11) The manner in which a nation’s economy reacts when the measured factors are changed affects almost every individual. 12) In the study of macroeconomics production leads to income and income leads to production in a continuing cycle. 13) In the circular flow model firms sell the services of factors of production to households. 14) If the prices of goods begin to rise rapidly people may find it difficult to maintain their lifestyles. Explain why. 15) Explain the supply and demand of products factors of production and the payments for the products and factors of production as described in the circular flow diagram. 11.2 The Production Approach: Measuring a Nation’s Macroeconomic Activity Using Gross Domestic Product 1) The value of all final goods and services produced during a given time period measures a nation’s A) gross domestic product. B) net national product. C) consumer price index. D) net exports. 2) If an economy produced 60 pounds of sushi at $12 per pound and 15 gallons of sake at $30 per gallon the total value of these goods and services would be A) $450. B) $720. C) $1 170. D) $2 700. 3) If an economy produced 220 pounds of jelly beans at $5 per pound and 90 pounds of gum drops at $2 per pound in 2012 its real gross domestic product (GDP) was A) 310 pounds of candy. B) $180. C) $1 100. D) $1 280. 4) We measure gross domestic product by multiplying the quantities of goods by their prices because it allows us to A) express the values of products in a common unit of measurement. B) correct for inflation. C) directly compare the output of one economy to that of another. D) calculate the total number of units of goods produced in an economy. 5) Gross domestic product calculations count only final goods and services because A) these are the only goods and services that are purchased in an economy. B) counting all goods and services would lead to double-counting of many activities. C) it is difficult to measure the prices of intermediate goods produced. D) one cannot calculate the quantities of intermediate goods produced.
