GDP EXAMPLE PROBLEMS (2025) QUESTIONS
& ANSWERS SCORED A+
Is the value of intermediate goods and services produced during the year
included in Gross Domestic Product (GDP)? For example, is aluminum used to
produce a new mountain bike included in GDP? Answer - Yes. The value of the
aluminum is not directly counted in GDP, but the production of aluminum is
included in the value-added method of measuring GDP
Indicate whether each of the following transactions represents the purchase of
a final good Answer - 1. The purchase of tires from Bridgestone tire company
by an automobile manufacturer.
Is not the purchase of a final good
2. The purchase of a new fleet of police cars by the local government.
Is the purchase of a final good
3. The purchase of French wine by a U.S. consumer.
Is the purchase of a final good
4. The purchase of a new machine tool by the Ford Motor Company.
Is the purchase of a final good
Suppose that a simple economy produces only the following four goods and
services: shoes, hamburgers, shirts, and cotton. Further, assume that all of the
cotton is used in the production of shirts.
Use the information in the following table to calculate Nominal Gross Domestic
Product (Nominal GDP) for 2015.
PRODUCTION AND PRICE STATISTICS FOR 2015
, Product Quantity Price
Shoes 100 60.00
Hamburgers 100 2.00
Shirts 50 25.00
Cotton 8,000 .60 Answer - The Nominal GDP for the year 2015 is $7450.
Shoe Q x P + Hamburger Q x P + Shirt Q x P = NGDP
An artist buys scrap metal from a local steel mill as a raw material for her
sculptures. Last year, she purchased $7,000 worth of scrap metal. With the
steel she produced 10 authentic sculptures that she sold for $1,000 each to a
local art dealer. The art dealer then sold all of the sculptures to art collectors
for an average of $1,200 each. Answer - The total value added of the artist is
$3000
7000-10000 =3000
which of the following are likely to increase the measured level of GDP and
which are likely to reduce it? Answer - a. When the number of people working
outside the home decreases, the measured level of GDP
decreases
.
b. When there is a sharp increase in the crime rate, the measured level of GDP
may increase or decrease
.
c. If lower tax rates cause fewer people to hide the income they earn, the
measured GDP
increases
.
& ANSWERS SCORED A+
Is the value of intermediate goods and services produced during the year
included in Gross Domestic Product (GDP)? For example, is aluminum used to
produce a new mountain bike included in GDP? Answer - Yes. The value of the
aluminum is not directly counted in GDP, but the production of aluminum is
included in the value-added method of measuring GDP
Indicate whether each of the following transactions represents the purchase of
a final good Answer - 1. The purchase of tires from Bridgestone tire company
by an automobile manufacturer.
Is not the purchase of a final good
2. The purchase of a new fleet of police cars by the local government.
Is the purchase of a final good
3. The purchase of French wine by a U.S. consumer.
Is the purchase of a final good
4. The purchase of a new machine tool by the Ford Motor Company.
Is the purchase of a final good
Suppose that a simple economy produces only the following four goods and
services: shoes, hamburgers, shirts, and cotton. Further, assume that all of the
cotton is used in the production of shirts.
Use the information in the following table to calculate Nominal Gross Domestic
Product (Nominal GDP) for 2015.
PRODUCTION AND PRICE STATISTICS FOR 2015
, Product Quantity Price
Shoes 100 60.00
Hamburgers 100 2.00
Shirts 50 25.00
Cotton 8,000 .60 Answer - The Nominal GDP for the year 2015 is $7450.
Shoe Q x P + Hamburger Q x P + Shirt Q x P = NGDP
An artist buys scrap metal from a local steel mill as a raw material for her
sculptures. Last year, she purchased $7,000 worth of scrap metal. With the
steel she produced 10 authentic sculptures that she sold for $1,000 each to a
local art dealer. The art dealer then sold all of the sculptures to art collectors
for an average of $1,200 each. Answer - The total value added of the artist is
$3000
7000-10000 =3000
which of the following are likely to increase the measured level of GDP and
which are likely to reduce it? Answer - a. When the number of people working
outside the home decreases, the measured level of GDP
decreases
.
b. When there is a sharp increase in the crime rate, the measured level of GDP
may increase or decrease
.
c. If lower tax rates cause fewer people to hide the income they earn, the
measured GDP
increases
.
