Quiz
Gross Domestic Product
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1. Which of the following best describes gross domestic product (GDP)?

a. The market value of all inputs used to produce all final goods and services in a nation during a period of time like a year.
b. The market value of all final goods and services produced in a nation during a period of time such as a year.
c. The quantity of all goods and services produced in a nation during a period of time such as a year.
d. The average price of all goods and services produced in a nation during a period of time such as a year.

2. Which of the following market transactions of final goods and services are excluded from the computation of U.S. GDP?

a. Purchases of "sin" products such as wine, beer, and hard liquor.
b. Secondhand transactions, such as when a used car is sold.
c. New purchases that a resident of one state makes in a different state.
d. Purchases of necessities such as groceries and rent.

3. In the circular flow model, who is a seller in the factor markets and a buyer in the product markets?

a. Businesses
b. Transnational corporations.
c. Foreign producers who export final goods and services into the U.S.
d. Households.

4. If Addie buys a smoothie at the corner café, which of the following best relates this transaction to the circular flow diagram?

a. Goods flow from the product market, and money flows from households.
b. Resources (land, labor, or capital) flows from households, and money flows from businesses.
c. Income flows from the factor market, and goods flow into the factor market.
d. Resources flow into households, and back into the goods and services market.

5. In an open economy version of the simple circular flow diagram, which of the following is true?

a. Household savings flow into the factor market, and investment flows to foreign economies.
b. Household savings flow into financial markets, and investment flows back to households.
c. Household savings flow into financial markets, and investment flows into product markets.
d. Dollar payments for exports flow into households, and net taxes flow to businesses.

6. TRUE OR FALSE: gross private investment makes up approximately 68 percent of the U.S. GDP.

a. True.
b. False.

7. Which of the following is larger for U.S. GDP: state and local government spending, or federal government spending?

a. State and local government.
b. Federal government.

8. Which of the following has been larger for U.S. GDP during most of the 1990's: the market value of exports, or the market value of imports?

a. Exports.
b. Imports

9. Which of the following is ADDED to arrive at GDP?

a. The value of "free" household services provided by at-home spouses rather than a paid cook, maid, and baby sitter.
b. The value of unpaid-for volunteer time.
c. The unpaid-for services provided by the natural environment, such as breathable air.
d. Net exports: (value of exports - value of imports).

10. If we compute GDP by adding up income, which of the following are NOT included?

a. Payments to workers.
b. Payments to landlords.
c. Interest to bondholders and lenders, and dividends to shareholders.
d. Payments to those who earn their living in the underground economy.

11. If we computed GDP using the expenditure approach, and then computed it using the income approach, which of the following can be expected to be true?

a. GDP computed from the expenditure approach will be larger than when GDP is computed using the income approach.
b. GDP computed from the expenditure approach will be equal to GDP computed using the income approach.
c. GDP computed from the expenditure approach will be smaller than when GDP is computed using the income approach.
d. None of the above is correct.

12. The effect of the Environment Protection Agency (EPA) ordering a firm to clean-up damages from pollution would have which of the following effects?

a. GDP would increase.
b. GDP would decrease.
c. GDP remains unchanged.

13. Which of the following correctly gives us national income (NI)?

a. Gross domestic product minus depreciation.
b. Personal income minus personal taxes.
c. Net domestic product minus indirect business taxes.
d. Consumption plus investment plus government plus net exports.

14. Which of the following correctly gives us net domestic product (NDP)?

a. Gross domestic product minus depreciation.
b. Personal income minus personal taxes.
c. Net national product minus indirect business taxes.
d. Consumption plus investment plus government plus net exports.

15. . TRUE OR FALSE: If the GDP chain price index is a given year is greater than 100, real GDP in that year would be greater than nominal GDP.

a. True.
b. False.





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