MBA 505 Chapter 21 Quiz
1. A farmer sells wheat to a miller for $100. The miller makes the wheat into flour and sells it to a baker for $200. The baker makes the wheat into bread and sells it to a grocer for $300. The grocer sells the bread to the public for $400. The effect on GDP is 
a. an increase of $1,000.
b. an increase of $100.
c. an increase of $400.
d. an increase of $600.
2. In order to include many different products in a summary or aggregate measure, GDP
a. uses a combination of weights and measures.
b. uses market prices.
c. uses the cost of production of the products.
d. uses a price index.
3. Which of the goods and services produced in the economy are included as part of GDP?
a. all goods and services
b. all final goods and services which are bought and sold in markets
c. all final goods and services bought and sold in legal markets
d. all final goods and services bought and sold in legal markets plus the imputed value of some other legal goods and services which are not bought and sold in markets
4. A Bulgarian owns an aircraft company in Poland. The company uses local labor and materials. 
a. The value of aircraft sales will be included in Polish GDP and in Bulgarian GNP.
b. The value of aircraft sales will be included in Polish GNP and in Bulgarian GDP.
c. The value of aircraft sales will be included in Polish GDP, and the profits will be included in Bulgarian GNP.
d. The value of aircraft sales will be included in Polish GNP, and the profits will be included in Bulgarian GDP.
e. None of the above.
5. The four components of GDP are
a. consumption, money supply, government purchases, and exports.
b. consumption, investment, transfer payments, and imports.
c. consumption, investment, government purchases, and net exports.
d. consumption, investment, government purchases, and foreign exchange.
6. If a U.S. citizen buys a tractor made in Belarus,
a. U.S. net exports decrease, and U.S. GDP decreases.
b. U.S. net exports are unaffected, and U.S. GDP decreases.
c. U.S. net exports are unaffected, and U.S. GDP is unaffected.
d. U.S. net exports decrease but U.S. GDP is unaffected.
7. Ingrid buys a pair of shoes produced by an American-owned shoe manufacturer in Italy. As a result,
a. U.S. consumption increases, U.S. net exports decrease, U.S. GDP is unaffected, but U.S. GNP increases.
b. U.S. consumption increases, U.S. net exports decrease, U.S. GDP increases, but U.S. GNP is unaffected.
c. U.S. consumption increases, U.S. net exports decrease, U.S. GNP increases, but Italian GDP is unaffected.
d. U.S. consumption increases, U.S. net exports are unaffected, U.S. GDP is unaffected, but Italian GDP increases.
8. If you win $5 million in the state lottery,
a. GDP will be unaffected.
b. GDP will increase by $5 million.
c. GDP will increase by less than $5 million. 
d. GDP will increase by more than $5 million.
9. If the U.S. government pays a postal worker $50,000 in salary in 1996, and $30,000 in retirement benefits in 1997, 
a. each payment will be included in GDP as government purchases for the respective years.
b. the 1996 payment is included in 1996 GDP as government purchases, but the 1997 payment is not included in 1997 GDP.
c. the 1996 payment is included in 1996 GDP as government purchases, and the 1997 payment is included in 1997 GDP as government transfer payments.
d. the 1996 payment is included in 1996 GDP as government purchases, and the 1997 payment is allocated to previous years' GDP according to the amount of work performed each year. 
10. Transfer payments
a. are included in GDP because they represent income to individuals.
b. are not included in GDP because they do not represent payments for currently produced goods or services.
c. are included in GDP because the income will be spent for consumption.
d. are not included in GDP unless they represent unemployment compensation.
Answers
1c, 2b, 3d, 4c, 5c, 6d, 7a, 8a, 9b, 10b.