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Take Home Quiz #4

– GDP, Inflation, Unemployment, Multiplier –

1. GDP & Inflation

1.1 GDP does not include a. increase in business inventories in the period b. expenditures by government for newly produced goods and services in a given period c. value of all transactions in the economy during a given period d. value of final output during a given period e. household spending on electricity

1.2 The Lee family won a $50 million jackpot. Which of their following purchases would be counted as investments when calculating GDP by the expenditure approach. a. the former Hollywood home of Arnold Schwarzenegger that they bought for $5 million. b. the villa the just built in the Swiss Alps for $2 million. c. the secondhand yacht that Mr. Lee purchased for $1 million and expects to sell for a profit before the end of the year. d. the vintage Rolls Royce purchased in London for $500,000. e. the new house that Mrs. Lee built in Pittsburgh for 200,000 to serve as living quarters for her ten new servants.

1.3 Which of the following expenditures are not included in the consumption component of GDP? a. maid service b. purchase of a new home c. a new DVD player d. a restaurant meal e. tax preparation services

1.4 Other things equal, increased imports decrease GDP. True or False?

1.5 In GDP measurement, investment spending includes a. spending by individual households on automobiles and durable goods b. spending by businesses on labor resources c. changes in business inventories d. spending of the government in salaries e. spending by households on stocks and bonds.

1.6 U.S. imports are… a. not added to U.S. GDP because they are produced abroad b. added to U.S. GDP because they are consumed domestically c. added to U.S. GDP because they represent an increase in inventories d. added to U.S. GDP as government purchases because the government decides what goods may be imported. e. not added to U.S. GDP because they are intermediate goods.

1.7 Use the following...