Chapter 8

Question 1

GDP may be defined as:

Answer 1

the monetary value of all final goods and services produced within a nation in a given year

Question 2

GDP can be calculated by adding:

Answer 2

gross investment, government purchases, consumption, and net exports

Question 3

If Holmes pays Weiss $190, then:

Answer 3

we need more information to determine whether GDP has changed or not

Question 4

National income accountants can avoid double counting by:

Answer 4

counting only final products

Question 5

“Value added” refers to:

Answer 5

the difference between the value of a business’s output and the value of the resources that it has purchased from others

Question 6

GDP includes:

Answer 6

final, but not intermediate, products

Question 7

BGF Corporation buys $100 000 of sand, rock, and cement to produce ready-to-mix concrete. It sells 10 000 cubic meters of concrete at $30 per cubic meter. The value added by BGF Corporation is:

Answer 7

$200 000

Question 8

Suppose that the total market value of all final goods and services produced in a particular country in a given year is $500 billion, and the total market value of final goods and services sold is $450 billion. We can conclude that:

Answer 8

inventories have increased by $50 billion

Question 9

By adding up the dollar value of all sales in the economy during a given year, we would:

Answer 9

obtain a sum substantially larger than GDP

Question 10

Assume a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:

Answer 10

$30

Question 11

The term “final products” refers to:

Answer 11

products to be purchased by ultimate users that are not intended for resale or further processing

Question 12

If intermediate goods and services were included in GDP, then:

Answer 12

GDP would be overstated

Question 13

Which of the following is a final product?

Answer 13

a haircut

Question 14

Which of the following is an intermediate product?

Answer 14

the purchase of pencils by a politician who is writing her memoirs

Question 15

Economists define investment to include:

Answer 15

any increase in business inventories

Question 16

If depreciation exceeds gross investment, it can be concluded that:

Answer 16

net investment is negative

Question 17

When an economy’s capital stock is expanding:

Answer 17

gross investment exceeds depreciation

Question 18

In 1933, net investment was -$5.8 billion. This meant that:

Answer 18

the production of 1933’s GDP used up more capital goods than were produced in that year

Question 19

A nation’s capital stock will decline when:

Answer 19

depreciation exceeds gross investment

Question 20

Which of the following is not considered to be part of gross investment?

Answer 20

the purchase of 100 shares of BMO by a retired business executive