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37. A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a
bicycle, which it sells for $250. Taken together, these two transactions contribute
a.
$150 to GDP.
b.
$250 to GDP.
c.
between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the
bicycle.
d.
$400 to GDP.
38. Al’s Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to
make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just
described contribute how much to GDP?
a.
$1 million
b.
$3 million
c.
$4 million
d.
$5 million
39. One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers. A
second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00. Taking these four transactions
into account, what is the effect on GDP?
a.
GDP increases by $3.00.
b.
GDP increases by $5.00.
c.
GDP increases by $6.00.
d.
GDP increases by $7.00.
40. A farmer sells five pounds of pecans to a Smith’s Fresh Pecans for $10. Smith’s Fresh Pecans resells three pounds for
$4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into
account, how much is added to GDP?
a.
$22.50
b.
$29.50
c.
$21.50
d.
$31.50
41. A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and
expenses to the homeowner. How much do these transactions add to GDP?
a.
$500
b.
$700
c.
$1200
d.
$1700
42. Wholesome Wheat Bakery buys $10.00 worth of flour from Mikes’ Mill and uses the flour to make bread. Wholesome
Wheat sells the bread to the public for $22.00. Taking these two transactions into account, what is the effect on GDP?
a.
GDP increases by $10.00
b.
GDP increases by $12.00
c.
GDP increases by $22.00
d.
GDP increases by $32.00
43. A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells
them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer’s inventory. How
much is added to GDP?
a.
$8,000
b.
$15,000
c.
$17,000
d.
$13,000
44. Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it used to bake bread that
customers purchased. In which case will the flour be counted as a final good?
a.
Janet’s purchase and ABC Bakery’s purchase.
b.
ABC Bakery’s purchase but not Janet’s purchase.
c.
Janet’s purchase but not ABC Bakery’s purchase.
d.
Neither Janet’s purchase nor ABC Bakery’s purchase.
45. Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What’s the
total contribution to GDP each time Tim mows a yard?
a.
$1
b.
$19
c.
$20
d.
$21
46. A dairy buys $50,000 worth of milk and spend $5,000 on cartons and utilities. It sells the cartons of milk to a grocery
store for $60,000 that then sells all of the cartons to consumers for $65,000. How much do these actions add to GDP?
a.
$55,000
b.
$65,000
c.
$120,000
d.
None of the above are correct.
GDP
47. An automobile factory in Michigan uses $100,000 worth of parts purchased from foreign countries along with U.S.
inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did
these actions add to GDP?
a.
$300,000
b.
$500,000
c.
$600,000
d.
$700,000
48. A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these cars are sold in Mexico and the
other $2.5 million are sold in the U.S. In both cases $1 million of the value of the cars was due to U.S-owned equipment
located in Mexico and U.S. managers working in Mexico. How much did this production contribute to U.S. GDP?
a.
$0
b.
$1 million
c.
$2 million
d.
None of the above are correct
49. Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which
produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide, Inc., Couches, Inc.
produces a couch and sells it for $2,600. Neither firm had any inventory at the beginning of 2015. During that year,
Cowhide produced enough leather for 25 couches. Couches, Inc. bought 80% of that leather for $20,000 and promised to
buy the remaining 20% for $5,000 in 2016. Couches, Inc. produced 20 couches during 2015 and sold each one during that
year for $2,600. What was the economy's GDP for 2015?
a.
$25,000
b.
$52,000
c.
$57,000
d.
$65,000
50. Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp,
Inc., which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling
Rawhide, Chewy Chomp, Inc. produces a dog chew and sells it for $2.50. Neither firm had any inventory at the beginning
of 2014. During that year, Rolling Rawhide produced enough rawhide for 2000 dog chews. Chewy Chomp, Inc. bought
90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015. Chewy Chomp, Inc. produced
1800 dog chews during 2014 and sold each one during that year for $2.50. What was the economy's GDP for 2014?
a.
$3,800
b.
$4,500
c.
$4,700
d.
$5,000
51. In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal
Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold
$1 million worth of cereal remains in Big Flake Cereal Company’s inventory at the end of 2014. The transactions just
described contribute how much to GDP for 2014?
a.
$3 million
b.
$7 million
c.
$8 million
d.
$11 million
52. Fine Edge manufactures lawn mowers. In 2014 it had $2 million worth of lawn mowers in inventory. In 2015 it sold
$10 million worth of lawn mowers to consumers and had $1 million worth of lawn mowers in inventory. How much did
the lawn mowers produced by Fine Edge add to GDP in 2015?
a.
$11 million
b.
$10 million
c.
$7 million
d.
$9 million
53. A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their
inventories during the last quarter. Based on this information GDP likely
a.
increased.
b.
decreased.
c.
stayed the same.
d.
may have increased, decreased, or stayed the same.
54. Which of the following domestically produced items is not included in GDP?
a.
a bottle of shampoo
b.
a hairdryer
c.
a haircut
d.
All of the above are included in GDP.
55. Which of the following is not included in GDP?
a.
a can of bug spray
b.
the services of an exterminator
c.
the honey produced and sold by a beekeeper
d.
