Question

8. Capital goods are treated as _______ goods and, therefore, _______ GDP.

A. final; included in

B. final; excluded from

C. intermediate; included in

D. intermediate; excluded from

9. Which of the following transactions would be included in the GDP of the United States?

A. Coca Cola produces soft drinks in England.

B. Honda produces cars in Ohio.

C. McDonalds sells hamburgers in Russia.

D. Ford Motors produces cars in Mexico

   10.  In the year 2006, Pete Rich purchases a painting done by Rembrandt in 1642 for $20 million. He also pays a one percent commission to the auction house that sold the painting. What is the contribution of this transaction to GDP in the year 2006?

A. $0

B. $200,000

C. $2 million

D. $20.2 million

   11.  The four categories of final users of GDP are:

A. businesses, firms, governments, and the foreign sector.

B. households, the Federal Reserve, governments, and the foreign sector.

C. businesses, corporations, firms, and farms.

D. households, firms, governments, and the foreign sector.

12. Total spending on final goods and services in an economy must equal total:

A. profits.

B. production.

C. revenues from all transactions.

D. investment.

13. Consumption spending includes spending on:

A. durables, nondurables, and services.

B. stocks, bonds, and other financial instruments.

C. capital goods, residential housing, and changes in inventories.

D. goods and services by federal, state, and local governments.

    14.  Spending on new capital goods, new homes, and the addition of unsold goods to company inventories is included in:

A. consumption expenditures.

B. investment.

C. government purchases.

D. service spending.

15. Government purchases include all of the following EXCEPT:

A. social security benefits paid by the federal government.

B. the construction of a new court house built by a county government.

C. the salary paid to an elementary school teacher employed by a local public school district.

D. the purchase of new military hardware by the U.S. Army.

Answer 1

8. Final goods , included . Because in GDP only final goods are included. Hence ,part (A) is correct.

9. Honda produces car in Ohio will include in the GDP of U.S because ohio is in the U.S. Hnce , part (B) is correct.

10. If the painting cost = $20 million = 20,000,000 and pays 1% commission to the auction to the sold house.

Then , total amount included in GDP = 20,000,000 /100 = $ 2,00,000 . Hence, option (B) is correct.

11. Households , firms , government and the foreign sector are four categories of final users of GDP . In simple model, there is only househlds and firms . In complicated model, there is also government sector. In open economy , there is inclusion of foreign sector too. Hence, option (D) is correct.

12. Total spending on final goods and services in an economy must equal to total production.

13. Consumption spending includes spending on durables, non-durables and services . Because consumer spending includes goods and services spending.Hence, option (A) is correct.

14. Investment spending because all these are part of this. Hence option (B) is correct.

15. Government purchases include all of the folowing except social security paid by the federal government because this is the part of the transfer payments. Hence, option (A) is correct.