ECO121_CHAP23,24

            In a simple circular-flow diagram, households buy goods and services with the income they get from

• wages

• rents

• profits

• All of the above are correct

GDP is defined as the

• value of all goods and services produced within a country in a given period of time.

• value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

• value of all final goods and services produced within a country in a given period of time.

• value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

Ryan lives in an apartment where he pays $7,000 a year in rent.   Alexis lives in a house that could be rented for  $14,000 a year.  How much do these housing services contribute to GDP?

• $21,000

• $14,000

• $7,000

• $0

Which of the following is not included in GDP?

• carrots grown in your garden and eaten by your family

• carrots purchased at a farmer’s market and eaten by your family

• carrots purchased at a grocery store and eaten by your family

• None of the above are included in GDP.

Spots, Inc. produces ink and sells it to Write on Target, which makes pens.  The ink produced by Spots, Inc. is called

• an inventory good.

• a transitory good.

• a final good.

• an intermediate good.

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3.00 to consumers.  A second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2.00.  Taking these four transactions into account, what is the effect on GDP?

• GDP increases by $3.00.

• GDP increases by $5.00.

• GDP increases by $6.00.

• GDP increases by $7.00.

Which of the following is included in U.S. GDP?

• the value of production by a Singaporean working in the U.S.

• the value of production by an American working in Singapore

• Both (a) and (b) are correct.

• Neither (a) nor (b) is correct.

The consumer price index is used to

• monitor changes in the level of wholesale prices in the economy.

• monitor changes in the cost of living over time.

• monitor changes in the level of real GDP over time.

• monitor changes in the stock market.

The term inflation is used to describe a situation in which

• the overall level of prices in the economy is increasing.

• incomes in the economy are increasing.

• stock-market prices are rising.

• the economy is growing rapidly.

The CPI is a measure of the overall cost of

• the inputs purchased by a typical producer.

• the goods and services purchased by a typical consumer.

• the goods and services produced in the economy.

• the stocks on the New York Stock Exchange.