Question 1

In-kind wages are not included in GDP.

Accepted Answer

A) True 
 B)False

Question 2

The stock of unused goods held by a firm is called:

Accepted Answer

A)  depreciation. 
B)  indirect taxes. 
C)  value added. 
D)  excess capacity. 
E)  inventory. 
A)  depreciation. 
B)  indirect taxes. 
C)  value added. 
D)  excess capacity. 
E)  inventory.

Question 3

National income accounting fills in the dollar values in the circular flow.

Accepted Answer

A) True 
 B)False

Question 4

The figure given below shows the various stages of production of a Corvette, a sports car produced by General Motors Company (GMC):
Table 5.2
 $\begin{array}{l}
\text { The Production of a Corvette }\
\begin{array}{|l|c|}
\hline  {\text { Production Stage }} &  {\text { Sales Value }} \
\hline \text { Steal Co. sells the raw material to Motor Inc. } & \$ 1,500 \
\text { Motor Inc. sells the engine to GMC } & \$ 2,350 \
\text { Dealer buys car form GMC } & \$ 19,700 \
\text { Dealer sells car (retail) } & \$ 36,000 \
\hline
\end{array}
\end{array}$
-According to Table 5.2, the value added by the dealer is:

Accepted Answer

A)  $2,350. 
B)  $16,300. 
C)  $19,700. 
D)  $36,000. 
E)  $59,550. 
A)  $2,350. 
B)  $16,300. 
C)  $19,700. 
D)  $36,000. 
E)  $59,550.

Question 5

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most likely to have taken place?

Accepted Answer

A)  Output increased and the price level increased 
B)  Output increased and the price level decreased 
C)  Output decreased and the price level increased 
D)  Output decreased and the price level decreased 
E)  Output increased and the price level remained constant 
A)  Output increased and the price level increased 
B)  Output increased and the price level decreased 
C)  Output decreased and the price level increased 
D)  Output decreased and the price level decreased 
E)  Output increased and the price level remained constant

Question 6

The table given below reports the value of sales at each stage of production of an economics book.
Table 5.1
 $\begin{array}{c}
\text { The Production of an Economics Book }\
\begin{array}{|l|c|}
\hline  {\text { Production Stage }} & \text { Sales Value } \
\hline \text { Purchase of Timber } & \$ 1.25 \
\hline \text { Processing of Timber into Paper } & \$ 7.75 \
\hline \text { Printing } & \$ 24.50 \
\hline \text { Retail Sales of Economics Book } & \$ 38.00 \
\hline
\end{array}
\end{array}$
-Refer to Table 5.1. What is the contribution to GDP from the production of an economics book?

Accepted Answer

A)  $13.50 
B)  $7.75 
C)  $24.50 
D)  $38 
E)  $71.50 
A)  $13.50 
B)  $7.75 
C)  $24.50 
D)  $38 
E)  $71.50

Question 7

Identify the impact of an increase in the inventory stock during a year.

Accepted Answer

A)  Consumption spending will decrease thereby reducing the GDP. 
B)  The GDP of the country should decrease by the amount of the increase in inventory. 
C)  The capital investment in the country will increase. 
D)  Neither the capital investment nor the GDP will change. 
E)  The GDP of the country should increase by the amount of the increase in inventory. 
A)  Consumption spending will decrease thereby reducing the GDP. 
B)  The GDP of the country should decrease by the amount of the increase in inventory. 
C)  The capital investment in the country will increase. 
D)  Neither the capital investment nor the GDP will change. 
E)  The GDP of the country should increase by the amount of the increase in inventory.

Question 8

Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.

Accepted Answer

A) True 
 B)False

Question 9

Gross national product in terms of the income method is equal to national income plus indirect business taxes minus the capital consumption allowance.

Accepted Answer

A) True 
 B)False

Question 10

The table given below reports the value of different economic variables of a country during a year.
Table 5.4
 $\begin{array}{c}
\text { GNP Data }\
\text { (Adjusted for net factor ícome from abroad) }\
\begin{array}{|l|l|}
\hline \text { Net Investment } & \$ 400 \
\hline \text { Capital Consumption Allowance } & \$ 800 \
\hline \text { Indirect Business Taxes } & \$ 600 \
\hline \text { U.S. Exports } & \$ 200 \
\hline \text { U.S. Imports } & \$ 300 \
\hline \text { Government Purchases } & \$ 150 \
\hline \text { Consumption Spending } & \$ 2,030 \
\hline
\end{array}\end{array}$
-Refer to Table 5.4. Calculate the NNP for this country.

Accepted Answer

A)  $2,680 
B)  $2,480 
C)  $3,280 
D)  $3,880 
E)  $4,480 
A)  $2,680 
B)  $2,480 
C)  $3,280 
D)  $3,880 
E)  $4,480

Question 11

The consumer price index [CPI] measures price changes at an earlier stage of production than the producer price index [PPI], hence, increases in the CPI are usually followed by increases in the PPI.

Accepted Answer

A) True 
 B)False

Question 12

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation) for the years 1995 and 2003.
Table 5.6
 $\begin{array}{c}
\quad\quad\quad\quad\text { Production Data }\
\quad\quad\quad\quad\quad\text { Prices per Unit } \quad\quad \text { Quantity }\
\begin{array}{|c|l|l|c|c|}
\hline \text { Production } & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} \
\hline \text { Computers } & \$ 2,000 & \$ 1,600 & 100 & 100 \
\text { Calculators } & \$ 60 & \$ 70 & 900 & 900 \
\hline
\end{array}\end{array}$
-Refer to Table 5.6. Calculate the nominal GDP for 1995.

