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MACRO ECONOMICS
Name: Zeeshan Afzal (Class ID: 58533)
4. The United States produces and sells millions of types of products. To add them up to
a single aggregate, each good is weighted by:
a. Its cost of production.
B. Its market price.
c. Its utility to consumers.
d. Its contribution to corporate profits.
6. To compute GDP, the quantity of each final good or service produced must first be
weighted by:
A. Its market price.
b. Its cost of production.
c. Its share of total output.
d. Its contribution to corporate profits.
9. Double counting in the national income accounts will not occur if GDP is computed
by summing all:
A. Sales of final output.
b. Sales of final output and intermediate goods.
c. Sales.
d. Production costs.
10. Use the following information to answer the question. There are three firms in an
economy: X, Y, and Z. Firm X buys $200 worth of goods from Y, and $300 worth of
goods from firm Z, and produces 250 units of output at $4 per unit. Firm Y buys $150
worth of goods from firm X, and $250 worth of goods from firm Z, and produces 300
units of output at $6 per unit. Firm Z buys $75 worth of goods from firm X, and $50
worth of goods from firm Y, and produces 500 units at $2 per unit. Given this
information, what is the economys GDP? Hint: remember that part of each firms
production is used by one of the other firms as a production input (an intermediate
product).
a. $1825.
b. $2700.
C. $2775.
d. $3800.
Components of GDP
13. For purposes of calculating GDP, which of the following payments is not included
in the government spending component?
A. Social security payments.
b. Wages paid by a local government to its road crew.
c. Wages paid by a state government to the workers in its welfare department.
d. The federal governments purchase of a submarine from a shipbuilder.
17. Which of the following would NOT be counted as a final good for inclusion in GDP?
a. A piece of glass bought by a consumer to fix a broken window.
B. A sheet of glass purchased by a commercial builder of a new home.
c. A sheet of glass produced this year and ending up in the inventory of a retail store.
d. A home that is built this year, but is not sold.
18. Which of the following economic activities would not be included in US GDP?
a. Dick hires a nanny for $10 an hour to help his wife take care of their kids.
b. Jose is a great hairdresser, often receiving $20 tips (which he reports on his income
taxes).
c. MaxiPress adds $8,000 worth of books to its inventory which remains unsold by the
end of the year.
D. Rita has a job after school washing dishes 2 hours each evening in her parents diner.
The other dishwashers get $6 an hour, but her parents give her room and board instead.
20. If a used car dealer buys a car for $6,000 and resells it for $6,500, how much has
been added to GDP?
a. Nothing.
B. $500.
c. $6,000
d. $6,500.
GDP Calculations
billions of
dollars
Consumption 4,900
Investment 1,300
Transfer payments 1,050
Government expenditures 1,200
Exports 1,050
Imports 950
Net foreign factor income 20
In billions of dollars
Consumption 3600
Investment 800
Transfer payments 750
Government expenditures 1000
Exports 650
Imports 450
Net foreign factor income -30
In trillions of dollars
GDP 5.0
Government purchases 1.0
Transfer payments 0.2
Exports 0.4
Imports 0.5
Net foreign factor income 0.4
Per-Capita GDP
29. GDP is a:
a. Good measure of relative welfare in various countries.
b. Good measure of relative prices in various countries.
c. Good measure of relative living standards in various countries.
D. Good measure of market activities at market prices.
30. Comparisons of GDP levels across countries are most accurate when:
a. The value of non-market activities is the same across countries.
b. Prices are the same across countries.
C. Prices and the value of non-market activities are the same across countries.
d. Prices for non-market activities are the same across countries.