout the
period. | c. | The production of goods and services increased in Ophir
throughout the period. | d. | All of the above are correct. | | |
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Table 23-3
Prices and Quantities | Year | Price
of
Sandwiches | Quantity of
Sandwiches | Price
of
Magazines | Quantity of
Magazines | 2006 | $4.00 | 100 | $2.00 | 180 | 2007 | $5.00 | 120 | $2.50 | 200 | 2008 | $6.00 | 150 | $3.50 | 200 | | | | | |
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13.
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Refer to Table 23-3. Nominal GDP for 2007 is a. | $900. | b. | $1,100. | c. | $1,250. | d. | $1,350. | | |
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14.
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Real
GDP in the United States is five times as great as it was 50 years ago, yet GDP weighs almost the
same as it did a half century ago and the population has less than doubled. These facts suggest
that a. | consumers are
having to settle for lower quality goods. | b. | we are no longer in danger of running out of raw
materials. | c. | each U.S. worker is more productive, and international trade is
less expensive to conduct. | d. | Americans are actually consuming fewer goods per person than
they did 50 years ago. | | |
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15.
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GDP
does not reflect a. | the value of
leisure. | b. | the value of goods and services produced at
home. | c. | the quality of the environment. | d. | All of the above
are correct. | | |
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