Question 1

Which of the following is an example of a transfer payment?

Accepted Answer

A)   The President's salary
B)   A payment for a gambling debt
C)   A barber's income
D)   A pension payment to retired military personnelE) A) and C)
F) A) and B)

Question 2

In the calculation of GDP, the value of a new house constructed by a firm is included in:

Accepted Answer

A)   personal consumption expenditures.
B)   personal saving.
C)   the depreciation of capital.
D)   private investment.E) B) and D)
F) B) and C)

Question 3

In each of the following cases, indicate if GDP is affected, under what category and what happens to GDP.
a. You buy a used textbook from one of your classmates.
b. You buy a new umbrella.
c. Ella, a French tourist, has a haircut in a salon in San Francisco.
d. New Orleans cleans up after a devastating hurricane.
e. Avon Barksdale buys a shipment of cocaine from Colombia.
f. You pay a monthly rent to Mrs. Wong, your landlady.
g. Kiyah spends two hours baby-sitting her little brother.
h. You hire Bruce Tree Service to mow your lawn every week.
i. Jodi purchases her first home, a 1980s fixer-upper.
j. The president of Ohio State University is given a salary increase.

Accepted Answer

In each of the following cases, I will indicate if GDP is affected, under what category, and what happens to GDP:

a. You buy a used textbook from one of your classmates.
- GDP is not affected. Used goods do not count in GDP calculations because they were part of GDP in the year they were produced and initially sold.

b. You buy a new umbrella.
- GDP is affected. This falls under the category of consumption. GDP increases because the purchase of a new good adds to the total production of goods within the country.

c. Ella, a French tourist, has a haircut in a salon in San Francisco.
- GDP is affected. This falls under the category of consumption, specifically service consumption by foreigners. GDP increases because the service is produced and consumed within the country.

d. New Orleans cleans up after a devastating hurricane.
- GDP is affected. This falls under government spending if public funds are used for cleanup. GDP increases due to the services provided for the cleanup, although it's worth noting that this type of spending is often considered a non-productive expenditure.

e. Avon Barksdale buys a shipment of cocaine from Colombia.
- GDP is not affected legally. Illegal transactions are not included in official GDP calculations.

f. You pay a monthly rent to Mrs. Wong, your landlady.
- GDP is affected. This falls under the category of consumption, specifically housing services. GDP increases because rent is considered a service provided by landlords to tenants.

g. Kiyah spends two hours baby-sitting her little brother.
- GDP is not affected. Unpaid work within the household is not included in GDP calculations.

h. You hire Bruce Tree Service to mow your lawn every week.
- GDP is affected. This falls under the category of consumption. GDP increases because it is a service that is paid for and adds to the economy's total output.

i. Jodi purchases her first home, a 1980s fixer-upper.
- GDP is not directly affected by the purchase of the home since it is a used good. However, any new investment in renovations would count under investment, which would increase GDP.

j. The president of Ohio State University is given a salary increase.
- GDP is affected indirectly. This falls under the category of compensation of employees, which is a component of GDP. However, the salary increase itself does not increase GDP, but the spending of that additional income could contribute to higher consumption, thus potentially increasing GDP.

In summary, GDP measures the value of goods and services produced within a country during a specific period. It includes consumption, investment, government spending, and net exports. Transactions involving new goods and services typically increase GDP, while used goods, illegal activities, and unpaid household work do not directly contribute to GDP calculations.

Question 4

Gross domestic income (GDI)  is defined as:

Accepted Answer

A)   the income of all the workers in an economy who have provided human capital in the production process during a particular period.
B)   the income of all workers in the private sector of an economy during a particular period.
C)   the total income generated in an economy by the production of final goods and services during a particular period.
D)   the total non-wage benefits of all the workers in private sector.E) None of the above
F) B) and C)

Question 5

The gross domestic product of an economy is defined as the:

Accepted Answer

A)   total value of all industrial goods produced and sold during a given period.
B)   total value of all final goods and services produced during a given period.
C)   value of all noneconomic transactions made among consumers during a particular period.
D)   value of all non-monetary transactions between consumers and firms during a given period.E) None of the above
F) A) and D)

Question 6

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions 57-60.
Table 6-2
 
-Refer to Table 6-2. Net exports are negative. This would mean that:

Accepted Answer

A)   imports are larger than exports and there is a trade surplus.
B)   exports are larger than imports and there is a trade surplus.
C)   imports are larger than exports and there is a trade deficit.
D)   exports are larger than imports and there is a trade deficit.E) A) and B)
F) A) and C)

Question 7

Personal income equals:

Accepted Answer

A)   net national product plus income earned but not received plus income received but not earned.
B)   wages and salaries plus net interest income plus transfer payments.
C)   national income minus income earned but not received plus income received but not earned.
D)   factor incomes received for supplying factors of production plus income received but not earned.E) C) and D)
F) B) and D)

Question 8

Government expenditure is the largest single category of GDP.

