Question 1

The purchase of rice produced this period is included in GDP if the rice is
A)used in a meal a restaurant sells during the same period they buy the rice.
B)purchased by a family who uses it to make tuna casserole for its supper.
C)purchased by a frozen food company to increase its inventory.
D)B and C are correct.

Accepted Answer

The answer of The purchase of rice produced this period...

Question 2

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
A)$150 to GDP.
B)$250 to GDP.
C)between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.
D)$400 to GDP.

Accepted Answer

The answer of A steel company sells some steel to...

Question 3

Grapes are considered intermediate goods
A)whether the purchaser uses them to make wine to sell or eats them.
B)if the purchaser uses them to make wine to sell others but not if the purchaser eats them.
C)if the purchaser eats them, but not if the purchaser uses to them to make wine to sell.
D)None of the above is correct.

Accepted Answer

The answer of Grapes are considered intermediate goods
A)whether the purchaser...

Question 4

Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they used to sell her. Which of the following statements is consistent with the way GDP is computed?
A)GDP will fall if Jennifer marries either Darin or Thomas.
B)GDP will fall if Jennifer marries Darin but not if she marries Thomas.
C)GDP will fall if Jennifer marries Thomas but not if she marries Darin.
D)GDP remains the same whether Jennifer marries Darin or Thomas.

Accepted Answer

Since marijuana is an illegal good, its inclusion in GDP computation is not done. So, if Jennifer marries Darin, his marijuana sales to her will be illegal and hence not included in GDP. On the other hand, Thomas sells broccoli, which is a legal good, so his sales are included in GDP. Therefore, if Jennifer marries Thomas, she will still be buying legal goods, and Thomas's sales will be included in the GDP computation. Hence, GDP will fall if Jennifer marries Thomas but not if she marries Darin.

Question 5

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move
A)raises GDP.
B)decreases GDP.
C)doesn't change GDP because gambling is never included in GDP.
D)doesn't change GDP because in either case his income is included.

Accepted Answer

The answer of A professional gambler moves from a state...

Question 6

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?
A)Only Joe's grocery store purchases are included in GDP.
B)Only Joe's and Jim's grocery store purchases are included in GDP.
C)Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value.
D)Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information.

Accepted Answer

The answer of Joe and Jim purchase vegetables at a...

Question 7

Which of the following is included in GDP?
A)marijuana purchased legally in Colorado.
B)marijuana purchased illegally from a drug dealer.
C)marijuana produced and consumed by a man in his attic
D)All of the above are included in GDP.

Accepted Answer

Only legal purchases are included in GDP because they are part of the formal economy and can be accurately measured. Illegal purchases and self-produced consumption cannot be accurately measured or taxed, so they are not included.

Question 8

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
A)caused measured GDP to fall.
B)not caused any change in measured GDP.
C)caused measured GDP to rise.
D)probably changed measured GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

Accepted Answer

The shift towards relying on market-produced goods and services has increased the demand for those goods and services, leading to an increase in economic activity and a rise in measured GDP. This is because GDP measures the total value of goods and services produced within a country's borders, and the increased demand for market-produced goods and services means more production is taking place, which increases GDP.

Question 9

Which of the following is not included in GDP?
A)carrots grown in your garden and eaten by your family
B)carrots purchased at a farmer's market and eaten by your family
C)carrots purchased at a grocery store and eaten by your family
D)None of the above are included in GDP.

Accepted Answer

Only goods and services that are produced and sold in the market are included in GDP. Carrots grown in your garden are not sold in the market and therefore not included. However, if you purchase carrots at a farmer's market or a grocery store, they would be included in GDP as they were sold in the market.

Question 10

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
A)inventory goods.
B)transitory goods.
C)final goods.
D)intermediate goods.

Accepted Answer

The answer of A farmer produces oranges and sells them...

Question 11

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP
A)decreases.
B)increases.
C)doesn't change because both legal and illegal production are included in GDP.
D)doesn't change because these activities are never included in GDP.

Accepted Answer

When a previously-illegal activity is made legal, it becomes a part of the formal economy and is included in GDP. Therefore, legalizing gambling or prostitution would increase GDP.