All of the above are included in GDP.
56. Which of the following transactions is not included in GDP?
a.
oranges sold to households by a grocer.
b.
orange juice sold by a restaurant to its diners.
c.
oranges sold by a farmer to a grocery store.
d.
All of the above are included in GDP.
57. Gross domestic product includes all
a.
legal and illegal final goods, but it excludes all legal and illegal final services.
b.
legal and illegal final goods and all legal and illegal final services.
c.
legal final goods and services, but it excludes illegal final goods and services.
d.
legal and illegal final goods and legal final services, but it excludes illegal final services.
58. Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership
or the purchase of an antique rocking chair by a person at a yard sale, are
a.
included in current GDP because GDP measures the value of all goods and services sold in the current year.
b.
included in current GDP but valued at their original prices.
c.
not included in current GDP because it is difficult to determine their value.
d.
not included in current GDP because GDP only measures the value of goods and services produced in the
current year.
59. Which of the following transactions would be included in GDP for 2015?
a.
In February 2015, Amanda sells a 2009 Hyundai to Isabella.
b.
In March 2015, Amanda buys a ticket to visit a zoo in Florida. She visits the zoo in February 2016.
c.
In November 2015, Isabella eats onions that she harvested from her backyard garden in October 2015.
d.
All of the above are correct.
60. Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house
for $260,000. Which of the following statements is correct regarding the sale of the house?
a.
The 2014 sale increased 2014 GDP by $260,000 and had no effect on 2011 GDP.
b.
The 2014 sale increased 2014 GDP by $20,000 and had no effect on 2011 GDP.
c.
The 2014 sale increased 2014 GDP by $260,000; furthermore, the 2014 sale caused 2011 GDP to be revised
upward by $20,000.
d.
The 2014 sale affected neither 2014 GDP nor 2011 GDP.
61. The Patersons bought a home that was newly constructed in 2007 for $275,000. They sold the home in 2015 for
$255,000. Which of the following statements is correct regarding the sale of the house?
a.
The 2015 sale increased 2015 GDP by $255,000 and had no effect on 2007 GDP.
b.
The 2015 sale reduced 2015 GDP by $20,000 and had no effect on 2007 GDP.
c.
The 2015 sale increased 2015 GDP by $255,000; and caused 2007 GDP to be revised downward by $20,000.
d.
The 2015 sale affected neither 2007 GDP nor 2015 GDP.
62. In early 2010 Molly paid $200,000 for a house built in 2000. She spent $30,000 on new materials to remodel the
house. Although Molly lived in the house after she remodeled it, its rental value rose. Which of the following contributed
to real GDP in 2010?
a.
the price of the house, the cost of remodeling materials, the increase in rental value
b.
the price of the house and the cost of remodeling materials, but not the increase in rental value
c.
the costs of the remodeling materials and the increase in rent, but not the price of the house
d.
None of the above are correct.
63. Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been
renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house.
How much does Tom and Lilly’s decision to buy the house change GDP?
a.
it reduces GDP by $12,000
b.
it does not change GDP
c.
it raises GDP by $238,000
d.
it raises GDP by $250,000
GDP
64. Sally purchased a log-splitter five years ago. This year, she purchases some new parts, gasoline, oil, and spends 2
hours repairing the log-splitter. Which of the following is included in this year’s GDP?
a.
the amount she paid to buy the new parts
b.
the amount she paid to buy new parts and gasoline
c.
the amount she paid to buy new parts, gasoline, and oil.
d.
the amount she paid to buy new parts, gasoline, oil, and the market value of the 2 hours spent to repair the log-
splitter.
65. Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for
$18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did
these transactions contribute to U.S. GDP for the year?
a.
$18,000
b.
$22,000
c.
$39,000
d.
$57,000
66. Consider two cars manufactured by Chevrolet in 2014. During 2014, Chevrolet sells one of the two cars to Emily for
$20,000. Later in the same year, Emily sells the car to Jim for $18,000. The second automobile, with a market value of
$19,000, is unsold at the end of 2014 and it remains in Chevrolet’s inventory. The transactions just described contribute
how much to GDP for 2014?
a.
$20,000
b.
$37,000
c.
$38,000
d.
$39,000
67. AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used
refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of
AA’s inventory is included in 2015 GDP?
a.
$0
b.
$10,000
c.
$90,000
d.
$100,000
68. Which of the following is included in Singapore’s GDP?
a.
The value of production by a Singaporean working in the U.S.
b.
The value of production by an American working in Singapore
c.
The value of production by a Singaporean that crosses the border to work in Malaysia.
d.
All of the above are correct.
69. Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included
a.
in both German GDP and U.S. GDP.
b.
in German GDP, but is not included in U.S. GDP.
c.
in U.S. GDP, but is not included in German GDP.
d.
in neither German GDP nor U.S. GDP.
70. Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is
included in
a.
both Mexican GDP and U.S. GDP.
b.
Mexican GDP, but it is not included in U.S. GDP.
c.
U.S. GDP, but it is not included in Mexican GDP.
d.
neither Mexican GDP nor U.S. GDP.
