Practice Test 1
1. Gross domestic product in the economy is measured by the
A) total number of goods and services produced in the economy.
B) dollar value of all final goods and services produced in the economy.
C) total number of goods produced in the economy.
D) total number of services produced in the economy.
2. A final good is one that
A) is used in the production of another good.
B) is a natural resource used to produce a good.
C) is purchased as an input in the production process.
D) is purchased by its final user.
3. How are intermediate goods treated in the calculation of GDP?
A) Their value is not counted separately, but included as part of the value of the final good for which they are an input.
B) Their value is counted separately, and their value is also included as part of the value of the final good for which they are an input.
C) They are included in the year that they are produced.
D) They are included only if they are imported.
4. A car that is produced in 2007 is not sold until 2008. According to the definition of GDP, in which year's GDP should it be counted?
C) Half of the sales price will count as part of 2007 GDP and half will count as part of 2008 GDP.
D) The production cost will count as part of 2007 GDP while the sales price will count as part of 2008 GDP.
5. Investment spending includes spending on
C) changes in business inventories
D) transfer payments
6. Which of the following is considered a durable good?
A) medical care
D) a washing machine
7. Government spending ______________ is included in gross domestic product.
A) at federal, state, and local levels of government
B) at the federal level of government only
C) at state and local levels of government only