1. Which of the following is the best definition of GDP?

1.Which of the following is the best definition of GDP?A. The total dollar value of all “final” goods and services produced in the economy during a given year.B. The total value of all goods and services produced in the economy during a given year.C. The total value of all primary, intermediate and final goods and services produced in the economy during a given year.D. The total value of all goods and services produced and sold in the economy during a given year.2.Gross Domestic Product can be measured (using the expenditure approach) as:A. consumer spending + government purchases + financial spending + exports – importsB. consumer spending + government transfers + investment spending + exports – importsC. disposable income + taxes + investment spending + exports + importsD. consumer spending + government purchases + investment spending + exports – imports3.If during 2009, the country of Sildavia recorded investment spending for $3 billion, government purchases for $3 billion, consumer spending for $7 billion, imports for $5 billion, government transfers for $1 billion, and exports for $3 billion, Sildavia’s GDP in 2009 was:A. $11 billionB. $12 billionC. $13 billionD. $14 billion4.Disposable income equalsA. income plus government transfers minus taxes.B. income plus government spending minus taxes.C. income minus taxes plus government spending.D. income minus taxes minus government transfers.5.Investment spending in the GDP accounts represents spending onA. productive physical capitalB. stocksC. mutual fundsD. corporate bonds6.A “stock” in a company is:A. a share of ownership of a company held by a shareholderB. an IOU that pays interestC. a portion of a firms profits paid to stock ownersD. part of private savings7.”Value added” in national income accounts refers toA. the value added by labor to the production process.B. the difference in the final price and the value of “intermediate” inputs purchased.C. the difference in profits at various stages of production.D. the value of all the inputs used by the final producer.8.Suppose that Mr. Green Jeans sells $5,000 of wheat to Big Ben Bakery. Big Ben uses the wheat to make flour and then hamburger buns, which they sell to Hamburger Heaven for $11,000. Hamburger Heaven also buys $20,000 of beef from a rancher. Hamburger Heaven uses the beef and buns to make 10,000 hamburgers with are sold for $5 each. How much do these transactions add to GDP? [Hint: this question is asking you to compute the “value added” at each stage of production and then to add up the value added amounts to get the answer to the question. You can check the result you get by comparing it to the total market value of the “final goods”.]A. $86,000B. $36,000C. $31,000D. $50,0009.A country’s Gross National Product (GNP):A. must be larger than its Gross Domestic Product (GDP).B. is the total factor income earned by residents of a country.C. includes factor income earned by foreigners.D. excludes factor income earned abroad by Americans.10.Economists frequently use GDP per capita to indicateA. the impact of prices on GDP.B. differences in living standards across countries.C. people who are employed.D. people who are both employed and unemployed11.A price indexA. always includes a base year.B. measures the cost of purchasing a market basket of output across different years.C. is normalized to 100 for the base year.D. all of the above.12.In the country of Sildavia, a market basket of goods and services cost $130 in 2003, $140 in 2004, and $160 in 2005. Based on this information and considering 2003 as the base year, inflation from 2003 to 2005 wasA. 7.14 percent.B. 7.69 percent.C. 14.28 percent.D. 23.07 percent.13.Many economists believe (see page 191) that the CPI overstates inflation because:A. innovation forces consumers to pay more for most goods and services.B. the Bureau of Labor Statistics collects data on the prices of only a few goods and services.C. the CPI market basket doesn’t reflect the fact that consumers shift consumption away from more expensive goods.D. people use it to bargain for wage increases.14.GDP tends to understate our economic well being because itA. includes the value of services produced in the home.B. excludes the value of leisure.C. includes expenditures on crime prevention equipment.D. includes health care costs related to the consumption of cigarettes.15.Goods that are produced in a particular period but not sold in that period:A. go into inventories and are called consumption.B. end up in inventories and are included in investment.C. are finally included in depreciation when they are sold.D. are classified as intermediate goods. Ans: B Topic: The national accounts Level: M