Exhibit 5-8 GDP data (billions of dollars)
Personal consumption expenditures$850
Interest90
Corporate profits150
Government spending400
Depreciation100
Rental income70
Gross private domestic investment120
Compensation of employees830
Exports120
Imports70
Indirect business taxes80
Proprietors' income120
Personal income taxes110
Social Security taxes50
Transfer payments160
In Exhibit 5-8, and using the expenditures approach, gross domestic product (GDP) equals:
A. $1,420 billion.
B. $2,460 billion.
C. $2,430 billion.
D. $1,450 billion.
Answer: A
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Suppose that the federal government had a budget deficit of $80 billion in year 1 and $10 billion in year 2, but it had budget surpluses of $140 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have
A) increased by $250 billion. B) decreased by $70 billion. C) decreased by $62.5 billion. D) increased by $70 billion.
Suppose that the inflation rate has been 3 percent per year for several years, and the unemployment rate has been stable at 5 percent. Unanticipated changes in government policy cause the inflation rate to increase to 6 percent
In the short run, we would expect the unemployment rate to A) increase, but the exact amount cannot be known for sure. B) decrease. C) increase to 10 percent. D) remain constant.
Suppose Larry's Lariats produces lassos in a factory, and uses nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length, then seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. Which of the following would be considered a fixed cost for this company?
A. Employee wages B. The cost of rope C. The packaging material D. None of these would be considered a fixed cost.
In a voluntary contribution game:
A. each member of a group makes a contribution to a common pool which benefits only the contributor, and this leads to alignment of individual and collective interests. B. each member of a group makes a contribution to a common pool which benefits everyone, and this leads to alignment of individual and collective interests. C. each member of a group makes a contribution to a common pool which benefits only the contributor, and this leads to a conflict between individual and collective interests. D. each member of a group makes a contribution to a common pool which benefits everyone, and this leads to a conflict between individual and collective interests.