Question

If the value of intermediate goods and services are included in GDP, then:

a. it would lead to depreciation.

b. GDP would be understated.

c. GDP would act as a true indicator of economic welfare.

d. there would be double-counting.

e. GDP would be able to give an exact estimate of the inventory in an economy.

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An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except:

a. an increase in the cost of vacations in Florida for Japanese tourists.

b. an increase in the foreign currency prices paid for U.S. exports.

c. foreign holidays for U.S. residents to be less expensive.

d. an increase in the demand for U.S. exports.

e. a decrease in the dollar prices paid by U.S. importers.

Answer 1

Q1) correct option - d. There would be double counting.

When certain items are counted more than once resulting in over-estimation of national product to the extent of the value of intermediate goods included. This is called the problem of double countingwhich means counting value of the same commodity more than once.

Q2 correct options - d.an increase in the demand for U.S. exports.

If the U.S. dollar appreciates, foreigners will find American goods more expensive because they have to spend more for those goods in USD. That means that with the higher price, the number of U.S. goods being exported will likely drop.