Question

Please give a brief justification for the correct answer you select:

1. Which of the following is NOT included in 2004’s GDP?

1. The value of a car produced in the United States and exported to England.
2. The profit earned in 2004 from selling a stock that you purchased in 2001.
3. The value of a computer chip that is used in the production of a personal computer.
4. The commission earned by an employment counsellor when she locates a job for a client.

2. Gross National Product is the total market value of

1. All final and intermediate goods and services produced by resources owned by a country in a given year.
2. All final and intermediate goods and services produced in a country in a given year, regardless of who owns the resources.
3. All final goods and services produced in a country in a given year, regardless of who owns the resources.
4. All final goods and services produced by resources owned by a country, regardless of where production takes place.

3. Which of the following is included in both the U.S. GDP and GNP?

1. The value of all cars produced by Ford in Mexico.
2. The value of all cars produced by General Motors in the US.
3. The value of all cars produced by Toyota in the US.
4. The value of cars produced by Nissan in Japan and the US.

4. The value of what Pizza Hut produces in Italy is included in the U.S. ____________ and in the Italian ____________.

1. GDP;GDP
2. GNP;GNP
3. GNP;GDP
4. GDP;GNP

5. The GDP of the U.S. in 2002 was around $10 trillion. This means

1. That the value of output in 2002 was around $10 trillion.
2. That total income in 2002 was around $10 trillion.
3. That total spending in 2002 was around $10 trillion.
4. All of the above

6. In 2004 the change in business inventories is $50 billion and GDP is $160 billion. Final sales in 2004

1. Are $110 billion.
2. Are $200 billion.
3. Are 210 billion.
4. Cannot be determined from this information.

Answer 1

1.b The profit earned in 2004 from selling a stock that you purchased in 2001.

Reason- Purchase and sale of stock is purely financial transaction. It is not included in GDP. It is only a transfer of ownership.

2 d. All final goods and services produced by resources owned by a country, regardless of where production takes place.

Reason- GNP takes into account net income receipts from the world. It is not bounded by where the resource is located.

3. B. The value of all cars produced by General Motors in the US

Reason- General motors is an American MNC. If it is located in US both GDP and GNP takes the value of all cars into account.

4. c. GNP;GDP

Reason- Pizza hut is an American company, if it is located in Italy. Since it is located outside US, it is only measured by US GNP. And it is located in Italy so it is measured by Italy GDP.

5 d. All of the above

Reason- GDP value remains the same when it is measured by output, income or expenditure method.

6.a Are $110 billion.

Reason- GDP= $160 billion

Change in business inventories=$50 billion

Final sales= GDP- Change in business inventories= $160 billion-$50 billion= $110 billion