15) Intermediate goods are NOT included in Gross Domestic Product (GDP) calculations
because
A) they are used in the production of final goods and would then be counted twice.
B) they are produced overseas.
C) they are made from foreign raw materials.
D) they have very low value added.
16) If Jack refinished his basement himself, the value of his work
A) is not included in Gross Domestic Product (GDP).
B) is included in Gross Domestic Product (GDP).
C) is only included in Gross Domestic Product (GDP) if he uses U.S. made components.
D) is included in the next year’s Gross Domestic Product (GDP).
17) Wheat used for producing bread is
A) a final good.
B) not going to generate any employment.
C) an intermediate good.
D) a durable good.
18) Which of the following transactions would be included in the calculation of Gross Domestic
Product (GDP)?
A) the purchase of legal services
B) the purchase of a share of stock in Apple
C) the purchase of wheat by a baker to make bread
D) the purchase of a second-hand lawnmower from your neighbor
19) Which of the following is a final good?
A) seed used for corn
B) wheat used for bread
C) electricity used for producing automobiles
D) a lawn mower purchased by a household
20) The farmer pays $0.2 for the seed that is sold to the miller for $0.45; the miller makes flour
and sells it to the baker for $0.55. The baker makes bread and sells it to the grocery store for $0.8
and the store sells it to consumers for $1.20. Gross Domestic Product (GDP) is
A) $2.20.
B) $2.00.
C) $1.20.
D) $0.20.
21) A farmer buys seed for 20 cents that is used to grow wheat. The farmer sells the wheat to the
miller for 35 cents, and the miller makes flour, which is then sold to the baker for 55 cents. The
baker makes bread and sells it to the grocer for 80 cents, and the grocer sells the bread to a
family for $1. What is the value added of the baker and what is the sum of the value added at
each stage of production?
A) 80 cents; $1
B) 80 cents; $2.90
C) 25 cents; $2.90
D) 25 cents; $1
22) The term “value added” refers to the dollar value of
A) an industry’s sales plus profits.
B) the intermediate goods and services purchased by an industry.
C) an industry’s sales less the dollar value of the intermediate goods purchased by the industry.
D) the intermediate goods purchased by an industry plus the profits of the industry.
23) The owner of an oil well in Texas sells 500 barrels of oil to a refinery in Mexico for $10,000.
This transaction
A) will increase Gross Domestic Product (GDP) by $10,000.
B) has no effect on Gross Domestic Product (GDP) because the refinery is in Mexico.
C) decreases Gross Domestic Product (GDP) because oil reserves have fallen by 500 barrels.
D) has no effect on Gross Domestic Product (GDP) because this is the sale of an intermediate
product.
24) Intermediate goods are goods that are used up entirely in the production of final goods. As
such, intermediate goods
A) are excluded in calculating Gross Domestic Product (GDP) because they are not valuable.
B) are excluded in calculating Gross Domestic Product (GDP) because to do so would be to
double count them.
C) make up only a small portion of Gross Domestic Product (GDP).
D) are included in Gross Domestic Product (GDP) only if produced within the borders of the
United States.
25) Why might a homemaker be upset with the way Gross Domestic Product (GDP) is
calculated?
A) because the government always underestimates the dollar value of the household services
produced at home and outside the market that are included in the Gross Domestic Product (GDP)
statistic
B) because household services produced at home and outside the market are only included in
Gross Domestic Product (GDP) if the homemaker is a man
C) because household services produced at home and outside the market that are sold to others
are not included in Gross Domestic Product (GDP)
D) because none of the household services produced for at home and outside the market are
included in Gross Domestic Product (GDP) even though they contribute greatly to the welfare of
the family
26) Social Security payments are
A) included in Gross Domestic Product (GDP).
B) not included in Gross Domestic Product (GDP), but are included in Gross Domestic Income
accounts.
C) not included in Gross Domestic Product (GDP).
D) not included in Gross Domestic Product (GDP), but are included in Net Domestic Product.
27) Which of the following statements is FALSE?
A) Gross Domestic Product (GDP) measures the market value of final goods and services
produced during a particular time period.
B) Transfers of used goods are not included in Gross Domestic Product (GDP).
C) Private transfer payments, such as an inheritance, are included in the Gross Domestic Product
(GDP).
D) If statisticians counted intermediate goods, the estimate of Gross Domestic Product (GDP)
would be too high.
28) A car sold from a used car lot
A) would be counted in Gross Domestic Product (GDP).
B) would fall under net exports, and would then be counted in Gross Domestic Product (GDP).
C) would not be counted in Gross Domestic Product (GDP).
D) would only be counted in Gross Domestic Product (GDP) if it was a foreign made car.
29) Which of the following is included in Gross Domestic Product (GDP)?
