Question : 51) The purchase of a new Boeing fighter jet by : 1240873

51) The purchase of a new Boeing fighter jet by Israel is classified in the U.S. GDP accounts as

A) export expenditure.

B) consumption expenditure.

C) investment expenditure.

D) government expenditure.

E) import expenditure.

52) Gross Domestic Product equals

A) Y = C + I – G + NX.

B) Y = C – I + G + NX.

C) Y = C + I + G + NX.

D) Y = C – I – G – NX.

E) Y = C + I + G – NX.

53) Last year in Candamica, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion. Hence total expenditure was

A) $24.5 billion.

B) $34.5 billion.

C) $36.5 billion.

D) $34 billion.

E) undetermined without information about imports.

54) Everything else the same, if government expenditure increases by $400 billion and imports increase by $400 billion, then GDP

A) increases by $400 billion.

B) increases by $200 billion.

C) decreases by $400 billion.

D) does not change.

E) decreases by $200 billion.

55) Suppose that business firms spend $500 million on new capital equipment this year.  Of this $500 million, $300 million was spent on domestically produced capital and $200 million was spent on foreign-produced capital.  All else equal, these transactions contribute ________ to GDP.

A) $0

B) $200 million

C) $300 million

D) $500 million

E) $800 million

56) Undistributed profits ________ counted as part of GDP because ________.

A) are not; households are not paid by the firms

B) are; they can be used to buy other goods

C) are ; they are considered income paid to households and loaned back to firms

D) are not; they are considered an intermediate good

E) are; firms are required to pay corporate income taxes on them

57) Total expenditure equals total income

A) because firms pay out everything they receive as income to the factors of production.

B) if firms earn zero profit.

C) if firms do not save for future investment.

D) only if firms sell all the goods they produce in a given time period.

E) only if net taxes equals government expenditures on goods and services.

58) The circular flow shows that GDP measures

i. total income.

ii. total expenditures.

iii.price changes.

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

59) Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________.

A) expenditure; investment; income

B) expenditure; income; value of production

C) consumption; expenditure; value of production

D) investment; income; consumption

E) consumption; investment; expenditure

60) In the circular flow, how are the “value of production,” “income,” and “expenditures” related?

A) They have no relationship to each other.

B) Once tax payments are subtracted at each stage, they are equal.

C) Expenditures on GDP equals the value of production which equals income.

D) Once net exports of goods and services are subtracted from GDP, all three are equal.

E) Value of production always equals income but expenditures is smaller because households save some of their income and do not spend it.