Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 5 GDP: A Measure of Total Production and Income
5.1 GDP, Income, and Expenditure
1) A measure of a country‘s production is its
A) gross daily production.
B) general daily product.
C) general domestic production.
D) gross domestic product.
E) gross total output.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
2) The total production within an economy is measured as
A) Gross Home Product.
B) Total Domestic Output.
C) Annual Production Value.
D) Gross Domestic Product.
E) Total Annual Output.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
3) Gross Domestic Product is equal to the market value of all the inal goods and services
________ in a given period of time.
A) produced within a country
B) consumed within a country
C) consumed by the citizens of a country
D) produced by the citizens of a country
E) produced and consumed within a country
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
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4) Gross Domestic Product measures the
A) quantity of the goods and services produced in a given year, listed item by item, within a
country.
B) income of the business sector within a country.
C) market value of the inal goods and services produced in a given year within a country.
D) measures the market value of the domestic labor in a given year within a country.
E) market value of the inal goods and services consumed by households in a given year
within a country.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
5) Gross Domestic Product is the market value of all ________ produced within a country in a
given period of time.
A) inal goods
B) intermediate goods
C) inal services
D) intermediate services
E) inal goods and services
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: New
AACSB: Relective thinking
6) To calculate GDP it is necessary to
A) add the total amounts of all the goods produced.
B) use the market price to place a dollar value on each good produced.
C) use production cost to place a dollar value on all goods produced.
D) use the average market price over the last ive years to place a dollar value on all goods
produced.
E) average the cost of producing a good with the price of the good to place a dollar value
on all goods produced.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
2
7) How are inal goods and services valued when measuring nominal GDP?
A) at current market prices
B) at base year prices
C) at foreign exchange parity
D) at factor market prices
E) at producer cost
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
8) Measuring total production by valuing items at their market value allows us to
A) separate the value of diferent goods with identical prices.
B) separate the value of diferent goods with diferent prices.
C) add together the value of diferent goods that have diferent prices.
D) add together the value of identical goods that have identical prices.
E) ignore the problem that goods and services difer in how long they last.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
9) Wobet is a small country that produces only steak and potatoes. Steaks have a price of
$10 each and potatoes have a price of $1 each. Suppose that Wobet produces 10 steaks and
20 potatoes in 2010. Using ________, Wobet has GDP equal to ________.
A) market value; 30 units
B) a market basket; 30 units
C) market value; $120
D) real value; $120
E) a price index; $120
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
3
10) To calculate GDP it is necessary to add up the market value of all the ________ produced
within a country during a year.
A) goods but not services produced
B) goods and services produced
C) intermediate goods and services produced
D) inal goods and services produced
E) intermediate goods and services produced and all the inal goods and services produced
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
11) GDP is best deined as the ________ in a given time period.
A) number of goods and services produced within a country
B) number of inal goods and services produced within a country
C) market value of the inal goods and services produced within a country
D) market value of the inal goods and services consumed by a nation’s citizens
E) market value of all the goods and services produced within a country
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
12) If you make dinner for yourself,
A) the market value of your dinner is added to GDP.
B) your service in preparing the meal is valued at a cook’s wage and added to GDP.
C) none of what you bought to prepare for dinner is included in GDP.
D) only the market value of ingredients that you purchased this year is added to GDP.
E) the diference between the cost of the ingredients that you purchased this year and the
market value of the dinner is added to GDP.
Skill: Level 3: Using models
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
4
13) Gross Domestic Product is deined to be the market value of all the inal goods and
services produced during a given time period
A) within a country.
B) within and outside a country by that country’s citizens.
C) by citizens of the country, regardless of their place of residence.
D) by only legal residents of the country.
E) within a county minus the market value of all the inal goods and services produced by
that country’s citizens outside the country.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
14) Where are the inal goods and services produced that are included in Germany’s GDP?
A) within Germany
B) anywhere, as long as they are produced using German resources
C) outside of Germany
D) anywhere, as long as they are produced using German labor
E) within Germany but only if they are produced using only German resources
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
15) GDP includes the goods and services produced
A) within a country’s borders by citizens and by non-citizens.
B) by a country’s legal citizens regardless of where in the world they are located.
C) by a country’s citizens but not by non-citizens within the country’s borders.
D) within a country’s borders by citizens and non-citizens plus goods produced abroad by
the country’s citizens.
E) within a country’s borders by citizens and by non-citizens minus the production abroad
by the country’s citizens.
Skill: Level 3: Using models
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
5
16) Which of the following is included in Germany’s GDP?
i. BMWs produced in a German-owned factory in South Carolina
ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock
Exchange
iii. china produced by the English-owned Wedgewood Company at a factory in Berlin,
Germany
A) i and iii
B) ii only
C) iii only
D) i and ii
E) None of the above answers is correct.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
17) Which of the following is included in U.S. GDP?
i. the rental value of homes owned by U.S. citizens
ii. the production of Suburban SUVs by GM in its plant in Mexico
iii. tickets sold by U2 for concerts held in the United States
A) ii only
B) ii and iii
C) i, ii and iii
D) i and iii
E) i only
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
18) Which of the following is NOT directly included in Canadian GDP?
