18. An economy produces only 1,000,000 computers valued at $2,000 each. Of these

Question

18. An economy produces only 1,000,000 computers valued at $2,000 each. Of these 200,000 are sold to consumers, 300,000 are sold to businesses, 300,000 are sold to the government, and 100,000 are sold abroad. No computers are imported. The unsold computers at the end of the year are held in inventory by the computer manufacturers. What is the value of GDP?

A. $0.9 billion

B. $1.0 billion

C. $1.8 billion

D. $2.0 billion

   19.  Three equivalent ways to measure GDP are total _____, total _____, and total ______.

A. profits; production; saving.

B. expenditure; income; profits

C. investment; consumption; saving

D. production; income; expenditure

   20. Wages and salaries are examples of:

A. consumption.

B. labor income.

C. capital income.

D. profits.

21. Capital income includes:

A. profits, rent, and interest.

B. wages and salaries.

C. earnings of the self-employed.

D. capital gains from stock sales.

  22.   A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

A. real GDP.

B. nominal GDP.

C. base GDP.

D. current GDP.

23.  To compare the change in physical production (GDP) between 2000 and 2006, we should compare _____ GDP in 2000 with _____ GDP in 2006.

A. real; real

B. real; nominal

C. nominal; nominal

D. current dollar; current dollar

Explanation / Answer

Question 18

GDP of a year constitutes the market value of final goods and services produced in the economy in that year.

In the given case, final good produced is computer.

Total computers produced = 1,000,000 computers

Market price of each computer = $2,000

Calculate the value of GDP -

GDP = Total computers produced * Market price

GDP = 1,000,000 * $2,000 = $2,000,000,000 or $2 billion

The value of GDP is $2 billion.

Hence, the correct answer is the option (D).

Question 19

GDP can be measured through three different approaches.

These are as follows 0

1. Product approach or Value added approach

2. Income approach

3. Expenditure approach

Thus, three equivalent ways to measure GDP are total production, total income, and total expenditure.

Hence, the correct answer is the option (D).

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