Question 1

In national-income accounting,the value of intermediate products

Accepted Answer

A)  should always be counted as part of GDP in the expenditure approach.
B)  should be subtracted from the value of final goods in determining a firm's total value added.
C)  should be added to the value of other inputs in determining a firm's contribution to GDP.
D)  must equal the value added by the firm.
E)  is counted as factor income in the calculation of GDP from the income side.

Question 2

One major reason that GDP is an inaccurate measure of the true level of economic activity is that

Accepted Answer

A)  people frequently buy things they do not want.
B)  it is statistically very inaccurate.
C)  it does not include non-market activities.
D)  it cannot be adjusted for changes in prices.
E)  it includes net exports.

Question 3

Which of the following statements about the underground economy and how it relates to GDP is correct?

Accepted Answer

A)  Activity in the underground economy in Canada is estimated at over 25% of the value of GDP,which therefore significantly understates total output.
B)  Transactions in the underground economy are not legal,are not reported for tax purposes,and therefore not included in GDP.
C)  Transactions in the underground economy are legal but are not reported for tax purposes,and therefore not included in GDP.
D)  Activity in the underground economy is illegal and therefore should not be included in any measure of legitimate economic activity.
E)  Transactions in the underground economy are legal and therefore an estimate of their total value is included in GDP.

Question 4

Using GDP as a measure of the economic well-being of a country can be criticized for ignoring non-market and other activities.However,it remains useful because

Accepted Answer

A)  GDP is the best measure we have of the effects of economic "bads" on the well-being of the country.
B)  the change in GDP from one year to the next is a good indication of what rates of inflation and unemployment will be.
C)  it provides a good indication of household income distribution when measured from the income side.
D)  the change that is measured in GDP from one year to the next is a good indication of the change in economic activity.
E)  it is simply not possible to reform the current measure of GDP.

Question 5

One major reason that GDP is an inaccurate measure of the "quality of life" is that

Accepted Answer

A)  people frequently buy things they do not want.
B)  it does not include the value of leisure.
C)  it is statistically very inaccurate.
D)  it cannot be adjusted for changes in prices.
E)  it includes net exports.

Question 6

The table below shows total output for an economy over 2 years.  TABLE 20-5 Refer to Table 20-5.Assume the output of all three goods is consumed in the country,and there are no imported goods and services.If 2018 is used as the base year,then the consumer price index (CPI) in 2019 was approximately

Accepted Answer

A)  102.
B)  180.
C)  179.
D)  193.
E)  418.

Question 7

The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2008 and 2018. Quantities Produced Prices  TABLE 20-6
Refer to Table 20-6.What is the real GDP for 2018 if 2008 is the base year?

Accepted Answer

A)  $6750
B)  $7975
C)  $9000
D)  $10 500
E)  $20 100

Question 8

Suppose national accounting was done by adding up the market values of all outputs of all firms.This approach would

Accepted Answer

A)  accurately reflect the value of production in the economy.
B)  obtain gross domestic product.
C)  obtain gross national product.
D)  underestimate the value of production in the economy.
E)  overestimate the value of production in the economy.

Question 9

Consider the following statement: "An increase in per capita income guarantees an increase in living standards." Is this statement true or false,and why?

Accepted Answer

A)  False.Living standards have no statistical correlation with per capita income,and so such a guarantee is not possible.
B)  False.Per capita income could be increasing while at the same time living standards are deteriorating due to,for example,environmental degradation or a decline in social cohesion.
C)  True.The measure of living standards is a subset of per capita income,so when one measure increases,the other measure must also increase.
D)  True.Per capita income is the most important contributor to living standards.
E)  Impossible to determine because "living standards" is a subjective concept that cannot be measured.

Question 10

One reason that real GDP tends to overstate the economic well-being of the country's residents is that it ignores

Accepted Answer

A)  the costs of increased leisure time.
B)  the market-based activity done from the home.
C)  the economic "bads" associated with production,such as pollution.
D)  non-market activities,such as teenaged-babysitting services.
E)  illegal activities,such as the drug trade.

Question 11

The table below shows total output for an economy over 3 years.  * millions of dollars ** real GDP measured in millions of 2010 dollars
TABLE 20-7
Refer to Table 20-7.The real GDP in 2017,expressed in 2010 prices,was

Accepted Answer

A)  $773 585.
B)  $798 000.
C)  $800 000.
D)  $869 200.
E)  $900 000.

Question 12

With regard to national-income accounting,which of the following statements about depreciation is correct?

Accepted Answer

A)  Depreciation includes net additions to the economy's total stock of capital.
B)  The total amount of capital goods in a country is called depreciation.
C)  Net investment is equal to gross investment minus depreciation.
D)  Net investment is equal to gross investment plus depreciation.
E)  Depreciation is equal to net investment.

Question 13

In national-income accounting,which of the following transactions by households is considered to be an investment expenditure?

Accepted Answer

A)  the purchase of an iPhone
B)  the purchase of a government bond
C)  the purchase of a Guaranteed Investment Certificate (GI
C)  
D)  payment for the construction of a custom-built new home
E)  the purchase of an imported car

Question 14

Which of the following is included in current calculations of GDP?

