chapter 6

• which of the following is most likely included in gross domestic product?

  A: matt gives his secondhand bicycle to his brother

  B: sal paints his own bicycle

  C: ali buys a new bicycle

  D: mike buys a share of stock in a bicycle firm

  E: daniel bikes to school every day

  C
• consumption spending $175 B

  individual income taxes $40 B

  private investment spending $30 B

  corporate taxes $25 B

  exports $75 B

  government purchases $40 B

  imports $100 B

  the country's gross domestic product is

  $220 B
• year 1: price quantity | year 2: price quantity

  apples $1 100 | apples $2 80

  bananas $2 50 | bananas $2 60

  assuming year 1 is the base year, what is the nominal and real GDP for year 2?

  nominal GDP: $280

  real GDP: $200
• in 2007, the nominal GDP was $50 B and the GDP deflator was 200. thus RGDP was

  $25 B
• GDP has been criticized as a measure of well-being because it wails to take in to account which of the following?

  A: the distribution of income

  B: the value of services

  C: the value of intermediate goods

  D: the value of financial transactions and sales of used items

  E: the value of government services

  A
• which of the following transactions would be counted as investment spending in the calculation of a nation's GDP?

  A: robert buys 100 shares of stock in an energy company

  B: ming purchases a new delivery truck for her bakery business

  C: latasha pays a mechanic to repair her personal car

  D: sam earns interest on Canadian government bonds

  E: taylor receives unemployment benefits when he loses his job

  B
• if the consumer price index increases from 200 to 240 in a one-year period, then the inflation rate is

  20 percent
• which of the following best explains why transfer payments are not included in the calculation of GDP?

  A: used to pay for intermediate goods, and intermediate goods are excluded from GDP

  B: government expenditure, and government expenditures are excluded from GDP

  C: recipients have not produced or supplied goods and services in exchange for these payments

  D: recipients are usually children, and income earned by children is excluded in GDP

  E: recipients are sometimes not citizens of the US

  C
• the value of which of the following would be included in the US GDP?

  A: time spent volunteering at a local hospital

  B: a US savings bond received as a birthday gift

  C: a movie ticket purchased at a local theater

  D: a new handbag made in Italy by a US firm

  E: a used car sold at the same price paid for it

  C
• in an economy, the price index in 2006 was 100 and the real GDP was $1,000. in 2010, the price index was 110 and the GDP was $2,200. based on that information, what is the nominal GDP in 2006 and the real GDP in 2010?

  nominal GDP in 2006: $1,000

  real GDP in 2010: $2,000