Question

Which of the following would not be included in United States GDP?
A. The wages and salaries of North Carolina State government workers.
B. An imported computer laser printer manufactured in Singapore and purchased by a
Virginia mail order company.
C. A Dell computer manufactured in the United States and exported to Italy for use by
an Italian college student.
D. Sale of 1000 shares of IBM stock on the New York Stock Exchange valued at the
current market price per share.
E. Both B and D.

Which of the following is most likely to decline in a recession?
A. Nominal GDP
B. Real GDP.
C. Potential real GDP
D. The natural rate of unemployment.
E. All of the above

Nominal GDP this year is $12 trillion. If personal consumption expenditures are $8
trillion, government purchases are $3 trillion, and gross private domestic
investment is $2 trillion. Then it follows that
A. net exports are $2 trillion.
B. imports exceed exports by $1 trillion.
C. exports exceed imports by $1 trillion.
D. net exports are zero

Answer 1

1.D. Sale of 1000 shares of IBM stock on the New York Stock Exchange valued at the
current market price per share.

Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. GDP includes all private and public consumption, government outlays, investments, additions to private inventories, and the foreign balance of trade. Current exchanges in stock and bonds are not included in GDP as they affect the values of financial assets and do not lead to changes in flow of goods and services.

2. B. Real GDP.

Recession is the phase of the business cycle during which output is falling. During a recession, real GDP falls below its potential and the unemployment rate is higher than the natural rate of unemployment.

3. B. imports exceed exports by $1 trillion.

GDP= C(onsumption) + G(overnment expenditure) + I(nvestment) + Net X

where Net X= Exports - Imports

Putting the given values, we get:

12= 8+3+2 + Net X

12- 13= Net X

-1 = Net X

That is, imports exceed exports by 1 trillion.