Question 12

A farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. How much of the farmer's sales will be included as apples in GDP?
A)$25,000
B)$150,000
C)$100,000
D)$125,000

Accepted Answer

The answer of A farmer sells $25,000 worth of apples...

Question 13

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP?
A)$1 million
B)$3 million
C)$4 million
D)$5 million

Accepted Answer

The answer of Al's Aluminum Company sells $1 million worth...

Question 14

Estimates of the values of which of the following non-market goods or services are included in GDP?
A)the value of unpaid housework
B)the value of services provided by major household appliances purchased in a previous period
C)the estimated rental value of owner-occupied homes
D)All of the above are included in GDP.

Accepted Answer

The estimated rental value of owner-occupied homes is included in GDP as part of the imputed rent calculation. The value of unpaid housework and the value of services provided by major household appliances are not included in GDP as they are non-market goods or services.

Question 15

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?
A)GDP increases by $3.00.
B)GDP increases by $5.00.
C)GDP increases by $6.00.
D)GDP increases by $7.00.

Accepted Answer

The answer of One bag of flour is sold for...

Question 16

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has
A)reduced measured GDP.
B)not affected measured GDP.
C)increased measured GDP by the value of the restaurant meals.
D)increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

Accepted Answer

The change in behavior towards eating more at restaurants has increased measured GDP by the value added by the restaurant's preparation and serving of the meals. This is because GDP includes the value added by each stage of production, and restaurants are providing a service in the form of preparing and serving meals, which contributes to GDP.

Question 17

Rachel cuts her sister's hair for free. When she cuts the hair of her customers in her shop, she charges $10. When is Rachel's haircutting included in GDP?
A)When she cuts her sister's hair or cuts her customers' hair.
B)When she cuts her sister's hair, but not her customers' hair.
C)When she cuts her customers' hair, but not her sister's.
D)Never.

Accepted Answer

Only the production of goods and services for payment are included in GDP. Cutting her sister's hair does not involve payment, so it is not included. However, cutting her customers' hair for $10 is a service provided for payment and is therefore included in GDP.

Question 18

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?
A)Sam's and Ellen's.
B)Sam's but not Ellen's.
C)Ellen's but not Sam's.
D)Neither Sam's nor Ellen's.

Accepted Answer

The answer of Sam, an American citizen, prepares meals for...

Question 19

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is
A)included in GDP whether Susan pays Speedy Lube to change it or changes it herself.
B)included in GDP if Susan pays Speedy Lube to change it but not if she changes it herself.
C)included in GDP if Susan changes it herself, but not if she pays Speedy Lube to change it.
D)not included in GDP whether Susan pays Speedy lube to change it or she changes it herself.

Accepted Answer

GDP includes the market value of goods and services produced within a country's borders. When Susan pays Speedy Lube to change her oil, it is considered a service and therefore included in GDP. However, when she changes the oil herself, there is no transaction occurring in the market, and therefore it is not included in GDP.

Question 20

Gasoline is considered a final good if it is sold by a
A)gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles.
B)pipeline operator to a gasoline station in San Francisco.
C)gasoline station to a motorist in Los Angeles.
D)All of the above are correct.

Accepted Answer

Gasoline becomes a final good when it is sold directly to consumers for their own use, as it is in choice C. In choices A and B, gasoline is being sold to intermediaries who will use it to produce other goods or provide services.

Quiz 23: Measuring a Nation S Income

The purchase of rice produced this period is included in GDP if the rice is

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

Grapes are considered intermediate goods

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his back yard. Regarding these two practices, which of the following statements is correct?

Which of the following is included in GDP?

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 is not included in GDP?

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP?

Estimates of the values of which of the following non-market goods or services are included in GDP?

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions into account, what is the effect on GDP?

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

Rachel cuts her sister's hair for free. When she cuts the hair of her customers in her shop, she charges $10. When is Rachel's haircutting included in GDP?

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself. Which of the following is correct? The value of changing the oil is

Gasoline is considered a final good if it is sold by a