Question 1

Tim buys a house from Betty in 2011 for $200,000.Betty receives $185,000 and $15,000 goes to Mary,the real-estate agent.Betty originally purchased the house in 2007 for $240,000.What value is added to GDP in 2011 for this transaction?

Accepted Answer

The value added to GDP in 2011 for this transaction is the real estate agent's commission of $15,000. The sale of used goods (the house, in this case) does not add to GDP, but the services (real estate services) provided in the transaction do.

Question 2

The value of a car produced and sold in 2000 and sold again to a second owner in 2008 would be included in GDP for:

Accepted Answer

GDP measures the value of goods and services produced within a country in a specific period. The car's value is included in GDP when it is first produced and sold in 2000. Subsequent sales of used goods, like the car being sold again in 2008, do not contribute to GDP as they do not represent new production.

Question 3

You sell your old bedroom set to your roommate for $1,800 and buy new custom-built furniture for $6,000.How much is added to GDP?

Accepted Answer

The sale of the old bedroom set is not added to GDP because it is a second-hand transaction. Only the purchase of new custom-built furniture, valued at $6,000, is added to GDP as it reflects current economic activity.

Question 4

Orrin mines iron ore,which he sells to Thorin,who turns iron ore into steel.The steel is sold to Gorin,who turns the steel into battle axes.The battle axes are sold by a merchant in the city to adventurers.Which of the following would be considered a final good?

Accepted Answer

The final good is the good that is sold to the ultimate consumer, in this case, the adventurers. The battle axes sold to the merchant are still an intermediate good because they have not yet reached their final destination. Similarly, the steel sold to Gorin is also an intermediate good because it is not yet in its final form. Finally, the iron ore mined by Orrin is also an intermediate good because it has not yet been transformed into steel.

Question 5

Intermediate goods are goods:

Accepted Answer

Intermediate goods are goods that are used as inputs in the production of other goods rather than being sold to final consumers. They may be finished products that are used as inputs in the production of other goods, or they may be raw materials and components that are used in the production process. Therefore, the correct choice is A) used to produce other goods.

Question 6

A computer chip that you purchase to repair your home computer is an example of:

Accepted Answer

A computer chip purchased for home computer repair is considered a final good because it is a finished product used by the consumer, not a component used in the production of another good.

Question 7

A sound system produced by a supplier to Ford Motor Company is an example of:

Accepted Answer

An intermediate good is a good that is used in the production of a final good, rather than being sold directly to consumers. In this case, the sound system is not sold directly to consumers, but is used in the production of Ford vehicles, making it an intermediate good.

Question 8

Imagine that Jack and Jill buy $500 worth of milk and $200 worth of crayons and coloring books each year for use in their day-care business.Jack and Jill also hire a day-care attendant at a salary of $14,000 per year.If Jack and Jill sell $100,000 worth of day care to parents each year,what is the contribution to GDP by Jack and Jill's Day Care?

Accepted Answer

The contribution to GDP is the total value of goods and services produced, which in this case is the $100,000 worth of day care services sold to parents. The costs of inputs and salaries are not subtracted when calculating GDP.

Question 9

Since 1950,the portion of U.S.GDP created by services has:

Accepted Answer

According to data from the Bureau of Economic Analysis, in 1950, services accounted for approximately 42% of U.S. GDP. As of 2019, services accounted for approximately 85% of U.S. GDP. Therefore, the portion of GDP created by services has more than doubled since 1950.

Question 10

A computer chip sold to Dell is an example of:

Accepted Answer

A computer chip sold to Dell is an intermediate good, as it is a component that is used in the production of Dell's final product (computers). Final goods are goods that are purchased by the end consumer for consumption or use. Services are intangible activities provided by one party to another. Finally, an inferior good is a type of good for which demand decreases as income increases (i.e. cheaper alternatives are sought as income rises).

Question 11

Final goods are goods:

Accepted Answer

Final goods are goods that are consumed or held in personal inventories. They are goods that are purchased by the end consumer for their own use and satisfaction, rather than for the production of other goods. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they describe intermediate goods (used for production), durable goods (not necessarily consumed), and export restrictions (which are not related to the definition of final goods).

Question 12

A car produced by the Japanese company Honda in a plant located in Ohio would be included in:

Accepted Answer

The car would be included in the U.S. GDP because it was produced within the borders of the United States. However, it would not be included in the U.S. GNP because the company producing it (Honda) is based in Japan. GNP includes the value of production by a country's residents and businesses, regardless of where it takes place.

Question 13

Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000.Winston sells its golf clubs to Academy Sports for $1,000,000.Academy Sports sells Winston golf clubs for $1,500,000.How much is added to GDP?

Accepted Answer

GDP measures the market value of all final goods and services produced within a country in a given period. The sale from Academy Sports to consumers is the final sale, adding $1,500,000 to GDP. The earlier transactions are intermediate and not counted to avoid double counting.

Question 14

Which of these transactions occurring in 2011 would contribute to GDP for 2011?

Accepted Answer

The sale of a new aircraft produced in 2011 to a foreign buyer is considered an export and is included in the calculation of GDP. A is not included as it is not a newly produced good or service. B is not included as it is a transfer of ownership of a used good. C is not included as it is a financial transaction and does not represent the production of a good or service.

Question 15

The sale of sugar will contribute to GDP when the buyer is:

Accepted Answer

When a mother buys sugar to bake cookies at home, it is considered a final consumption, contributing to GDP. The other options involve intermediate goods used in production.

Question 16

An increase in the price you pay for a haircut will:

Accepted Answer

An increase in the price of a haircut would contribute to GDP as it is a purchase of a service. GDP measures the total value of all goods and services produced in a country during a given period of time. As a haircut is a service, the price paid for it would be considered part of GDP. The nationality of the hair stylist is not relevant to whether or not the purchase contributes to GDP.

Question 17

Which transaction will be included in GDP?

Accepted Answer

Only the purchase of a real estate agent's services will be included in GDP as it is a final goods and services transaction. The purchase of a used bicycle and a home built in 1957 are both second-hand goods and not new production. The purchase of IBM stock is considered a financial transaction and not a transaction involving the production of goods and services.

Question 18

A car produced by the American company GM in a plant located in Canada would be included in:

Accepted Answer

Gross National Product (GNP) measures the value of goods and services produced by the residents of a country, regardless of where they are located. Since the car is produced by an American company (GM), it would be included in the U.S. GNP. Gross Domestic Product (GDP), on the other hand, measures the value of goods and services produced within a country's borders, regardless of who produces them. Since the car is produced in Canada, it would not be included in the U.S. GDP.

Question 19

Services involve production that provides:

Accepted Answer

Services are intangible and are provided to customers without the production of a tangible physical product. However, they provide a benefit to the customer, such as education, entertainment, or healthcare.

Question 20

The calculation of GDP includes:

Accepted Answer

The calculation of Gross Domestic Product (GDP) includes both goods and services. It is a measure of the monetary value of all final goods and services produced within a country's borders in a given time period (usually annually). Therefore, both goods and services are taken into account when calculating GDP.

Quiz 6: GDP and the Measurement of Progress