A) the buying and selling of securities
B) government transfer payments
C) private transfer payments
D) the sale of used goods
E) none of the above
30) A valid rationale for the decision NOT to include non-compensated housework in Gross
Domestic Product (GDP) calculations is that
A) it would decrease the employment rate for domestic work.
B) there is some difficulty in measuring quality and quantity.
C) it is not a product or service.
D) it would understate the value of production in the economy.
31) Which of the following is NOT included in the calculation of Gross Domestic Product
(GDP)?
A) the purchase of a raincoat by Mr. Z
B) Mrs. T’s use of a lawyer
C) Mr. J’s purchase of a share of General Motors stock
D) All of these would be included.
32) The purchase of a share of stock is excluded in the calculation of Gross Domestic Product
(GDP) because it
A) is an intermediate good.
B) produces value added.
C) only represents the transfer of ownership rights.
D) is a final service and not a good.
33) Which of the following transactions would be included in Gross Domestic Product (GDP)?
A) the purchase of new tires by a family to replace worn out tires on the family car
B) the purchase of a used car
C) the purchase of 100 shares of General Motors stock
D) the purchase of 2 grams of cocaine
34) If you buy stocks and bonds, the dollar value of those stocks and bonds is
A) included in Gross Domestic Product (GDP) under investment.
B) included in Gross Domestic Product (GDP) under consumer expenditures.
C) not included in calculating Gross Domestic Product (GDP) for they merely represent a
transfer of ownership.
D) included in Gross Domestic Product (GDP) if the stocks and bonds were issued by business
firms but not if they were issued by governments.
35) Gross Domestic Product (GDP) figures may understate the value of goods and services due
to
A) the exclusion of the underground economy.
B) the inclusion of household production.
C) the inclusion of legal non-reported, non-taxed income.
D) the exclusion of the value of stocks.
36) Which of the following would NOT be included in a nation’s Gross Domestic Product
(GDP)?
A) The government purchases 100 new trucks for the Army.
B) The inventory of paper towels goes up.
C) A landlord rents an apartment.
D) In a poker game a student wins $500 that he does not report as income.
37) National income accounting is
A) how the amount of unemployment in the system is measured.
B) used only to determine the government deficit.
C) an approach to measuring an economy’s aggregate performance.
D) the system that measures the value of the Dow Jones average.
38) Which of the following items are included in GDP?
A) used cars
B) all transactions involving bonds
C) newly built homes
D) unemployment benefits
39) Which of the following is included in GDP?
A) A computer manufacturer produces and sells a computer.
B) A woman mows her own yard and trims her own hedges.
C) An individual smuggles illegal drugs into the country and sells them.
D) An illegal gambling operation profits from secret betting activities.
40) Which of the following items is excluded from GDP?
A) services a barber performs in cutting hair
B) production and sale of hair-cutting equipment
C) services a barber performs in repairing his own hair-cutting equipment
D) the construction of a new barbershop
41) Gross Domestic Product (GDP) is
A) the total wholesale value of all final goods and services produced by factors of production
owned by citizens of a nation.
B) the total market value of all services produced by factors of production located within a
nation’s borders.
C) the total market value of all goods produced within a nation’s borders.
D) the total market value of all final goods and services produced by factors of production
located within a nation’s borders.
42) The total value of all final goods and services produced by factors of production located
within a nation’s borders is
A) GDP.
B) NI.
C) PI.
D) net investment.
43) Suppose that in 2018, the total value of all final services produced in a nation was $300
billion; the total value of all final goods produced in that nation was $400 billion; and the total
value of all final goods and services produced by that nation’s firms in other countries was $300
billion. Gross domestic product (GDP) was
A) $700 billion.
B) $500 billion.
C) $900 billion.
D) $800 billion.
44) GDP
A) is a stock measure since it represents the total market value.
B) is a flow measure since it represents the value of a flow of production over a year’s period.
C) is neither a stock or flow measure since it is measured in dollars.
D) could be either a stock or flow measure depending upon whether it is measured in dollars or
units of production.
45) GDP is a
A) stock because it measures income for the entire country.
B) stock because it measures wealth at a distinct point in time.
C) flow because dollar values are used.
D) flow because it measures income over a period of time.
46) When dealing with anything that is measured as a flow, one must
A) use dollar values.
B) make sure the thing can be measured accurately.
C) specify a time period.
D) specify one day in time.
47) Intermediate goods are
A) goods that are used up entirely in the production of final goods.
B) the stock of all resources excluding labor.
C) goods that get sold to the U.S. government.
D) equal to the receipts of firms.
48) GDP does NOT include intermediate goods because
A) intermediate goods are not valuable.
B) intermediate goods are not useful to consumers.
C) that would count the value of intermediate goods twice.
D) that would understate the true size of GDP.
