All of the following are components of the formula used to calculate gross domestic product, except:
Answer(s): A
Choice "a" is correct. Gross domestic product (GDP) is calculated in two different ways. The first, which is the expenditure approach and can be used to answer this question, is the mnemonic GICE, or government purchases plus private domestic investment plus personal consumption expenditures plus net exports. Household income is the only one of the answers that is not included in this mnemonic.Choice "b" is incorrect. Foreign net export spending is included in the mnemonic (E) for GDP; although, it is called simply net exports in the mnemonic and not foreign net export spending. Choice "c" is incorrect. Government spending is included in the mnemonic (G) for GDP. Choice "d" is incorrect. Gross investment is included in the mnemonic (I) for GDP, although it is called private domestic investment in the mnemonic.
Gross domestic product includes which of the following measures?
Answer(s): C
Choice "c" is correct. Gross domestic product (GDP) is the total dollar (monetary) value of all new final products and services produced with the economy in a given time perioD. The emphasis is on the final goods and services.Choice "a" is incorrect. The size of a population that must share a given output within one year is not a part of the GDP calculation.Choice "b" is incorrect. The negative (or positive) externalities of the production process of a nation within one year are not a part of the GDP calculation. In economics, externalities are the effects that the acts of consumers or producers have on each other. Externalities range from technological changes to changes in the range of options available to consumers. Externalities may also be regarded as the unanticipated side effects of courses of action. Choice "d" is incorrect. The total monetary value of goods and services, including barter transactions, is not a part of the GDP calculation. GDP includes only monetary value, not barter value.
Which of the following is correct regarding the consumer price index (CPI) for measuring the estimated decrease in a company's buying power?
Answer(s): B
Choice "b" is correct. The consumer price index measures the costs of a market basket of specific goods commonly purchased by consumers. It measures consumer buying power and is not distorted by items generally bought by industry.Choice "a" is incorrect. The Consumer Price Index (CPI) represents monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Choice "c" is incorrect. The Consumer Price Index measures what has been paid for items, not what consumers will pay for items.Choice "d" is incorrect. The Consumer Price Index measures what has been paid by consumers in over eighty urban areas in the United States. The amounts paid are denominated in US dollars and would not be skewed by foreign currency translations.
The following table contains Emerald Corp.'s quarterly revenues, in thousands, for the past three years. During that time, there were no major changes to Emerald's selling strategies and total capital investment.Which of the following statements best describes the likely cause of the fluctuations in Emerald's revenues and the best response to those fluctuations?
Answer(s): D
Choice "d" is correct. Relatively stable demand over a three year period in each of the first three quarters of the year followed by an increase of between 40 and 50 percent in the final quarter of the year over average sales in the first three quarters in each of the three years presented is indicative of seasonal fluctuations in demand for Emerald's product that would require appropriate inventory management.Choice "a" is incorrect. The consistent volume levels and fluctuation percentages displayed for the activity in each quarter for each year are indicative of changes in seasonal demand rather than changes in the economy generally.Choice "b" is incorrect. The consistent volume levels and fluctuation percentages displayed for the activity in each quarter for each year are indicative of changes in seasonal demand rather than changes in the economy generally.Choice "c" is incorrect. Relatively stable demand over a three year period in each of the first three quarters of the year followed by an increase of between 40 and 50 percent in the final quarter of the year over average sales in the first three quarters in each of the three years presented is indicative of seasonal fluctuations in demand for Emerald's product. The company should be more attentive to the timing of inventory purchases to meet demand, however, rather than the company's overall cost structure.Market Influences on Business Strategies
When markets are perfectly competitive, consumers:
Choice "a" is correct. Since price is barely sufficient to give a firm a normal profit and stay in business, the consumer obtains the product at as low a price as is economically feasible. In addition, every firm is forced to produce at the most efficient output rate.Choice "b" is incorrect. Brand differentiation is present in monopolistic competition, not perfect competition.Choice "c" is incorrect. This is a far-out distractor.Choice "d" is incorrect. Also far out. Individual consumers are also price takers at the market equilibrium price.
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