Question

3 questions ${\color{Red} }$

Question 1

Jake, Sr. sells the family business, a factory that produces snake oil, to Jake, Jr., for $100, even though the factory has been assessed at $400,000. How will this transaction affect GDP?

Multiple Choice

Investment will increase by $100.

Investment will increase by $400,000.

Consumption will increase by $400,000.

GDP will not be affected by the transaction.

Question 2

A period of significant decline in economic activity, marked by falling GDP, rising unemployment, and an increased number of bankruptcies, is called:

Multiple Choice

a severe depression.

a recession.

a boom.

an expansion.

question 3

An example of a good or service that would count in the U.S. GNP would be a bag of coffee made in:

Multiple Choice

Vermont by Green Mountain Coffee Roasters.

Colombia by Dunkin' Donuts.

Canada by Starbucks.

All of these would count in U.S. GNP.

Answer 1

In the first case GDP will not be affected because there is no new transaction made. The factory is not constructed in the current year and therefore it will be not be considered as a part of investment.

In the second question it is called recession where economic activities come to a halt and there is a series of bank failures. Unemployment increases sharply and inflation drops.

In the third question all of these would be count in the GNP because GNP will measure all the product being made by domestic companies abroad.