Question

10a)

Which of the following items would be included in GDP calculations?

Police officers’ salary

Social security benefits

Disability payments

Unemployment compensation

b)Which component of GDP enters into the calculations using cost as its basis?

Net exports

Household consumption

Gross private domestic investment

Government purchases

c)The difference between net domestic product and gross domestic product is determined by which of the following?

. The value of expenditures on replacement of worn-out or obsolete capital equipment. The value of expenditures on replacement of worn-out or obsolete capital equipment. The value of expenditures on replacement of worn-out or obsolete capital equipment. The value of expenditures on replacement of worn-out or obsolete capital equipment. The value of expenditures on replacement of worn-out or obsolete capital equipment

The value of spending on fixed investment and inventory investment

The values of expenditures on fixed investment

The value of spending on inventory replacement

e)

Wilma has a yard sale of some household items she no longer needs and her daughter, Pebbles, sells customers some homemade ice cream. Wilma’s receipts __________ be counted in GDP; Pebble’s receipts __________ be counted in GDP.

should not; should

should; should

should; should not

should not; should not

Answer 1

10) a) Only bilateral payments are added for which there are services provided in return for money. Unemployment compensation, social security benefits, disability payments all are the compensations made without any services received in return. Hence salary of the policy should be added in the GDP

b) Gross private domestic investment. This is because what consumers government and foreigners spend is the market price of goods and services while investment is done at cost basis

c) The difference between Gross and Net is represented by depreciation or wear and tear of the capital units. Hence select  the value of expenditures on replacement of worn-out or obsolete capital equipment

e) Items in the yard sale are not first hand while home made ice cream when sold becomes first hand. We know that only first hand items are added in GDP, select should not; should