49) The farmer pays 15 cents for wheat seeds. When the wheat is grown and harvested, the
farmer sells it to the miller for 30 cents, who makes flour and sells the flour to the baker for 60
cents. The baker makes bread and sells it to the grocer for 90 cents, and the grocer sells it to a
family for $1.25. The contribution to GDP is
A) 35 cents.
B) $1.25.
C) $1.95.
D) $3.20.
50) Value added is
A) the price of an intermediate product.
B) the amount of dollar value contributed to a product at each stage of its production.
C) the sum of the prices of intermediate products.
D) the dollar value contributed to a product at the last stage of its production.
51) The dollar value of an industry’s sales minus the value of intermediate goods is
A) GDP.
B) NDP.
C) transfer payments.
D) value added.
52) The total value added
A) equals the retail price.
B) equals the wholesale price.
C) equals the sum of the prices on the intermediate goods.
D) equals the retail price less the wholesale price.
53) Refer to the above table. The production of this good goes through 4 different stages of
production. What is the value added at Stage 2?
A) $0.02
B) $0.08
C) $0.10
D) $0.75
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54) Refer to the above table. The production of this good has been through the first 3 stages of
production. What is the total value added in Stage 1 through 3?
A) $0.75
B) $0.43
C) $0.07
D) Cannot be computed without more information.
55) Refer to the above table. The production of this good goes through 4 different stages of
production. What is the total dollar value added when production is completed?
A) $0.07
B) $0.32
C) $0.75
D) Cannot be computed without more information.
56) Refer to the above table. The production of this good goes through 4 different stages of
production. What does the total value added equal?
A) $0.07
B) $0.32
C) $0.75
D) Cannot be computed without more information.
57) A farmer buys seed for 15 cents that is used to grow wheat. The farmer sells the wheat to the
miller for 30 cents, who makes flour. The flour is sold to the baker for 65 cents and the baker
makes bread, which is sold to the grocer for 90 cents. The grocer sells the bread for $1.25. What
is the value added for the miller?
A) 65 cents
B) 45 cents
C) 35 cents
D) 90 cents
58) The production of a portable power bank involves 5 stages. The value added after the first
stage of production occurs is $1.20. The sale price of the portable power bank is $2.50. Based on
the above information, what amount is used to measure GDP?
A) $3.70
B) $1.20
C) $1.30
D) $2.50
59) A farmer buys seed for 15 cents that is used to grow wheat. The farmer sells the wheat to the
miller for 30 cents, who makes flour. The flour is sold to the baker for 60 cents and the baker
makes bread, which is sold to the grocer for 90 cents. The grocer sells the bread for $1.30. What
is the value added for the grocer?
A) 15 cents
B) 40 cents
C) 35 cents
D) $1.30
60) A good goes through three stages of production. The value added at stage 1 is $3; the value
added at stage 2 is $5; the value added at stage 3 is $2. What is the retail price of the good?
A) $2
B) $10
C) $20
D) Cannot be determined based on the information given.
61) Which of the following transactions would NOT be included in GDP?
A) the purchase of 100 shares of newly issued Microsoft stock
B) the purchase of a newly issued government bond
C) the purchase of previously issued corporate bond
D) all of the above
62) Which of the following transactions is included in GDP?
A) funds given to a college student by her parents
B) funds received by a college student for working in the college dining hall
C) funds given to a family on welfare
D) Social Security check received by an elderly couple
63) Which of the following is included in measuring GDP?
A) the value added at each stage of production of a final product
B) the buying and selling of securities
C) the transfer of secondhand goods
D) household services rendered by homemakers
64) Which of the following items is included in GDP?
A) the value of a medical service
B) the value of home cooking
C) proceeds for a garage sale of used goods
D) purchase of a government bond
65) Which of the following items is NOT included in GDP?
A) purchase of a hamburger at a fast-food restaurant
B) sales at a grocery store
C) sale of Microsoft security stock
D) downloads of iTunes music charged to a credit card
66) GDP is a measure of all of the following EXCEPT
A) the overall level of economic activity.
B) the total of production.
C) overall welfare.
D) the total value of expenditures.
67) A family sells the house they have lived in for two years to a friend. They received $300,000
and paid $200,000 three years ago. This transaction
A) increases GDP by $150,000.
B) increases GDP by $50,000.
C) has no effect on GDP because the house was not built this year.
D) has no effect on GDP because the buyer is the family’s friend.
68) Which of the following statements is NOT true of GDP?
A) GDP excludes nonmarket production.
B) There are no significant weaknesses in using GDP as a measure of the nation’s economic
performance.
C) GDP is the value of final goods and services produced in the economy.
D) GDP is not a measure of a nation’s overall welfare.
69) Which of the following is a significant weakness of GDP as a measure of the nation’s
economic performance?
