Topic: Home Production

Scenario: Sarah takes care of her son instead of sending him to a daycare that charges $12,000 annually.

8) Refer to the scenario above. Which of the following will happen if she puts him into day care?

A) The country's GDP will increase by $12,000.

B) The country's GDP will remain unchanged.

C) The country's GDP will decrease by $12,000.

D) The country's trade deficit will increase by $12,000.

9) Refer to the scenario above. Which of the following will happen if Sarah opens a daycare and takes care of five children, in addition to her son, charging $12,000 per year for each child?

A) The country's trade surplus will increase by $12,000.

B) The country's GDP will decrease by $12,000.

C) The country's GDP will increase by $60,000.

D) The country's trade deficit will increase by $2,400.

10) Refer to the scenario above. Sarah's husband earns a salary of $70,000 per year. Which of the following will happen if her husband, instead of Sarah, quits his job to look after their son?

A) The country's GDP will decrease by $58,000.

B) The country's GDP will decrease by $70,000.

C) The country's trade surplus will increase.

D) The country's trade deficit will increase.

Scenario: Mike's housekeeper charges $30 for mowing his lawn.

11) Refer to the scenario above. Which of the following will happen if Mike decides to mow his lawn himself instead of paying his housekeeper for the service?

A) GDP will increase.

B) GDP will decrease.

C) Income per capita will increase.

D) GDP will remain unchanged.

12) Refer to the scenario above. Which of the following will happen if Mike starts charging $30 to mow lawns that were previously mowed by their owners?

A) GDP will increase.

B) GDP will decrease.

C) Income per capita will remain unchanged.

D) Income per capita will decrease.

13) Refer to the scenario above. Suppose Edwin consumes the total output produced instead of selling part of it. What is likely to happen in this case?

A) GDP will increase.

B) GDP will decrease.

C) GDP will remain unchanged.

D) Trade surplus will increase by $200.

14) Refer to the scenario above. Suppose that besides consuming all the potatoes grown on his farm, Edwin buys 5 pounds of potatoes at $0.80 per pound. What is likely to happen in this case?

A) The $4 spent by Edwin will be included in GDP.

B) The $4 spent by Edwin will be excluded from GDP.

C) The value of Edwin's total output will be included in GDP.

D) The value of Edwin's total output will increase.

15) A shoe retailer does not give a bill for shoes purchased from her store and does not report her income correctly to evade taxes. If she is paid $50, ________.

A) The GDP of her country will increase

B) The GDP of her country will fall

C) The trade surplus of her country will increase

D) The GDP of her country will remain unchanged

17) A Chinese worker started working in the United States and earned an income of $10,000 during a certain year. This is likely to have led to a(n) ________ in the same year.

A) increase in the U.S. GDP

B) increase in the U.S. GNP

C) increase in China's GDP

D) decrease in China's GDP

The following table provides data for the small country of Nabou.

Component Expenditure (in thousands)

Social Security payments $200

Depreciation $ 41

Private investment $580

Exports $220

Imports $260

Salaries earned by foreigners working in Nabou $150

Household consumption $840

Purchases of raw materials $230

Government purchases $800

Capital income $270

Salaries earned by Nabou residents working abroad $310

18) Refer to the above table. What is the GDP for Nabou using the expenditure method?

A) $3,901

B) $2,180

C) $2,490

D) $2,340

19) Refer to the above table. How much do GNP and GDP differ for Nabou?

A) GDP is larger by $150.

B) GNP is larger by $160.

C) GDP is larger by $310.

D) GNP is larger by $460.

20) Refer to the above table. Which categories are not used for calculating GDP or GNP?

A) Social Security payments

B) Depreciation

C) Purchases of raw materials and capital income

D) All of the above

21) The GDP of Country X in a particular year was $820,000. The value added by U.S. workers in the production of various goods and services in Country X during that year was worth $150,000. The value added by the workers of Country X in the production of various goods and services in other countries during that year was worth $130,000. What was the GNP of Country X during that year?

A) $135,000

B) $800,000

C) $1,140,000

D) $8,235,000

22) The GNP of a country for a certain year was $340,000. If the contribution of its factors of production to

the production of various goods and services in other countries was worth $140,000 and the contribution of

foreign factors of production in the production of goods and services in this country was worth $50,000, the

GDP of the country for that year was ________.

A) $430,000

B) $160,000

C) $250,000

D) $480,000

24) The value of production generated by a country's factors of production in foreign countries during a particular year was $51,000, and the value of production generated by foreign factors of production in the country during that year was worth $80,000. Which of the following is likely to be true in this case?

A) The GDP of the country is higher than its GNP.

B) The GDP of the country is lower than its GNP.

C) The GDP of the country equals its GNP.

D) The GDP of the country equals its trade balance.