5.1

6-7) Scenario: Infi Corp. is a leading manufacturer of smartphones. Every year, customers spend $31 billion on smartphones manufactured by Infi Corp. A leading retailer generates $10 billion worth of total sales, while the remaining is generated directly from consumers. The retailer pays 70 percent of its revenue to Infi Corp., and Infi Corp. pays $19 billion to its suppliers.

Refer to the scenario above. Infi Corp. adds a value of ________ to the production process.

A) $31 billion

B) $9 billion

C) $21 billion

D) $12 billion

Refer to the scenario above. The retailer adds a value of ________ to the production process.

A) $5 billion

B) $10 billion

C) $3 billion

D) $1 billion

8) If Dell buys a computer from a foreign producer for $500 and sells it to Best Buy for $800, who then sells it to a consumer for $1,200, what is Dell's value-added, Best Buy's value-added, and the computer's contribution to GDP?

A) $300, $400, and $1,200

B) $300, $700, and $1,000

C) $300, $400, and $700

D) $800, $1,200, and $400

10) One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake two loaves of bread that are sold for $3.00 each to consumers. The second bag of flour is sold for $1.00 to a grocery store, which sells it to a consumer for $2.00. Taking these transactions into account, what is the effect on GDP?

A) GDP increases by $5.00.

B) GDP increases by $7.00.

C) GDP increases by $8.00.

D) GDP increases by $9.00

12) In early 2010, Molly paid $200,000 for a house built in 2000. She spent $30,000 on new materials to remodel the house. Although Molly lived in the house after she remodeled it, its rental value rose. Which of the following contributed to real GDP in 2010?

A) The price of the house, the cost of remodeling materials, and the increase in rental value

B) The price of the house and the cost of remodeling materials, but not the increase in rental value

C) The cost of the remodeling materials and the increase in rent, but not the price of the house

D) Only the costs of the remodeling materials, not the price of the house or increase in rental value

16-17) The table below shows the values of various economic variables of a country during a particular year.

Variables Value

Consumption $185,000

Investment $60,000

Government expenditure $103,000

Exports $54,000

Imports $50,000

Refer to the table above. If consumption expenditure increases to $200,000 in the next year, GDP will ________, all other variables remaining unchanged.

A) increase to $367,000

B) increase to $400,000

C) fall to $367,000

D) fall to $400,000

Refer to the table above. If a trade deficit of $23,000 occurs in the next year, GDP will ________, all other variables remaining unchanged.

A) fall to $325,000

B) increase by $2,000

C) fall by $2,000

D) increase to $531,000

18) A Bozeman, Montana, the household receives a Social Security check for $800, which it uses to purchase a $599 television made in Korea by a Korean firm, as well as pay a local mechanic $191 to fix the family car. The household spends the remaining $10 on ice cream from Town and Country. As a result, U.S. GDP ________.

A) does not change

B) increases by $201

C) increases by $800

D) increases by $1,001

20) Frozen Cow Ice Cream Company buys sugar and milk to produce ice cream and energy drinks. At the end of a quarter, both its inventory of sugar and its inventory of energy drinks has increased, but their inventory of milk has decreased. Investment for the quarter will include ________.

A) the increased inventory of sugar plus the increased inventory of energy drinks minus the decreased inventory of milk

B) the increased inventory of sugar and decreased inventory of milk, but not the increased inventory of energy drinks

C) the increased inventory of energy drinks, but not the increased inventory of sugar or decreased inventory of milk

D) none of the changes of inventory

21) The GDP of Richland during a particular year was $672,500. If the expenditure on consumption during that year was $220,000, the expenditure on investment was $250,000, the expenditure incurred by the government was $100,000, and the value of exports was $182,000, then the value of imports was ________.

A) $40,000

B) $79,500

C) $21,500

D) $100,750

22) The GDP of Ritzland during a particular year was $120,000. If the expenditure on investment was $16,000, the expenditure incurred by the government was $35,000, the value of exports was $10,000, and the value of imports was $22,000, then the expenditure on consumption was ________.

A) $81,000

B) $19,000

C) $37,500

D) $44,000

23) The expenditure on consumption in Berylia during a particular year was $310,000, the expenditure on investment was $180,000, the expenditure incurred by the government was $75,000, the expenditure of foreign economic agents on domestic products was $80,000, and the domestic expenditure on foreign-produced goods was $103,000. What was the GDP of Berylia during that year?

A) $530,000

B) $479,000

C) $542,000

D) $645,000

5.3

1) Part of a bridge built by the government of Ritzland collapsed in the same year it was constructed. If the total cost of building the bridge was $4 million, and then it costs $3 million to repair it, which of the following will happen in this scenario, everything else remaining unchanged?

A) Ritzland's GDP will decrease by $4 million.

B) Ritzland's GDP will increase by $3 million.

C) Ritzland's GDP will increase by $7 million.

D) Ritzland's GDP will increase by $1 million.

3) 10 percent of the total food grains produced in a country during a year get damaged due to poor storage. Which of the following will happen in this case?

A) The market value of the damaged food grains will be deducted from the country's GDP for that year.

B) The market value of the damaged food grains will not be considered while calculating the country's GDP for that year.

C) The country's trade surplus will increase.

D) The country's imports will fall.

5) 30 percent of the electric bulbs produced in a factory in Xenonia during a year were found to be defective. Which of the following is likely to hold true in this scenario if everything else remains unchanged?

A) Xenonia's GDP will reflect the value lost due to the defect.

B) Xenonia's GDP will be underestimated.

C) Xenonia's GDP will be overestimated.

D) Xenonia's trade surplus will increase.

6-7)Scenario: Jane sewed a prom dress, which she could have bought for $180 from a store.

Refer to the scenario above. Which of the following will happen if she keeps the dress for herself?

A) The GDP of her country will increase by $180.

B) The GDP of her country will remain unchanged.

C) The trade deficit of her country will decrease.

D) The trade surplus of her country will decrease.

Refer to the scenario above. Which of the following will happen if she sells it for $200 and the total cost incurred by her in making the dress was $150?

A) GDP will increase by $180.

B) GDP will increase by $50.

C) GDP will remain unchanged.

D) Trade surplus will increase by $200.