Accepted Answer

A) True 
 B)False

Question 9

Government purchases include:

Accepted Answer

A)   purchases made by people working in government organizations.
B)   the total value of output produced by government agencies.
C)   investments made by foreign public agencies.
D)   transfer payments.E) None of the above
F) B) and D)

Question 10

In the circular flow model for an economy that produces only consumption goods:

Accepted Answer

A)   factor incomes flow from households to firms.
B)   factors of production flow from households to firms.
C)   factor incomes flow from households to firms and to the government.
D)   factors of production flow from firms to households.E) A) and B)
F) A) and C)

Question 11

Table 6-3 shows data relating to the stages of production of toy model airplanes.
Table 6-3
 
-Refer to Table 6-3. The value added by the extraction of the crude oil is _____.

Accepted Answer

A)   $2
B)   $3
C)   $4
D)   $5E) A) and D)
F) A) and C) D

Question 12

Economic data adjusted for price level changes are said to be expressed in terms of current dollars.

Accepted Answer

A) True 
 B)False

Question 13

In reality, the GDP-GDI gap for the United States

Accepted Answer

A)   is due to the presence of substantial black market activity.
B)   is due to different accounting standards among countries in the world.
C)   represents a small fraction of measured activity.
D)   represents the impact of transfer payments.E) B) and C)
F) A) and C) C

Question 14

Double counting in GDP accounting:

Accepted Answer

A)   refers to the fact that accountants check their figures twice.
B)   refers to the inclusion of both intermediate goods and final goods in GDP.
C)   is the method of using both income and expenditures in measuring GDP.
D)   is the method of calculating the GDP by including the net incomes received by residents of a nation living abroad.E) A) and B)
F) A) and C)

Question 15

A Japanese worker, working in the U.S., deposits some money in his bank account, and his son collects the money from a branch of the same bank in Japan. This activity reduces the U.S. GDP.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the best example of a final good or service?

Accepted Answer

A)   Crude oil in an oil well
B)   Gasoline purchased by Exxon for its gas stations
C)   A song you downloaded for a fee from Amazon.com
D)   Retail floor space at a suburban shopping mallE) None of the above
F) A) and C)

Question 17

Table 6.1 provides data on the components of GDP for an economy.
Table 6-1
 
-Refer to Table 6-1. What is the value of exports?

Accepted Answer

A)   -$120 billion
B)   $120 billion
C)   -$480 billion
D)   $480 billionE) A) and D)
F) None of the above

Question 18

GDP can be calculated by totaling either the:

Accepted Answer

A)   market values of all final goods and services or the total volume of all intermediate goods at all stages of production.
B)   market values of all final goods and services or the value added at all stages of production.
C)   total sales values of all intermediate goods at all stages of production or the value added at all stages of production.
D)   market values of all final goods and services or the values added by labor at all stages of production.E) All of the above
F) A) and B)

Question 19

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

Accepted Answer

A)   The value of the increased inventory will be counted as part of GDP in 2007, and the value of the 170 umbrellas sold in 2008 will not cause GDP in 2008 to increase.
B)   The value of the increased inventory will not affect GDP in 2007, but the sale of the umbrellas will cause GDP in 2008 to increase.
C)   The value of the increased inventory will be counted as part of GDP in 2007 and the value of the 170 umbrellas sold in 2008 will cause GDP in 2008 to increase.
D)   Since the umbrellas were not sold in 2007, they will not be included as part of GDP in 2007, and since they were not produced in 2008, they will not be included as part of GDP in 2008. This is a shortcoming of GDP computations.E) C) and D)
F) A) and D)

Question 20

Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions 47-50.
Figure 6-2 
-Refer to Figure 6-2. A New York restaurant purchases 1,000 cases of wine from a winery in France. This transaction is recorded as part of:

Accepted Answer

A)   gross private investment and the flow is represented by 2.
B)   net exports and the flow is represented by 4.
C)   consumption expenditure and the flow is represented by 1.
D)   consumption expenditure and the flow is represented by 4.E) None of the above
F) B) and C)

Exam 6: Measuring Total Output and Income

Which of the following is an example of a transfer payment?

