Question 1

Long-lived goods used for producing other goods and services are called:

Accepted Answer

This is the definition of "capital goods."

Question 2

If Bountiful Orchard grows $100,000 worth of peaches, sells $50,000 worth of peaches to consumers and uses the rest to make jam that is sold to consumers for $100,000, Bountiful Orchard's contribution to GDP is:

Accepted Answer

Bountiful Orchard sold two final goods, peaches worth $50,000 and jam worth $100,000, to the ultimate buyer for $150,000.

Question 3

Intermediate goods and services are ________ production and ________ counted in GDP.

Accepted Answer

Intermediate goods, like the windows in a car, are sold to the carmaker but not the ultimate car buyer. Thus, the intermediate sale is not included in GDP.

Question 4

If the Citrus Growers Association grows $1 million worth of oranges, sells $500,000 worth of oranges to consumers, uses the rest to make orange juice that is sold to consumers for $3 million, Citrus Grower's contribution to GDP is:

Accepted Answer

Citrus Growers Association sold two final goods, oranges and orange juice, to the ultimate buyer for $3,500,000.

Question 5

Which of the following would be classified as a final good?

Accepted Answer

A final good is one sold to its ultimate user, which can be an individual, a business or a government entity.

Question 6

The value added by any firm equals the firm's ________ from selling the product minus ________.

Accepted Answer

Value added is computed by subtracting the cost of inputs purchased from other firms from revenue received by the sale.

Question 7

A firm's revenue from selling its product minus the cost of inputs purchased from other firms is called:

Accepted Answer

A firm's revenue from selling its product minus the cost of inputs purchased from other firms is called value added.

Question 8

Capital goods are treated as ________ goods and, therefore, are ________ GDP.

Accepted Answer

Capital goods are produced for specific business use, thus they are considered final goods and included in the GDP.

Question 9

Goods and services that are consumed by the ultimate user are called ________ goods and services.

Accepted Answer

This is the definition of "final" goods.

Question 10

Which of the following is an example of a capital good?

Accepted Answer

A metal-stamping machine is a capital good because it is used in the production of other goods.

Question 11

Final goods and services are ________ production and ________ counted in GDP.

Accepted Answer

Goods and services are added to GDP when they are sold to their final buyer. Intermediate transactions are not counted in GDP.

Question 12

If a pizza maker pays $1 for tomatoes, $1 for cheese, $2 for sausage, and sells the pizza made with these ingredients for $7, then each pizza sold contributes how much to GDP?

Accepted Answer

Just the value of the final good, the $7 pizza, is included in GDP.

Question 13

Which of the following is an example of an intermediate good?

Accepted Answer

The new speaker system is an intermediate good because it is a component part of the final good, the car.

Question 14

Goods and services that are used up in the production of other goods and services are called ________ goods and services.

Accepted Answer

This is the definition of "intermediate" goods.

Question 15

Factories and machines are examples of:

Accepted Answer

Factories and machines are built for the purpose of producing other goods, which means they are capital goods.

Question 16

The value of intermediate goods is excluded from the measurement of GDP in order to:

Accepted Answer

GDP measures the market value of goods and services sold to their final user as a means of avoiding double counting.

Question 17

Which of the following is NOT a capital good?

Accepted Answer

Batteries purchased by a car manufacturer to be installed in new cars are considered intermediate goods because the batteries are used up in the production of final goods. Capital goods are not used up during the production process, but are instead long-lived.

Question 18

Which of the following is not classified as a final good?

Accepted Answer

Fresh vegetables purchased by a restaurant are intermediate goods because they are inputs to the final good, a restaurant meal.

Question 19

Capital goods are

Accepted Answer

Capital goods are long-lived goods used for producing other goods and services.

Question 20

If an automobile manufacturer pays $200 for a car windshield, $400 for four car tires, $100 for a car radio, and sells cars made with these parts for $20,000, then each car the automobile manufacturer sells contributes how much to GDP?

Accepted Answer

Just the value of the final good, the $20,000 car, is included in GDP.

Quiz 17: Measuring Economic Activity: GDP and Unemployment