Question 1

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

Accepted Answer

A)   consumption expenditures.
B)   investment expenditures.
C)   government purchases.
D)   net exports. D

Question 2

The circular flow of income shows that GDP can be measured as the sum of wages, interest, rent, and profits received by households or total expenditures on goods and services by households, firms, government, and the rest of the world.

Accepted Answer

A) True 
 B)False

Question 3

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

A)   $10,700
B)   $10,300
C)   $10,200
D)   $10,000

Question 4

Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add?

Accepted Answer

A)   $75
B)   $1,425
C)   $1,500
D)   $4,425

Question 5

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

A)   $9,700
B)   $9,800
C)   $10,800
D)   $11,700

Question 6

The largest component of spending in GDP is

Accepted Answer

A)   consumption spending.
B)   investment spending.
C)   government spending.
D)   net export spending. A

Question 7

The "underground economy" refers to

Accepted Answer

A)   the buying and selling of goods that is concealed from the government.
B)   the production of goods and services used by the government for covert spy operations.
C)   the sector of the economy that earns profits that are higher than average.
D)   the formal sector of the economy in developing countries.

Question 8

Table 19-10
  a)  What is the value added by each stage of production?
b)  What is the total value added?
For simplicity, you can ignore the cost of the inputs for oil drilling.
-The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion. You should conclude

Accepted Answer

A)   a typical person in Vietnam is 10 times as well off as the typical person in the Philippines.
B)   a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines.
C)   a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines.
D)   it is not possible to make a good comparison of the economic well-being of a typical individual in the 2 countries without additional information.

Question 9

Why do we subtract import spending from total expenditures?

Accepted Answer

Import spending is defined as spending o...

Question 10

Personal income is defined as

Accepted Answer

A)   national income less retained earnings plus transfer payments and plus interest on government bonds.
B)   national income plus retained earnings less transfer payments and less interest on government bonds.
C)   national income less depreciation.
D)   national income less personal taxes.

Question 11

Scenario 19-1
CANOES-R-US makes canoes. It buys the shell of the canoe from another 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 19-1. The value added of CANOES-R-US for each canoe equals

Accepted Answer

A)   $1,200.
B)   $800.
C)   $500.
D)   $400. C

Question 12

Table 19-26
 
-Which of the following is included in both the U.S. GDP and U.S. GNP?

Accepted Answer

A)   the value of all cars produced by General Motors in the United States
B)   the value of all cars produced by Ford in Mexico
C)   the value of all cars produced by Toyota in the United States
D)   the value of all cars produced by Nissan in Japan and the United States

Question 13

Table 19-24
 
-Refer to Table 19-24. Suppose that a very simple economy produces three goods: pizzas, haircuts, and backpacks. Suppose the quantities produced and their corresponding prices for 2007 and 2013 are shown in the table above. Use the information to compute real GDP in the year 2007 and 2013. Calculate real GDP in 2013 assuming the base year is 2007. Do the same calculation assuming the base year is 2013. Are the calculations different? Why?

Accepted Answer

Recall that real GDP is found by valuing...

Question 14

In the circular flow diagram, the value of all the income in the economy is greater than the value of goods and services produced in the economy.

Accepted Answer

A) True 
 B)False

Question 15

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is

Accepted Answer

A)   5% higher in year 2 than in year 1.
B)   105% higher in year 2 than in year 1.
C)   5% higher in year 1 than in year 2.
D)   105% higher in year 1 than in year 2.

Question 16

What is the underground economy and how could it hurt an economy? How does it hurt developing economies?

Accepted Answer

The underground economy is that part of ...

Question 17

Table 19-26
 
-Refer to Table 19-26. Given the information above, calculate the GDP deflator for both 2012 and 2013. What does the value of the deflator in the year 2012 tell you about that year with respect to the base year? What happened to prices in 2013 as compared to 2012?

Accepted Answer

To calculate the GDP deflator for 2012 a...