Accepted Answer

A)  $223,000 
B)  $254,000 
C)  $448,000 
D)  $520,000 
E)  $110,000 
A)  $223,000 
B)  $254,000 
C)  $448,000 
D)  $520,000 
E)  $110,000

Question 13

According to the expenditures approach, gross domestic product represents the sum of consumption spending, government spending, net exports, and net investment.

Accepted Answer

A) True 
 B)False

Question 14

The difference between gross and net investment is referred to as:

Accepted Answer

A)  a personal tax. 
B)  the income earned but not received. 
C)  a capital consumption allowance. 
D)  an indirect business tax. 
E)  a statistical discrepancy. 
A)  a personal tax. 
B)  the income earned but not received. 
C)  a capital consumption allowance. 
D)  an indirect business tax. 
E)  a statistical discrepancy.

Question 15

The table given below reports the value of sales at each stage of production of an economics book.
Table 5.1
 $\begin{array}{c}
\text { The Production of an Economics Book }\
\begin{array}{|l|c|}
\hline  {\text { Production Stage }} & \text { Sales Value } \
\hline \text { Purchase of Timber } & \$ 1.25 \
\hline \text { Processing of Timber into Paper } & \$ 7.75 \
\hline \text { Printing } & \$ 24.50 \
\hline \text { Retail Sales of Economics Book } & \$ 38.00 \
\hline
\end{array}
\end{array}$
-Refer to Table 5.1. What is the value-added by processing timber into paper?

Accepted Answer

A)  $6.50 
B)  $38 
C)  $7.75 
D)  $1.25 
E)  $24.50 
A)  $6.50 
B)  $38 
C)  $7.75 
D)  $1.25 
E)  $24.50

Question 16

Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?

Accepted Answer

A)  Imports 
B)  Consumption 
C)  Exports 
D)  Investment 
E)  Government spending 
A)  Imports 
B)  Consumption 
C)  Exports 
D)  Investment 
E)  Government spending

Question 17

When indirect business taxes are subtracted from GDP we get net national product of a nation.

Accepted Answer

A) True 
 B)False

Question 18

The national income accounting system provides a measure of:

Accepted Answer

A)  only the total amount of profits made by the business firms. 
B)  the total value of all inputs used in production. 
C)  government budget surplus and deficit. 
D)  the net exports of a nation. 
E)  the output of an entire economy. 
A)  only the total amount of profits made by the business firms. 
B)  the total value of all inputs used in production. 
C)  government budget surplus and deficit. 
D)  the net exports of a nation. 
E)  the output of an entire economy.

Question 19

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true of real GDP?

Accepted Answer

A)  It measures a nation's output in terms of current year prices. 
B)  It measures a nation's output in constant year prices. 
C)  It measures the degree of change in the general price level in an economy. 
D)  It measures the change in the value of an economy's output. 
E)  It measures the value of both intermediate and final goods and services produced in an economy. 
A)  It measures a nation's output in terms of current year prices. 
B)  It measures a nation's output in constant year prices. 
C)  It measures the degree of change in the general price level in an economy. 
D)  It measures the change in the value of an economy's output. 
E)  It measures the value of both intermediate and final goods and services produced in an economy.

In-kind wages are not included in GDP.

The stock of unused goods held by a firm is called:

National income accounting fills in the dollar values in the circular flow.

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most likely to have taken place?

Identify the impact of an increase in the inventory stock during a year.

Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.

Gross national product in terms of the income method is equal to national income plus indirect business taxes minus the capital consumption allowance.

The consumer price index [CPI] measures price changes at an earlier stage of production than the producer price index [PPI], hence, increases in the CPI are usually followed by increases in the PPI.

According to the expenditures approach, gross domestic product represents the sum of consumption spending, government spending, net exports, and net investment.

The difference between gross and net investment is referred to as:

Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?

When indirect business taxes are subtracted from GDP we get net national product of a nation.

The national income accounting system provides a measure of:

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

Which of the following is true of real GDP?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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Exam 5: National Income Accounting

In-kind wages are not included in GDP.

The stock of unused goods held by a firm is called:

National income accounting fills in the dollar values in the circular flow.

If both real GDP and nominal GDP of a country increased at the same rate in a particular year, which of the following is most likely to have taken place?

Identify the impact of an increase in the inventory stock during a year.

Most countries tend to follow only one price index to measure the price level in an economy because all prices rise or fall at the same time or by the same amount.

Gross national product in terms of the income method is equal to national income plus indirect business taxes minus the capital consumption allowance.

The consumer price index [CPI] measures price changes at an earlier stage of production than the producer price index [PPI], hence, increases in the CPI are usually followed by increases in the PPI.

According to the expenditures approach, gross domestic product represents the sum of consumption spending, government spending, net exports, and net investment.

The difference between gross and net investment is referred to as:

Consider GDP calculated according to the expenditures approach. Which of the following components of GDP would need to decrease for GDP to increase?

When indirect business taxes are subtracted from GDP we get net national product of a nation.

The national income accounting system provides a measure of:

FICA taxes and corporate retained earnings are subtracted from national income when personal income is computed.

Which of the following is true of real GDP?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters