Chapter 23 (B)

81. A U.S. publisher purchases new computers. This purchase by itself makes

• A.investment and GDP higher.
• B.investment higher and leaves GDP unchangeD.
• C. investment higher and reduces GDP.
• D.neither investment nor GDP higher.

82. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result

• A.U.S. investment and GDP increase, but German GDP is unaffected
• B.U.S. investment and German GDP increase, but U.S. GDP is unaffected
• C. U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods.
• D.U.S. investment, U.S. GDP, and German GDP all increase.

83. If a U.S. citizen buys a television made in Korea by a Korean firm,

• A.U.S. net exports decrease, and U.S. GDP decreases.
• B.U.S. net exports are unaffected, and U.S. GDP decreases.
• C. U.S. net exports are unaffected, and U.S. GDP is unaffected
• D.U.S. net exports decrease but U.S. GDP is unaffected

84. If a U.S. household buys a $75 handbag from Italy, U.S. consumption increases by $75, U.S.

• A.imports increase by $75, and U.S. GDP increases by $75.
• B.imports increase by $75, but U.S. GDP is unaffected
• C. imports are unaffected, and U.S. GDP is unaffected
• D.exports increase by $75, and U.S. GDP increases by $75.

87. After the terrorist attack on September 11, governments raised expenditures to increase security at airports. These purchases of goods and services are

• A.not included in GDP since they are not productive.
• B.not included in GDP since the government will have to raise taxes to pay for them.
• C. included in GDP since government expenditures are included in GDP.
• D.included in GDP only to the extent that the Federal, and not state or local governments, paid for them.

90. A transfer payment is

• A.a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location.
• B.a payment that is automatically transferred from your bank account to pay your utility bill.
• C. the term that is used to indicate that your paycheck has been automatically deposited to your bank account.
• D.a form of government spending that is not made in exchange for a currently produced good or service.

91. Which of the following represents a transfer payment?

• A.you transfer $1,000 from your bank account to a mutual funD.
• B.the government sends your grandfather his Social Security check.
• C. the bank transfers $10 quarterly interest to your savings account.
• D.your employer automatically transfers $100 each month from your wages to a non-taxable medical spending account.

92. If the U.S. government pays an economist at the U.S. Department of Commerce $50,000 in salary in 2003, and $30,000 in retirement benefit in 2004

• A.each payment will be included in GDP as government purchases for the respective years.
• B.the 2003 payment is included in 2003 GDP as government purchases, but the 2004 payment is not included in 2004 GDP.
• C. the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is included in 2004 GDP as government transfer payments.
• D.the 2003 payment is included in 2003 GDP as government purchases, and the 2004 payment is allocated to previous years' GDP according to the amount of work performed each year.

93. To encourage formation of small businesses, the government could provide subsidies; these subsidies would

• A.be included in GDP because they are part of government expenditures.
• B.be included in GDP because they are part of investment expenditures.
• C. not be included in GDP because they are transfer payments.
• D.not be included in GDP because the government raises taxes to pay for them.

94. Transfer payments are

• A.included in GDP because they represent income to individuals.
• B.not included in GDP because they are not payments for currently produced goods or services.
• C. included in GDP because the income will be spent for consumption.
• D.not included in GDP because taxes will have to be raised to pay for them.