Question 1

Which one of the following flows from firms to households?

Accepted Answer

A) goods and services 
B) factor services 
C) payments for goods and services 
D) payments for loans 
E) loans 
A) goods and services 
B) factor services 
C) payments for goods and services 
D) payments for loans 
E) loans

Question 2

The existence of which one of the following is a reason for the fact that GDP gives an underestimated value of total output in the economy?

Accepted Answer

A) pollution 
B) market activities 
C) underground economy 
D) depreciation 
E) environmental problems 
A) pollution 
B) market activities 
C) underground economy 
D) depreciation 
E) environmental problems

Question 3

Use the figure below to answer the following questions.
   
Figure 20.1.1
-Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2014, A was $100, B was $50, C was $30 and D was $10. What is aggregate income?

Accepted Answer

A) $25 
B) $50 
C) $75 
D) $90 
E) $100 
A) $25 
B) $50 
C) $75 
D) $90 
E) $100

Question 4

When we use PPP we can make valid international comparisons of real GDP because we

Accepted Answer

A) calculate the value of goods and services produced in two countries using the same quantities. 
B) use data provided by the IMF. 
C) use the price data provided by the two countries but not the quantities. 
D) calculate the value of goods and services produced in two countries using the same prices. 
E) use official government data. 
A) calculate the value of goods and services produced in two countries using the same quantities. 
B) use data provided by the IMF. 
C) use the price data provided by the two countries but not the quantities. 
D) calculate the value of goods and services produced in two countries using the same prices. 
E) use official government data.

Question 5

Government expenditure on goods and services

Accepted Answer

A) includes transfer payments. 
B) includes expenditure by all levels of government on goods and services. 
C) is always greater than consumption expenditure. 
D) plus consumption expenditure equals aggregate expenditure. 
E) plus consumption expenditure plus investment equals aggregate expenditure. 
A) includes transfer payments. 
B) includes expenditure by all levels of government on goods and services. 
C) is always greater than consumption expenditure. 
D) plus consumption expenditure equals aggregate expenditure. 
E) plus consumption expenditure plus investment equals aggregate expenditure.

Question 6

Use the table below to answer the following questions.
Table 20.2.3
  
-Refer to Table 20.2.3. Consider the economy represented in the table. Total income, in millions of dollars, is

Accepted Answer

A) $800,000. 
B) $850,000. 
C) $1,350,000. 
D) $1,050,000. 
E) $1,100,000. 
A) $800,000. 
B) $850,000. 
C) $1,350,000. 
D) $1,050,000. 
E) $1,100,000.

Question 7

Use the table below to answer the following questions.
Table 20.2.4
  
-Refer to Table 20.2.4. Gross investment is equal to

Accepted Answer

A) $460. 
B) $260. 
C) $400. 
D) $560. 
E) $250. 
A) $460. 
B) $260. 
C) $400. 
D) $560. 
E) $250.

Question 8

Use the information below to answer the following questions.
Fact 20.1.2
Classify each of the following items as a final good or an intermediate good, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services:
Item 1. A DVD bought by a household
Item 2. A new airplane bought by WestJet
Item 3. Aluminum sheets bought by Boeing
Item 4. A new limousine for the prime minister
-Refer to Fact 20.1.2. Item 1 is ________ and item 2 is ________.

Accepted Answer

A) an intermediate good; a final good that is consumption expenditure 
B) a final good that is consumption expenditure; a final good that is investment 
C) a final good that is consumption expenditure; a final good that is consumption expenditure 
D) an intermediate good; a final good that is investment 
E) an intermediate good; an intermediate good 
A) an intermediate good; a final good that is consumption expenditure 
B) a final good that is consumption expenditure; a final good that is investment 
C) a final good that is consumption expenditure; a final good that is consumption expenditure 
D) an intermediate good; a final good that is investment 
E) an intermediate good; an intermediate good

Question 9

In the Canadian economy, market prices and factor costs would be the same except for

Accepted Answer

A) depreciation. 
B) exports. 
C) personal taxes. 
D) indirect taxes and subsidies. 
E) capital consumption. 
A) depreciation. 
B) exports. 
C) personal taxes. 
D) indirect taxes and subsidies. 
E) capital consumption.

Question 10

In the circular flow diagram, aggregate expenditure includes

Accepted Answer

A) consumption expenditure, saving, investment and government expenditure. 
B) saving, investment, and taxes. 
C) consumption expenditure, investment, government expenditure, and taxes. 
D) consumption expenditure, investment, government expenditure and net exports. 
E) government expenditure, transfer payments, and taxes. 
A) consumption expenditure, saving, investment and government expenditure. 
B) saving, investment, and taxes. 
C) consumption expenditure, investment, government expenditure, and taxes. 
D) consumption expenditure, investment, government expenditure and net exports. 
E) government expenditure, transfer payments, and taxes.