A) the purchase of tickets to a Kanye West concert in Montreal
B) the sale of tickets to the Vancouver Olympics to U.S. citizens
C) gasoline purchased by a tour bus operator in Quebec
D) bus tickets sold to tourists for a tour bus ride in Montreal
E) All of the items would be included in Canadian GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
6
19) Which of the following is NOT directly included in U.S. GDP?
A) sales to tourists of beach umbrellas in Hilton Head, South Carolina
B) sales of sandwiches at a Subway store in Bangor, Maine
C) ticket sales to Ripley’s Aquarium in Gatlinburg, Tennessee
D) popcorn purchased by a movie theater chain in Georgia
E) movie tickets purchased by consumers in Georgia
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: New
AACSB: Relective thinking
20) Which of the following is classiied as a inal good or service?
i. tires bought by GM to put on new Tahoes
ii. mustard bought by Subway to put on its sub sandwiches
iii. your purchase of online access to the Wall Street Journal
A) i and ii
B) i, ii and iii
C) iii only
D) ii and iii
E) ii only
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
21) Which of the following correctly describes a inal good?
i. A inal good is bought by its inal consumer.
ii. A inal good can be used by a irm as a component of another good or service.
iii. Investment goods cannot be a inal good.
A) i only
B) i and ii
C) i, ii and iii
D) i and iii
E) ii and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
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22) Which of the following is a inal good or service?
A) the grilled chicken purchased by Taco Bell for use in their burritos
B) a new replacement muler installed by Midas Mulers
C) the fertilizer purchased by Royal Lawn and Landscape
D) the computers purchased by Oice Depot for sale to its customers
E) the CPUs purchased by Dell to be used in their computers
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
23) Which of the following is a inal good or service?
A) tires purchased by Ford for use on one of their SUVs
B) the new economics textbook you are using
C) the hair gels used by a hair stylist at the local hair salon
D) the butter used by a chef to make butter cream frosting
E) the taco shells purchased by Taco Bell for use in their tacos
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
24) A restaurant buys ish to ofer as a daily menu special. The purchase of the ish by the
restaurant is
A) a consumption expenditure.
B) an investment.
C) an intermediate good.
D) an example of government expenditures on goods and services.
E) part of net exports if the ish was caught beyond the U.S. border.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
8
25) Which of the following is classiied as an intermediate good?
i. the purchase of a Big Mac by a college student
ii. McDonald’s purchase of pickles
iii. a McDonald’s restaurant owner’s interest payment for the loan on her building
A) ii only
B) ii and iii
C) i only
D) i and iii
E) i, ii and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
26) Which of the following is an example of an intermediate good or service?
A) gasoline purchased by Sam for her commute to work
B) lour purchased by Jake to bake a cake for his spouse
C) training seminars for employees of an accounting irm
D) golf balls sold to Tiger Woods
E) None of the above are examples of intermediate goods or services.
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: New
AACSB: Relective thinking
27) Which of the following would NOT be directly included in the U.S. GDP in 2010?
A) the market value of restaurant meals sold in 2010
B) the market value of the jet fuel bought by Delta to use for its lights in 2010
C) the value of the automobiles produced in 2010 at the Toyota plant located in
Georgetown, Kentucky
D) legal services provided to irst time home buyers during 2010
E) the purchase of a new home in Atlanta, Georgia in 2010
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
9
28) One bag of cofee beans is sold for $7 to a cafe that uses it to brew cofee which it sells
to customers for a total of $15. A second bag of cofee is sold directly to Joan for $7, who
uses it to brew cofee for her family every morning. What is the contribution to GDP from
the purchases of cofee beans and cofee?
A) $7
B) $14
C) $15
D) $22
E) $29
Skill: Level 2: Using deinitions
Section: Checkpoint 5.1
Status: New
AACSB: Relective thinking
29) Consumption expenditure includes spending
A) on intermediate goods and services by irms.
B) on oice supplies by irms.
C) by households.
D) by households and spending on oice supplies by irms.
E) by governments when they are buying goods and services that consumers also buy.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
30) Consumption goods and services include
A) washing machines and tickets to football games.
B) new homes and existing homes (as long as improvements have been made to the existing
home).
C) tickets to concerts and medical care provided to veterans by the government.
D) new and used textbooks as long as they are sold via stores or online.
E) vacation time accumulated by workers.
Skill: Level 1: Deinition
Section: Checkpoint 5.1
Status: Old
AACSB: Relective thinking
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