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Q1. When the expenditure approach is used to measure GDP, the major components are: |
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A. |
consumption, investment, government purchases, and net exports. |
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B. |
employee compensation, corporate profits, depreciation, and indirect business taxes. |
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C. |
consumption, investment, indirect business taxes, and depreciation. |
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D. |
employee compensation, rents, interest, corporate profits, and net exports. |
Answer: A
Hint: Consumption = the largest part of GDP, includes purchases of households, such as durable goods, nondurable goods, and services.
Investments = are important because it is an indicator of the economy's future productive capacity.
Government purchases = include federal, state and local expenditures not including payments to social security and welfare.
Net exports of goods and services = must be domestically produced goods and services purchased by consumers outside the country.
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Q2. Use of the following information to calculate the gross domestic product in billions of dollars using the resource cost-income approach.
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A. |
$7,866 |
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B. |
$6,080 |
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C. |
$6,114 |
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D. |
$7,900 |
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Answer: D
Hint: Add all the items together to get $7,900. In this example the net income of foreigners happens to be positive.
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Q3. Which one of the following would NOT be factored into the GNP of the United States ? |
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A. |
The income Americans earn abroad. |
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B. |
A Toyota truck manufactured in the U.S. |
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C. |
A Gateway computer manufactured in the U.S. |
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D. |
A Ford truck manufactured in Venezuela . |
Answer: D
Hint: GNP is the total market value of all final goods and services produced by the citizens of a country.
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Q4. Which of the following statements regarding the gross domestic product (GDP) is FALSE? |
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A. |
In GDP, sales of used or secondhand goods are excluded. |
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B. |
GDP counts only the goods and services produced during the year. |
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C. |
GDP is the total market value of all final goods and services produced by the citizens of a country, no matter where they are residing. |
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D. |
GDP is the total market value of all final goods and services produced by people in that country, whether they are citizens or not. |
Answer: C
Hint: GDP is the total market value of all final goods and services produced domestically during the year.
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Q5. Which of the following statements about the gross domestic product (GDP) are FALSE? |
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A. |
Financial transactions are included in determining the GDP. |
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B. |
Only final production is measured. |
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C. |
Goods and services produced by all citizens, foreign and domestic, within U.S. borders are included. |
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D. |
No second hand goods are counted. |
Answer: A
Hint: GDP excludes financial transactions and transfer payments since they do not represent current production. For example, stock and bond sales along with welfare and social security payments are excluded. These payments represent exchanges of goods, not production of goods.