Correct Answer
verified

In the calculation of GDP, the value of a new house constructed by a firm is included in:

Correct Answer
verified

Gross domestic income (GDI) is defined as:

Correct Answer
verified

The gross domestic product of an economy is defined as the:

Correct Answer
verified

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions 57-60. Table 6-2 -Refer to Table 6-2. Net exports are negative. This would mean that:

Correct Answer
verified

Personal income equals:

Correct Answer
verified

Government expenditure is the largest single category of GDP.

Correct Answer
verified

Government purchases include:

Correct Answer
verified

In the circular flow model for an economy that produces only consumption goods:

Correct Answer
verified

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The value added by the extraction of the crude oil is _____.

Correct Answer
verified
D

Economic data adjusted for price level changes are said to be expressed in terms of current dollars.

Correct Answer
verified

In reality, the GDP-GDI gap for the United States

Correct Answer
verified
C

Double counting in GDP accounting:

Correct Answer
verified

A Japanese worker, working in the U.S., deposits some money in his bank account, and his son collects the money from a branch of the same bank in Japan. This activity reduces the U.S. GDP.

Correct Answer
verified

Which of the following is the best example of a final good or service?

Correct Answer
verified

Table 6.1 provides data on the components of GDP for an economy. Table 6-1 -Refer to Table 6-1. What is the value of exports?

Correct Answer
verified

GDP can be calculated by totaling either the:

Correct Answer
verified

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

Correct Answer
verified

Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions 47-50. Figure 6-2 -Refer to Figure 6-2. A New York restaurant purchases 1,000 cases of wine from a winery in France. This transaction is recorded as part of:

Correct Answer
verified

Exam 6: Measuring Total Output and Income

Which of the following is an example of a transfer payment?

Correct AnswerverifiedShow Answer

In the calculation of GDP, the value of a new house constructed by a firm is included in:

Correct AnswerverifiedShow Answer

Gross domestic income (GDI) is defined as:

Correct AnswerverifiedShow Answer

The gross domestic product of an economy is defined as the:

Correct AnswerverifiedShow Answer

Table 6.2 shows data on the components of GDP in an economy. Use the table to answer questions 57-60. Table 6-2 -Refer to Table 6-2. Net exports are negative. This would mean that:

Correct AnswerverifiedShow Answer

Personal income equals:

Correct AnswerverifiedShow Answer

Government expenditure is the largest single category of GDP.

Correct AnswerverifiedShow Answer

Government purchases include:

Correct AnswerverifiedShow Answer

In the circular flow model for an economy that produces only consumption goods:

Correct AnswerverifiedShow Answer

Table 6-3 shows data relating to the stages of production of toy model airplanes. Table 6-3 -Refer to Table 6-3. The value added by the extraction of the crude oil is _____.

Correct AnswerverifiedD

Economic data adjusted for price level changes are said to be expressed in terms of current dollars.

Correct AnswerverifiedShow Answer

In reality, the GDP-GDI gap for the United States

Correct AnswerverifiedC

Double counting in GDP accounting:

Correct AnswerverifiedShow Answer

A Japanese worker, working in the U.S., deposits some money in his bank account, and his son collects the money from a branch of the same bank in Japan. This activity reduces the U.S. GDP.

Correct AnswerverifiedShow Answer

Which of the following is the best example of a final good or service?

Correct AnswerverifiedShow Answer

Table 6.1 provides data on the components of GDP for an economy. Table 6-1 -Refer to Table 6-1. What is the value of exports?

Correct AnswerverifiedShow Answer

GDP can be calculated by totaling either the:

Correct AnswerverifiedShow Answer

Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case?

Correct AnswerverifiedShow Answer

Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions 47-50. Figure 6-2 -Refer to Figure 6-2. A New York restaurant purchases 1,000 cases of wine from a winery in France. This transaction is recorded as part of:

Correct AnswerverifiedShow Answer

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D

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C

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