The American Timber Company harvests trees and processes the timber into finishe
ID: 1211983 • Letter: T
Question
The American Timber Company harvests trees and processes the timber into finished wood that is then sold to the American Lumber Yard, which in turn packages and markets the wood to the American Homebuilder Company, who then uses the wood to construct homes that are sold to the public. Which of these companies should be included in GDP in regard to the final goods and services they each produce?
American Homebuilder Company
American Timber Company and American Lumber Yard
All three companies
American Homebuilder Company and American Lumber Yard
All of the following statements are true regarding the term X-IM, which is used in the aggregate spending calculation that determines GDP, EXCEPT
It represents net exports
X is sales to foreigners
IM is sending on imports
Income spent on exports is income that has leaked across national borders and was not spent on domestic good and services.
The most important uses of gross domestic product (GDP) include all of the following EXCEPT
measuring the size of an economy.
providing a scale against which to measure the economic performance of other years.
comparing the economic performance of different countries.
measuring the quality of life
To measure actual changes in aggregate output, a modified version of gross domestic product (GDP), known as real GDP, is needed to adjust for what variable?
Price changes
Currency fluctuations
Exchange rate differences
Productivity variances
All of the following are established methods to calculate gross domestic product (GDP) EXCEPT
surveying firms and adding up the total value of their production of final good and services
adding up aggregate spending on domestically produced final goods and services in the economy.
summing the total factor income earned by household from firms in the economy
increasing the previous fiscal year's GDP by the rate of inflation for the current year to arrive at real GDP for the current year
o ne method to calculate gross domestic product (GDP) is to add up aggregate spending on domestically produced final goods and services. Based on this method, which of the following expenditures by Apple, Inc. should be counted in GDP
the purchase of microprocessors to be used in its new laptop
factory space bought for producing a new product line
wages paid to R&D staff members to develop new software technology
components purchased from an outside supplier to be used in the iPhone
Suppose a small economy produces three items: wheat, flour, and bread. Farmer Ted produces wheat and sells it to the American Wheat Company. The American Wheat Company produces flour and sells it to the Big Bread Corporation. Use this information and the table to answer the following question
Farmer Ted
American Wheat Company
Big Bread Corporation
Intermediate goods
$0
$40
$110
Wags
30
50
60
Profits
10
20
40
Value of output
40
110
210
American Wheat Company's value added is _____________ and Big Bread's value added is__________
20; 40
50; 60
70; 100
40; 120
Which of the following are included in the calculation of gross domestic product (GDP)
changes in inventory and net exports
changes in inventory only
changes in net exports only
neither changes in inventory nor net exports
Suppose a small economy produces three items: wheat, flour, and bread. Farmer Ted produces wheat and sells it to the American Wheat Company. The American Wheat Company produces flour and sells it to the Big Bread Corporation. Use this information and the table to answer the question.
Farmer Ted
American Wheat Company
Big Bread Corporation
Intermediate goods
$0
$40
$110
Wags
30
50
60
Profits
10
20
40
Value of output
40
110
210
Total value of gross domestic product (GDP) for this small economy is
$370.
$210.
$160.
All of the following represent components of aggregate spending EXCEPT:
imports minus exports.
consumer spending.
government purchases of goods and services.
investment spending.
Which transaction does NOT represent an addition to U.S. gross domestic product (GDP)?
A U.S. firm manufactures a bicycle sold to a U.S. consumer.
A U.S. firm manufactures a bicycle sold to a Canadian consumer.
A U.S. firm hires construction workers to expand its manufacturing facility.
A German citizen buys stock in a U.S. company.
Which statement is TRUE?
Gross domestic product GDP overstates the true level of production because goods that are sold to other firms as inputs are counted twice.
Inventories of finished goods are not counted as investment because they do not allow for future consumption.
Changes in GDP tell us about economic growth, but they do not reveal anything about the pattern of the business cycle.
Since GDP is equal to the total value of final goods and services produced in the economy in a given time period, it must also equal the flow of money received by firms from their sales in the product market during the same time period.
Gross domestic product (GDP) can be calculated in all of the following ways EXCEPT by adding up:
the value added by all firms.
all spending on domestically produced final goods and services.
all factor income paid by firms.
the cost of each intermediate good and service.
Aggregate spending is equal to:
consumer spending + investment spending + government purchases of goods and services + exports.
consumer spending + inventory spending + government purchases of goods and services + exports.
consumer spending + investment spending + government purchases of goods and services + exports – imports.
consumer spending + inventory spending + government purchases of goods and services + exports – imports.
Consider the following goods at a coffee shop. Which would be considered a final good?
the labor of the barista
the milk that goes into a latte
the cup that the latte was made in
a large latte
Farmer Ted
American Wheat Company
Big Bread Corporation
Intermediate goods
$0
$40
$110
Wags
30
50
60
Profits
10
20
40
Value of output
40
110
210
Explanation / Answer
1. American Homebuilder Company
2. income that has leaked across national borders and was not spent on domestic good and services.
3. measuring the quality of life
4. Price changes
5. increasing the previous fiscal year's GDP by the rate of inflation for the current year to arrive at real GDP for the current year
6. factory space bought for producing a new product line
8. changes in inventory and net exports
10. imports minus exports
11. A German citizen buys stock in a U.S. company
12. Changes in GDP tell us about economic growth, but they do not reveal anything about the pattern of the business cycle.
13. the cost of each intermediate good and service
14. consumer spending + investment spending + government purchases of goods and services + exports – imports
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