Question 1

Transfer payments are included in:

Accepted Answer

A)   GNP.
B)   PI.
C)   GDP.
D)   GE) B) and C)
F) None of the above

Question 2

Value added is the value of a firm's output minus:

Accepted Answer

A)   the value of intermediate goods purchased from other firms.
B)   the compensation it pays to employees.
C)   the value of its capital goods.
D)   its depreciation.E) None of the above
F) B) and C)

Question 3

The simplest way to calculate GDP is to sum the total sales of all business firms.

Accepted Answer

A) True 
 B)False

Question 4

GDP includes:

Accepted Answer

A)   neither intermediate nor final goods.
B)   both intermediate and final goods.
C)   intermediate,but not final,goods.
D)   final,but not intermediate,goods.E) C) and D)
F) B) and D)

Question 5

The table below indicates the price and output data over a five year period for an economy that produces only one good.
 
-Refer to the above data.The nominal GDP for year 4:

Accepted Answer

A)   is $90.
B)   is $55.
C)   is $40.
D)   is $35.E) A) and B)
F) A) and C)

Question 6

In an economy experiencing persistent deflation:

Accepted Answer

A)   potential GDP will necessarily exceed actual GDP.
B)   changes in nominal GDP may either overstate or understate changes in real GDP.
C)   changes in nominal GDP understate changes in real GDP.
D)   changes in nominal GDP overstate changes in real GDP.E) A) and B)
F) A) and C)

Question 7

As defined in national income accounting,investment includes:

Accepted Answer

A)   business expenditures on machinery and equipment.
B)   all consumption.
C)   imports,but not exports.
D)   all nonfood items.E) None of the above
F) C) and D)

Question 8

Tom Atoe grows tomatoes for home consumption.This activity is:

Accepted Answer

A)   excluded from GDP in order to avoid double counting.
B)   excluded from GDP because an intermediate good is involved.
C)   productive but is excluded from GDP because no market transaction occurs.
D)   included in GDP because it reflects production.E) A) and D)
F) All of the above

Question 9

Exports are subtracted from imports in calculating Canadian GDP because exports are not available for domestic consumption.

Accepted Answer

A) True 
 B)False

Question 10

Assume an economy which is producing only one product.Output and price data for a three-year period are as follows.
 
-Refer to the above data.If year 2 is chosen as the base year,the price index for year one is:

Accepted Answer

A)   80
B)   100
C)   120
D)   20E) A) and B)
F) None of the above

Question 11

If real GDP rises and the GDP price index has increased:

Accepted Answer

A)   the percentage increase in nominal GDP must have been less than the percentage increase in the price level.
B)   nominal GDP may have either increased or decreased.
C)   nominal GDP must have increased.
D)   nominal GDP must have fallen.E) A) and B)
F) C) and D)

Question 12

A price index is:

Accepted Answer

A)   a comparison of the price of a market basket from a fixed point of reference.
B)   a comparison of real GDP in one period relative to another.
C)   the cost of a market basket of goods and services in a base period divided by the cost of the same market basket in another period.
D)   a ratio of real GDP to nominal GDP.E) A) and C)
F) All of the above

Question 13

In November 2012,General Motors produced an automobile that was delivered to a local dealership in December 2012.The auto was sold to Sharon Smith for personal use in February of 2013.Following national income accounting practices,this auto would be counted as:

Accepted Answer

A)   consumption in 2012 and consumption in 2012.
B)   consumption in 2012 and investment in 2013.
C)   disinvestment in 2012 and consumption in 2013.
D)   investment in 2012 and disinvestment in 2013.E) None of the above
F) C) and D)

Question 14

In Year 1,inventories rose by $25 billion.In Year 2,inventories fell by $20 billion.In calculating total investment,national income accountants would have:

Accepted Answer

A)   decreased it by $25 billion in Year 1 and increased it by $20 billion in Year 2.
B)   decreased it by $25 billion in Year 1 and increased it by $5 billion in Year 2.
C)   increased it by $25 billion in Year 1 and decreased it by $5 billion in Year 2.
D)   increased it by $25 billion in Year 1 and decreased it by $20 billion in Year 2.E) B) and C)
F) All of the above

Question 15

In national income accounting,G stands for:

Accepted Answer

A)   government purchases.
B)   gross investment.
C)   government transfer payments.
D)   gross saving.E) A) and B)
F) All of the above

Question 16

Suppose Smith pays $100 to Jones.

Accepted Answer

A)   We can say with certainty that the GDP has increased by $100.
B)   We can say with certainty that the GDP has increased,but we cannot determine the amount.
C)   We can say with certainty that the nominal GDP has increased,but we can't say whether real GDP has increased or decreased.
D)   We need more information to determine whether GDP has changed.E) C) and D)
F) B) and D)

Question 17

Subtracting the purchase of intermediate products from the value of the sales of final products determines the amount of:

Accepted Answer

A)   net investment for a business.
B)   profit and cost.
C)   value added from the economic activity.
D)   surplus or deficit from the economic activity.E) B) and C)
F) A) and D)

Question 18

The growth of GDP may understate changes in the economy's well-being over time if the:

Accepted Answer

A)   distribution of income becomes increasingly unequal.
B)   quality of products and services improves.
C)   environment deteriorates because of pollution.
D)   amount of leisure decreases.E) A) and B)
F) A) and C)

Question 19

GDP tends to overstate economic well-being because it takes into account:

Accepted Answer

A)   improvements in product quality over time.
B)   expenditures undertaken to correct pollution.
C)   illegal activities of individuals and businesses.
D)   nonmarket activities,such as the productive work of homemakers.E) B) and C)
F) A) and D)

Question 20

In 1933 net investment was minus $208 million.This meant that:

Accepted Answer

A)   gross investment exceeded depreciation by $208 million.
B)   the economy was expanding in that year.
C)   the production of 1933's GDP used up more capital goods than were produced in that year.
D)   the economy produced no capital goods at all in 1933.E) All of the above
F) None of the above

Exam 7: Measuring the Economys Output

GDP tends to overstate economic well-being because it takes into account:

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The simplest way to calculate GDP is to sum the total sales of all business firms.

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Exports are subtracted from imports in calculating Canadian GDP because exports are not available for domestic consumption.

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In November 2012,General Motors produced an automobile that was delivered to a local dealership in December 2012.The auto was sold to Sharon Smith for personal use in February of 2013.Following national income accounting practices,this auto would be counted as:

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The growth of GDP may understate changes in the economy's well-being over time if the:

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Transfer payments are included in:

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If real GDP rises and the GDP price index has increased:

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The table below indicates the price and output data over a five year period for an economy that produces only one good. -Refer to the above data.The nominal GDP for year 4:

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Assume an economy which is producing only one product.Output and price data for a three-year period are as follows. -Refer to the above data.If year 2 is chosen as the base year,the price index for year one is:

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In Year 1,inventories rose by $25 billion.In Year 2,inventories fell by $20 billion.In calculating total investment,national income accountants would have:

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In national income accounting,G stands for:

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Value added is the value of a firm's output minus:

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Tom Atoe grows tomatoes for home consumption.This activity is:

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A price index is:

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In 1933 net investment was minus $208 million.This meant that:

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In an economy experiencing persistent deflation:

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GDP includes:

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Suppose Smith pays $100 to Jones.

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Subtracting the purchase of intermediate products from the value of the sales of final products determines the amount of:

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As defined in national income accounting,investment includes:

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