A. Which of the following does NOT add to U.S. GDP?

a. Boeing manufactures and sells a plane to Air France.

b. General Motors builds a new auto factory in North Carolina.

c. The city of New York pays a salary to a policeman.

d. The federal government sends a Social Security check to your grandmother.

B. An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction?

a. Net exports and GDP both rise.

b. Net exports and GDP both fall.

c. Net exports fall, while GDP does not change.

d. Net exports do not change, while GDP rises.

C. Which is the largest component of GDP?

a. consumption

b. investment

c. government purchases

d. net exports

D. An economy produces 10 cookies in year 1 at a price of $2 per cookie and 12 cookies in year 2 at a price of $3 per cookie. From year 1 to year 2, real GDP increases by

a. 20 percent.

b. 50 percent.

c. 70 percent.

d. 80 percent.