A) GDP excludes the secondhand good market because it is impossible to obtain an estimate of
the amount sold.
B) GDP excludes the value of the buying and selling of securities.
C) GDP considers product and factor markets but not services.
D) GDP excludes nonmarket production, such as black market activities.
70) GDP does NOT measure the well-being of a nation’s residents because it
A) excludes the sale of secondhand goods.
B) excludes the value of intermediate goods.
C) includes the value of final goods and services produced in the economy.
D) excludes nonmarket transactions.
71) When considering GDP as a measure of the nation’s economic performance, which of the
following statements is NOT true?
A) GDP is a good measure of a nation’s overall welfare.
B) GDP is useful to map changes in the economy’s domestic economic performance over time.
C) GDP is underestimated because it does not include illegal activities.
D) GDP would be a better measure of economic performance if it included nonmarket activities.
72) Which of the following is a main limitation of GDP?
A) GDP figures are grossly inaccurate due to sampling errors.
B) The real definition of what is and is not included in GDP is unclear.
C) GDP is not a good measure of a nation’s overall welfare.
D) GDP includes some products, which by their very nature are bad products, such as military
weapons.
73) Which one of the following is NOT included in GDP?
A) You pay a roofer $2,000 to repair your roof after it is damaged in a hailstorm.
B) You pay a roofer $2,000 to repair your roof after you discover leaks have appeared due to
normal wear and tear.
C) You give up a weekend of leisure to repair your roof yourself.
D) You purchase $20 worth of first aid supplies at the local drugstore to treat the cuts and
scrapes you suffered while crawling around on the roof.
74) Which one of the following is NOT included in GDP?
A) You look after your neighbor’s plants during her vacation in exchange for her agreement to
feed your fish while you are gone.
B) A homeowner hires a cleaning service to take care of household chores she chooses not to do
because of the demands of her job.
C) A bicycle manufacturer pays an advertising agency to develop a new promotional campaign.
D) You purchase new tires for your old car.
75) Which of the following is included in GDP?
A) A newly laid-off worker receives his $400 unemployment compensation check from the state
government.
B) A college senior receives a $1,000 graduation gift from a grandparent.
C) You buy a $12 snow shovel to have on hand for the next snow storm.
D) You purchase $300 worth of clothes from a thrift shop selling second-hand clothing.
76) GDP is a measure of
A) production.
B) innovation.
C) inflation.
D) the amount of money available.
77) The total market value of the nation’s annual final products produced domestically best
defines the
A) GDP.
B) GNP.
C) CPI.
D) PPI.
78) Gross domestic product is a measure of
A) the total value of all transactions in U. S. markets.
B) the added value of production.
C) the dollar value of final goods and services produced in the United States.
D) the dollar value of the aggregate measure of business as measured by the Dow Jones
Industrial Average.
79) Which of the following is NOT included when calculating GDP?
A) the dollar value of a new book
B) the dollar value of a new iPod
C) the dollar value of a newly issued corporate bond
D) the dollar value of tuition expenditures at a community college
80) Which of the following is counted in the GDP in a given year?
A) the sale of Facebook stock
B) the sale of a used Mazda convertible
C) the dollar value of the housework done by a stay-at-home mom
D) the sale of a new screwdriver
81) Suppose you drive downtown, pay for parking at a private parking garage, and go to see an
investment advisor. He charges you a $50 fee to advise you to purchase 100 shares of stock,
which you do. Which of these transactions is NOT included in GDP?
A) the purchase of gas for the trip
B) paying the parking fee
C) paying the $50 fee to the investment advisor
D) your purchase of the stock
82) Which one of the following is NOT included in GDP?
A) The federal government pays a defense contractor to develop a new weapons system.
B) You volunteer to organize a neighborhood watch group on your block.
C) You pay your monthly apartment rent.
D) A mail-order firm constructs a new warehouse in Kansas as a central distribution facility.
83) National income accounting is
A) used by businesses to calculate their profits during a given year.
B) a system utilized to measure macroeconomic activity.
C) a measure of consumer income.
D) used by accountants to calculate the tax obligations of multinational corporations.
84) Gross domestic product is the
A) market value of all intermediate and final goods produced in a year.
B) market value of all final goods produced in a year.
C) total spending in an economy in a year.
D) value of total exports in a year.
85) The value added method of calculating GDP means
A) adding up the market values of all intermediate goods.
B) calculating the percentage changes in the GDP between two years.
C) adding up the incomes of all businesses in a given year.
D) adding up the difference between the sale price and the value of intermediate goods of each
product at every stage of production.
86) Your parents surprise you with a $500 check. As a result, the U.S. GDP
A) increases because this is unexpected income to you.
B) decreases because you will spend it on useless goods.
C) remains unchanged because it was counted when your parents earned it.
D) decreases because you have to pay taxes on this income.