Accepted Answer

A)  computers produced here and exported to Europe
B)  the value of a vintage automobile purchased from the previous owner
C)  volunteer work
D)  the value of vegetables consumed by the home gardener
E)  welfare payments

Question 15

Suppose a government collects $12 billion in various tax revenues,and pays $2.5 billion in debt interest,$9 billion in social security benefits,and $0.5 billion in government employee wages.What is the direct contribution to GDP coming from this government's fiscal actions?

Accepted Answer

A)  $0.5 billion
B)  $2.5 billion
C)  $3.0 billion
D)  $11.5 billion
E)  $12.0 billion

Question 16

Which of the following statements about national-income accounting is correct?

Accepted Answer

A)  The total value added in the economy is equal to the sum of all components in the circular flow of expenditure and income.
B)  The value of the expenditure on a nation's output is equal to the total income claims generated by producing that output.
C)  GDP on the expenditure side is calculated by adding up all the income claims generated by the act of production.
D)  GDP on the income side is calculated by adding up total expenditure for each of the main components of final output.
E)  GDP from the expenditure side and GDP from the income side differ by the amount of investment in the economy.

Question 17

Total value added in an economy is equal to the value of

Accepted Answer

A)  all final goods produced.
B)  all final and intermediate goods produced.
C)  all inputs and outputs in the economy.
D)  all profits of all firms in the economy.
E)  the sum of the value of primary,intermediate and final goods.

Question 18

Which of the following is excluded from GDP?

Accepted Answer

A)  the labour services provided by a police officer in the narcotics squad
B)  the purchase of new computers by a police department
C)  the repairs to a police car after damage as a result of a high speed chase
D)  the labour supplied by a lawyer to defend a suspect charged with a criminal offense
E)  the purchase price of illegal drugs sold by a drug dealer

Question 19

The table below includes data for a one-year period required to calculate GDP from the income side for a teeny-tiny economy.  TABLE 20-4 Refer to Table 20-4.What is the value of net domestic income at factor cost?

Accepted Answer

A)  $1711.60
B)  $1811.40
C)  $1840.40
D)  $1910.80
E)  $2004.80

Question 20

The table below shows total output for an economy over 2 years.  TABLE 20-5 Refer to Table 20-5.The implicit GDP deflator in 2019,when 2018 is used as the base year,was approximately

Accepted Answer

A)  105.
B)  160.
C)  180.
D)  193.
E)  203.

Exam 20: The Measurement of National Income

The table below shows total output for an economy over 2 years. TABLE 20-5 Refer to Table 20-5.Assume the output of all three goods is consumed in the country,and there are no imported goods and services.If 2018 is used as the base year,then the consumer price index (CPI) in 2019 was approximately

Correct AnswerverifiedShow Answer

The table below shows total output for an economy over 2 years. TABLE 20-5 Refer to Table 20-5.The implicit GDP deflator in 2019,when 2018 is used as the base year,was approximately

Correct AnswerverifiedShow Answer

Suppose national accounting was done by adding up the market values of all outputs of all firms.This approach would

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Which of the following is included in current calculations of GDP?

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Consider the following statement: "An increase in per capita income guarantees an increase in living standards." Is this statement true or false,and why?

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With regard to national-income accounting,which of the following statements about depreciation is correct?

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One reason that real GDP tends to overstate the economic well-being of the country's residents is that it ignores

Correct AnswerverifiedShow Answer

One major reason that GDP is an inaccurate measure of the "quality of life" is that

Correct AnswerverifiedShow Answer

Total value added in an economy is equal to the value of

Correct AnswerverifiedShow Answer

Using GDP as a measure of the economic well-being of a country can be criticized for ignoring non-market and other activities.However,it remains useful because

Correct AnswerverifiedShow Answer

Which of the following statements about the underground economy and how it relates to GDP is correct?

Correct AnswerverifiedShow Answer

In national-income accounting,the value of intermediate products

Correct AnswerverifiedShow Answer

The table below includes data for a one-year period required to calculate GDP from the income side for a teeny-tiny economy. TABLE 20-4 Refer to Table 20-4.What is the value of net domestic income at factor cost?

Correct AnswerverifiedShow Answer

In national-income accounting,which of the following transactions by households is considered to be an investment expenditure?

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Which of the following is excluded from GDP?

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One major reason that GDP is an inaccurate measure of the true level of economic activity is that

Correct AnswerverifiedShow Answer

The table below shows total output for an economy over 3 years. * millions of dollars ** real GDP measured in millions of 2010 dollars TABLE 20-7 Refer to Table 20-7.The real GDP in 2017,expressed in 2010 prices,was

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Which of the following statements about national-income accounting is correct?

Correct AnswerverifiedShow Answer

The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2008 and 2018. Quantities Produced Prices TABLE 20-6 Refer to Table 20-6.What is the real GDP for 2018 if 2008 is the base year?

Correct AnswerverifiedShow Answer

Suppose a government collects $12 billion in various tax revenues,and pays $2.5 billion in debt interest,$9 billion in social security benefits,and $0.5 billion in government employee wages.What is the direct contribution to GDP coming from this government's fiscal actions?

Correct AnswerverifiedShow Answer

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