1. Suppose a gold miner finds a gold nugget and sells the nugget to a mining company for $600. The mining company melts down the gold, purifies it, and sells it to a jewelry maker for $1200. The jewelry maker fashions the gold into a necklace that it sells to a department store for $1800. Finally, the department store sells the necklace to a customer for $2400.

As a result of these transactions, GDP increases by $.

 

2.The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country.

cotton farmer fabric maker sewing and printing

  Cotton farmer Fabric maker Sewing and printing Inputs     $0 $1.10    $3.50

Value of output $1.10 $3.50 $18.00

 

a. Using the standard expenditure method, the total contribution of this shirt to GDP is $.

 

b. If we use a value-added method (i.e., summing the value-added by producers at each step of the production process, equal to the price of inputs minus the price of outputs), the contribution of this shirt to GDP is $.

 

c. If we mistakenly added the price of both intermediate and final outputs without adjusting for value-added, we would find that this shirt contributes $ to GDP.

 

    This overestimates the true contribution by $.

 

3. Which of the following items would have their market value counted toward the total GDP for the United States for the current year?

 

Instructions: You may select more than one answer.

 

The salary of a Chilean citizen who is working as a researcher at a U.S. university.

Corn produced by a U.S. farmer and sold to Kellogg's to produce breakfast cereal at one of their U.S. plants.

The salary of a U.S. citizen working as a consultant in London.

A house that was constructed last year and was purchased by the homeowner in January of this year.

Tires sold by a retail tire shop in Illinois as replacement tires.

A Chevrolet that was made at a General Motors factory in China.

 

4. Which of the following items would be counted as part of current U.S. GDP when using the income approach?

 

Instructions: You may select more than one answer.

Wages BMW paid to an autoworker in their South Carolina assembly plant.

$2,000 in receipts earned in the current year by a home business owner selling 20 wedding cakes at $100 each.

The sale price of a tire sold produced in Kentucky and sold to a Chrysler plant in Michigan.

The sale price of a Ford car made in the U.S. and sold to a dealer in Europe, minus the cost of producing the car.

The profits made by a specialty shopkeeper in Boston who sells European cheeses.

The commission earned by a real estate agent who sold a five-year-old house.

 

5. Which methods do economists employ in order to calculate the market value of all final goods and services?

 

Instructions: You may select more than one answer.

 

Income approach

Expenditure approach

Input-output approach

Value-deducted approach

Fiscal approach

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Status NEW Posted 12 Jul 2017 12:07 AM My Price 8.00

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