Homework 3ECON 101: Principles of EconomicsDue Date: June 5 th 20121. Macroeconomists studya. the decisions of individual households and firms.b. the interaction between households and firms.c. economy-wide phenomena.d. regulations imposed on firms and unions.2. Which of the following newspaper headlines is more closely related to what microeconomists study than to what macroeconomists study?a. Unemployment rate rises from 5 percent to 5.5 percent.b. Real GDP grows by 3.1 percent in the third quarter.c. Retail sales at stores show large gains.d. The price of oranges rises after an early frost.3. Gross domestic product measuresa. income and expenditures.b. income but not expenditures.c. expenditures but not income.d. neither income nor expenditures.4. For an economy as a whole, income must equal expenditure becausea. the number of firms is equal to the number of households in an economy.b. individuals can only spend what they earn each period.c. every dollar of spending by some buyer is a dollar of income for some seller.d. every dollar of saving by some consumer is a dollar of spending by some other consumer.5. In the actual economy, goods and services are purchased bya. households, but not firms or the government.b. households and firms, but not the government.c. households and the government, but not firms.d. households, firms, and the government.6. GDP is defined as thea. value of all goods and services produced within a country in a given period of time.b. value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.c. value of all final goods and services produced within a country in a given period of time.d. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.7. In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,a. values of goods and services based on surveys of consumers.b. market prices.c. quantities purchased by a typical urban household.d. profits from producing goods and services.8. If the price of a Blu-Ray Disc player is three times the price of an MP3 player, then a Blue-Ray Disc player contributesa. more than three times as much to GDP as does a MP3 player.b. less than three times as much to GDP as does a MP3 player.c. exactly three times as much to GDP as does a MP3 player.d. None of the above is necessarily correct.9. Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, hasa. reduced measured GDP.b. not affected measured GDP.c. increased measured GDP by the value of the restaurant meals. d. increased measured GDP by the value added by the restaurant’s preparation and serving of the meals.10. A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His movea. raises GDP.b. decreases GDP.c. doesn't change GDP because gambling is never included in GDP.d. doesn't change GDP because in either case his income is included.11. Gasoline is considered a final good if it is sold by a a. gasoline station to a bus company that operates a bus route between San Francisco and Los Angeles.b. pipeline operator to a gasoline station in San Francisco.c. gasoline station to a motorist in Los Angeles.d. All of the above are correct.12. Grapes are considered intermediate goods a. whether the purchaser uses them to make wine to sell or eats them.b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them.c. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell.d. None of the above is correct.13. Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included ina. both Mexican GDP and U.S. GDP.b. Mexican GDP, but it is not included in U.S. GDP.c. U.S. GDP, but it is not included in Mexican GDP.d. neither Mexican GDP nor U.S. GDP.14. Which of the following items is included in U.S. GDP?a. final goods and services that are purchased by the U.S. federal governmentb. intermediate goods that are produced in the U.S. but that are unsold at the end of the GDP accounting periodc. goods and services produced by foreign citizens working in the U.S.d. All of the above are included in U.S. GDP.15. The consumption component of GDP includes spending ona. durable goods and nondurable goods, but not spending on services.b. durable goods and services, but not spending on nondurable goods.c. nondurable goods and services, but not spending on durable goods.d. durable goods, nondurable goods, and services.16. Which of the following is an example of a durable good?a. a refrigeratorb. a quart of motor oilc. a business suitd. a can of soup17. Which of the following is included in the investment component of GDP?a. spending on new residential construction and spending on stocks and bondsb. spending on new residential construction but not spending on stocks and bondsc. spending on stocks and bonds but not spending on new residential constructiond. neither spending on stocks and bonds nor spending on new residential construction18. A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?a. consumption and importsb. consumption but not importsc. imports but not consumptiond. neither consumption nor imports19. The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included ina. in government expenditures and exports.b. government expenditures and imports.c. exports, but not government expenditures.d. imports, but not government expenditures.20. The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result,a. U.S. government purchases increase by $30,000; U.S. net exports decrease by $30,000; and U.S. GDP is unaffected.b. U.S. government purchases increase by $30,000; U.S. net exports are unaffected; and U.S. GDP increases by $30,000.c. U.S. government purchases, net exports, and GDP are unaffected.d. U.S. government purchases are unaffected; U.S. net exports decrease by $30,000; and U.S. GDP decreases by $30,000.21.In the economy of Ukzten in