Question 18

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

Accepted Answer

A)   crime rate increased.
B)   percentage of people addicted to illegal drugs increased.
C)   amount of pollution decreased.
D)   average hours worked per week decreased.

Question 19

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

Accepted Answer

A)   the market value of final goods and services produced during a particular period.
B)   only the value added by the underground economy.
C)   the value added by each firm involved in the production of final goods and services.
D)   the market value of intermediate goods and services produced during a particular period.

Question 20

The size of the underground economy would tend to decrease if the government of a country

Accepted Answer

A)   decreased government regulations on businesses.
B)   made over-the-counter drugs illegal.
C)   increased income tax rates.
D)   increased business taxes.

Exam 19: GDP: Measuring Total Production and Income

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

Correct Answer
verified
D

The circular flow of income shows that GDP can be measured as the sum of wages, interest, rent, and profits received by households or total expenditures on goods and services by households, firms, government, and the rest of the world.

Correct Answer
verified

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?

Correct Answer
verified

Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add?

Correct Answer
verified

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?

Correct Answer
verified

The largest component of spending in GDP is

Correct Answer
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A

The "underground economy" refers to

Correct Answer
verified

Correct Answer
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Why do we subtract import spending from total expenditures?

Correct Answer
verified
Import spending is defined as spending o...
View Answer

Personal income is defined as

Correct Answer
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Correct Answer
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C

Table 19-26 -Which of the following is included in both the U.S. GDP and U.S. GNP?

Correct Answer
verified

Correct Answer
verified
Recall that real GDP is found by valuing...
View Answer

In the circular flow diagram, the value of all the income in the economy is greater than the value of goods and services produced in the economy.

Correct Answer
verified

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is

Correct Answer
verified

What is the underground economy and how could it hurt an economy? How does it hurt developing economies?

Correct Answer
verified
The underground economy is that part of ...
View Answer

Table 19-26 -Refer to Table 19-26. Given the information above, calculate the GDP deflator for both 2012 and 2013. What does the value of the deflator in the year 2012 tell you about that year with respect to the base year? What happened to prices in 2013 as compared to 2012?

Correct Answer
verified
To calculate the GDP deflator for 2012 a...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

The size of the underground economy would tend to decrease if the government of a country

Correct Answer
verified

Exam 19: GDP: Measuring Total Production and Income

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

Correct AnswerverifiedD

The circular flow of income shows that GDP can be measured as the sum of wages, interest, rent, and profits received by households or total expenditures on goods and services by households, firms, government, and the rest of the world.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The largest component of spending in GDP is

Correct AnswerverifiedA

The "underground economy" refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why do we subtract import spending from total expenditures?

Correct AnswerverifiedImport spending is defined as spending o...View AnswerShow Answer

Personal income is defined as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

Table 19-26 -Which of the following is included in both the U.S. GDP and U.S. GNP?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedRecall that real GDP is found by valuing...View AnswerShow Answer

In the circular flow diagram, the value of all the income in the economy is greater than the value of goods and services produced in the economy.

Correct AnswerverifiedShow Answer

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is

Correct AnswerverifiedShow Answer

What is the underground economy and how could it hurt an economy? How does it hurt developing economies?

Correct AnswerverifiedThe underground economy is that part of ...View AnswerShow Answer

Table 19-26 -Refer to Table 19-26. Given the information above, calculate the GDP deflator for both 2012 and 2013. What does the value of the deflator in the year 2012 tell you about that year with respect to the base year? What happened to prices in 2013 as compared to 2012?

Correct AnswerverifiedTo calculate the GDP deflator for 2012 a...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The size of the underground economy would tend to decrease if the government of a country

Correct AnswerverifiedShow Answer

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D

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A

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Import spending is defined as spending o...
View Answer

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C

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Recall that real GDP is found by valuing...
View Answer

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The underground economy is that part of ...
View Answer

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To calculate the GDP deflator for 2012 a...
View Answer

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