Chapter Four: Module Quiz -- Output and National Income


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  1. Using the expenditure approach, GDP would include all the following except:

      The production of watches in the U.S.
      The production of steel used to construct skyscrapers.
      The production of software by a foreign-owned firm located in the U.S.
      The production of education services by a high school.

  2. The main difference between GDP and GNP is that

      GDP counts only production of goods while GNP counts production of services.
      GDP counts only production of goods and services produced and sold in the US, while GNP counts production of goods and services in the US, regardless of where they are sold.
      GDP counts production of final goods and services, while GNP counts production of all goods and services, including intermediate goods.
      GDP counts production of final goods and services produced in the US, while GNP counts production of final goods and services by US citizens.
      none of the above

  3. If the US experienced a devastating earthquake, GDP would most likely

      increase due to production necessary to repair the damage.
      decrease by the amount of the damage.
      increase due to the foreign imports we would need to purchase in order to sustain us through the crisis.
      None of the Above

  4. Which of the following is a measured component of GDP using any of the three methodologies to count GDP?

      Joe adds on a room to his house and does all the work himself with donated materials from a friend.
      Barbara spends a lot of time babysitting on the weekends but fails to report the income to the IRS.
      Charles Schwab Inc. traded $2 billion is stocks last year, not counting the value of its brokerage services.
      The glass industry produced $400 million in glass to go into new houses.
      None of the above is a measured component of GDP.

  5. GDP is not a perfect measure of the health of the economy because

      it fails to account for quality changes such as an improvement in air quality.
      it fails to take into account the value of leisure time.
      it fails to account for the non-production value of our stock of natural resources.
      it fails to distinguish, for example, between production of televisions and production of bombs. Each is valued according to the market value of the production.
      all of the above

  6. GDP in the U.S. is currently near

      $100 billion
      $1.2 trillion
      $5.3 trillion
      $13.0 trillion
      $16 trillion

  7. If production by US firms located outside of the US exceeded production by foreign firms located in the US then

      GNP would exceed GDP.
      GDP would exceed GNP.
      we cannot tell whether GDP or GNP would be larger.

  8. A recession is loosely defined as

      an unemployment rate above the natural rate of unemployment.
      having more than 6 percent of the work force receiving unemployment insurance.
      more than two consecutive months of decline in the economy's level of consumption spending.
      six or more consecutive months of decline in the economy's level of output.
      none of the above

  9. Business cycles seem to be recent phenomena that are probably caused by political interference in the economy.

      True
      False

  10. GDP per capita is a good measure of the average standard of living in an economy.

      True
      False


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