Question

1. True or False

a) U.S. gross domestic product is measured by the dollar value of all goods and services produced within the borders of the U.S. Output produced by foreigners (either workers or foreign-owned capital) is not included.

b) An example of a final good is a natural resource like coal used to produce a good.

c) Welfare benefits such as food stamps and health insurance coverage for the poor are not considered as part of government purchases in national income accounts.

d) Government spending at all levels of government (federal, state, and local) is included in gross domestic product.

e) Consumption expenditures do not include household purchases of new houses.

f) An increase in the number of shares of Apple stock that households own would

increase gross private domestic investment in national income accounts.

g) If Gladys sells her 2000 Honda Civic for $1,500 in 2015, the sale of her car contributes $1,500 to 2015 GDP.

h) One effect of a major hurricane is that GDP would decrease because of a loss in productive capacity since factories and businesses can be destroyed.

i) Nominal GDP measures the value of all final goods and services adjusted for changes in prices from “base-year” prices.

j) Gross national product (GNP) is defined as the value of final goods and services produced by residents of the United States even if the production takes place outside of the United States.

k) If a German firm produces cars in the United States, that production should count towards both U.S. GNP and German GDP.

Answer 1