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Exam 10: Measuring a Nations Income

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Question 181

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Which of the following examples of household spending is categorized as investment rather than consumption?

A) expenditures on durable goods such as automobiles and refrigerators
B) expenditures on intangibles items such as medical care
C) expenditures on new housing
D) All of the above are correct.

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Question 182

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GDP excludes the value of intermediate goods because their value is included in the value of final goods.

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Question 183

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Changes in the GDP deflator reflect only changes in the prices of goods and services.

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 component(s) of fourth-quarter GDP?

An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services, but GDP cannot measure both at the same time.

Michigan Tea Company sold $15 million worth of tea it produced. In producing this tea it purchased $5 million dollars worth of ingredients from foreign countries and paid workers who reside in Canada but commute to the U.S. $1 million. How much did these transactions add to U.S. GDP?

Which of the following is correct?

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP?

Table 10-5 A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2009.Prices and Quantities $\begin{array} { c c c c c } \hline \text { Year } & \begin{array} { c } \text { Price af } \\\text { Mavies }\end{array} & \begin{array} { c } \text { Quantity af } \\\text { Mavies }\end{array} & \begin{array} { c } \text { Price af } \\\text { Popcarn }\end{array} & \begin{array} { c } \text { Quantity df } \\\text { Papentn }\end{array} \\\hline 2008 & \$ 10.00 & 400 & \$ 5 & 800 \\2009 & 11.00 & 500 & \$ 4 & 900 \\2010 & \$ 12.00 & 600 & \$ 5 & 1000 \\2011 & \$ 12.00 & 600 & \$ & 900\end{array}$ -Refer to Table 10-5 What was this country's real GDP in 2010?

GDP is adjusted to reflect changes in the quality of the environment such as changes in air and water quality.

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

Underground economic activity as a percentage of GDP was highest in

When economists talk about growth in the economy, they measure that growth as the

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

Which of the following statements regarding GDP is correct?

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

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 quarter(s) does(do) these transactions raise investment?