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Exam 12: GDP: Measuring Total Production and Income

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Question 121

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If the quantity of goods and services produced in the economy decreases

A) it may be possible for real GDP to increase.
B) real GDP would certainly increase.
C) it may be possible for nominal GDP to increase.
D) nominal GDP would certainly increase.

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Question 122

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In periods when prices are falling,on average

A) real GDP will grow slower than nominal GDP.
B) real GDP will grow faster than nominal GDP.
C) real GDP will grow as fast as nominal GDP.
D) one cannot calculate real GDP.

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Question 123

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If the GDP deflator is equal to 100,then for that year nominal GDP is equal to real GDP.

Table 12-13 $\begin{array}{|c|c|c|c|c|}\hline \text { Year } & \begin{array}{c}\text { Oranges } \\\text { Produced }\end{array} & \begin{array}{c}\text { Price of } \\\text { Oranges }\end{array} & \begin{array}{c}\text { Shirts } \\\text { Produced }\end{array} & \begin{array}{c}\text { Price of } \\\text { Shirts }\end{array} \\\hline 2016 & 1,800 & \$ 0.90 & 110 & \$ 30.00 \\\hline 2018 & 2,000 & 1.00 & 110 & 35.00 \\\hline\end{array}$ Consider the data shown above for Vicuna, a country that produces only two products: oranges and shirts. -Refer to Table 12-13.Real GDP for Vicuna for 2016 using 2018 as the base year equals

Table 12-22 2013 2018 $\begin{array}{|l|c|c|c|c|}\hline {\text { Product }} & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \\\hline \text { Pizzas } & 100 & \$ 10 & 120 & \$ 12 \\\hline \text { Haircuts } & 50 & 15 & 45 & 20 \\\hline \text { Backpacks } & 200 & 40 & 210 & 45 \\\hline\end{array}$ -Refer to Table 12-22.Suppose that a very simple economy produces three goods: pizzas,haircuts,and backpacks.Suppose the quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.Use the information to compute real GDP in the year 2013 and 2018.Assume that 2013 is the base year.Is output higher in 2018 or 2013? Why?

Scenario 12-1 CANOES-R-US makes canoes. It buys the shell of the canoe from another local firm for $300 and uses its labor and intermediate goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200. -Refer to Scenario 12-1.The value of each canoe in gross domestic product equals

Which of the following is included in both the U.S.GDP and U.S.GNP?

If China decides to enact laws to clean up the environment,what would be the effect on GDP?

To calculate GDP using the value-added method,one would add up

Table 12-27 $\begin{array}{|l|c|} \hline & \begin{array}{c}\text { Billions of } \\\text { Dollars }\end{array} \\\hline \text { GDP } & \$ 3,250 \\\hline \text { Depreciation } & 300 \\\hline \text { Retained earnings } & 1,000 \\\hline \text { Personal income } & 2,500 \\\hline \text { Transfer payments } & 50 \\\hline\end{array}$ -Refer to Table 12-27.Based on the table above,what is national income for this economy?

Under what circumstances would the GDP deflator be less than 100 after the base year?

Caroline is an artist.She purchases canvases,paints,brushes,and accessories for $75.She sells one of her original paintings to an art gallery for $1,500,which,in turn,sells it to an art lover for $4,500.How much market value does the gallery add?

If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018,the sale of her car contributes $3,500 to 2018 GDP.

Give two reasons why GDP does not reflect total production in an economy.

If nominal GDP is less than real GDP,then the GDP deflator will be greater than 100.

Steve Ballmer organized government spending data on the basis of four "missions" for government that he identified in the preamble to the U.S.Constitution.Which of the four "missions" had the highest level of spending at all levels of government?

Increases in real GDP would overstate the increase in the well-being of a country over time if,over that time period,the

Presently,GDP is ________ to compensate for the costs of environmental damage.

Table 12-31 $\begin{array}{|l|c|} \hline & \text { Billions of Dollars } \\\hline \text { National income } & \$ 11,200 \\\hline \text { Retained earnings } & 560 \\\hline \text { Depreciation } & 700 \\\hline \text { Interest on government bonds } & 300 \\\hline \text { Transfer payments } & 2,200 \\\hline \text { Personal taxes } & 1,400\\\hline\end{array}$ -Refer to Table 12-31.The table above represents hypothetical data from the National Income Accounts for 2017.Use the data to calculate personal income and disposable income.

Why do we not count the value of intermediate goods and services in gross domestic product? Does the value of intermediate goods and services show up in gross domestic product? If so,how?