mc1_revised_4_18_11

mc1_revised_4_18_11 - Mock Multiple Choice, Warm-Up Kyle F....

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Unformatted text preview: Mock Multiple Choice, Warm-Up Kyle F. Herkenhoff∗ UCLA Department of Economics April 18, 2011 1 GDP Which of the following are true? (a) An intermediate, such as Wheat, used in the production of a final good, Bread, is counted once in the current GDP when the Bread is sold. (b) Corn, used up in the production of high fructose corn syrup (intended as an ingredient in other foods that have not yet been made) is in current GDP. (c) Government spending on missiles not used this year that are sitting on an aircraft carrier is in current GDP. (d) Commission on a house that was sold in the current year, but built in 1964 is in current GDP. (e) Spending on candy that has been sitting in the candy store for over 1 year is in current GDP. ∗ Correspondence: kfh@ucla.edu 1 Notes: GDP is the market value of all newly produced FINAL goods and services (within a country during some time period). Intermediate goods are not finals goods! But, of course, once the final good is sold, go ahead and add the value of all intermediates used in producing that final good and this goes into GDP Answer: Under the assumptions of the class notes, the first statement is true, the second statement is not (intermediate, not final good– the high fructose corn syrup is an intermediate good. If it goes into some candy and that candy is sold, then GDP includes the candy price=value of high fructose corn syrup+value of other itnermediates used to make candy), the government missiles are counted (our assumed purchase of excess inventory), the third statement is true, the fourth is ture (you should just include the commission), and the fifth is not (the candy was considered purchased by the candy store last year– our assumed purchase of excess inventory). 2 ...
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mc1_revised_4_18_11 - Mock Multiple Choice, Warm-Up Kyle F....

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