Question 11

Suppose the economy's capital increases over the year. It must be true that

Accepted Answer

A) net investment was greater than gross investment. 
B) net investment was positive. 
C) depreciation was greater than net investment. 
D) depreciation was greater than gross investment. 
E) depreciation is less than zero. 
A) net investment was greater than gross investment. 
B) net investment was positive. 
C) depreciation was greater than net investment. 
D) depreciation was greater than gross investment. 
E) depreciation is less than zero.

Question 12

Use the figure below to answer the following questions.
   
Figure 20.3.1
-Refer to Figure 20.3.1. In the figure, the distance between points T and U represents

Accepted Answer

A) an expansion. 
B) a trough. 
C) a peak. 
D) a recession. 
E) a business cycle. 
A) an expansion. 
B) a trough. 
C) a peak. 
D) a recession. 
E) a business cycle.

Question 13

Net domestic income at market prices equals

Accepted Answer

A) consumption expenditure plus government expenditure plus net exports plus investment. 
B) consumption expenditure plus government expenditure plus exports plus personal taxes. 
C) indirect business taxes plus personal income plus net exports. 
D) all incomes plus indirect taxes minus subsidies. 
E) all incomes minus depreciation. 
A) consumption expenditure plus government expenditure plus net exports plus investment. 
B) consumption expenditure plus government expenditure plus exports plus personal taxes. 
C) indirect business taxes plus personal income plus net exports. 
D) all incomes plus indirect taxes minus subsidies. 
E) all incomes minus depreciation.

Question 14

Which one of the following would not be counted as part of this year's GDP?

Accepted Answer

A) the lumber you purchase when building bookshelves for your room 
B) the government bond you buy for your newborn niece 
C) the purchase of a new personal computer that was produced in the current year 
D) the purchase of wheat that was produced in the current year by a Saskatchewan farmer 
E) the purchase of a house that was produced in the current year 
A) the lumber you purchase when building bookshelves for your room 
B) the government bond you buy for your newborn niece 
C) the purchase of a new personal computer that was produced in the current year 
D) the purchase of wheat that was produced in the current year by a Saskatchewan farmer 
E) the purchase of a house that was produced in the current year

Question 15

Net domestic income at market prices equals GDP (income approach)minus

Accepted Answer

A) taxes. 
B) corporate profits. 
C) subsidies. 
D) consumption expenditure. 
E) depreciation. 
A) taxes. 
B) corporate profits. 
C) subsidies. 
D) consumption expenditure. 
E) depreciation.

Question 16

The purchasers in the goods markets are

Accepted Answer

A) households and government only. 
B) households and firms only. 
C) households and net exporters only. 
D) households, firms, and government only. 
E) households, firms, government, and those who import our goods. 
A) households and government only. 
B) households and firms only. 
C) households and net exporters only. 
D) households, firms, and government only. 
E) households, firms, government, and those who import our goods.

Question 17

Which one of the following is an expenditure flow from households to firms?

Accepted Answer

A) goods and services 
B) factor services 
C) payments for goods and services 
D) payments for factor services 
E) loans 
A) goods and services 
B) factor services 
C) payments for goods and services 
D) payments for factor services 
E) loans

Question 18

A south sea island produces only coconuts. In 2005, the price of a coconut is $2.00 and the quantity produced is 400. In 2012, the price of a coconut is $1.50 and the quantity produced is 350. 2005 is the reference base year. Real GDP in 2012 in terms of base-year prices is

Accepted Answer

A) $600. 
B) $525. 
C) $800. 
D) $700. 
E) $750. 
A) $600. 
B) $525. 
C) $800. 
D) $700. 
E) $750.

Question 19

Use the table below to answer the following question.
Table 20.2.9

-Refer to Table 20.2.9. The base year is 2013 and the table gives the quantities produced and the prices in 2013 and 2014. Nominal GDP in 2013 is

Accepted Answer

A) $5,500. 
B) $6,100 
C) $7,400. 
D) greater than real GDP in 2013. 
E) $7,600. 
A) $5,500. 
B) $6,100 
C) $7,400. 
D) greater than real GDP in 2013. 
E) $7,600.

Question 20

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2014, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500. At the end of 2014, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
-Refer to Fact 20.1.1. Peter's depreciation in 2014 is

Accepted Answer

A) $2,300. 
B) $800. 
C) zero. 
D) $1,000. 
E) $3,000. 
A) $2,300. 
B) $800. 
C) zero. 
D) $1,000. 
E) $3,000.

Exam 20: Measuring Gdp and Economic Growth

Which one of the following flows from firms to households?

The existence of which one of the following is a reason for the fact that GDP gives an underestimated value of total output in the economy?

Use the figure below to answer the following questions. Figure 20.1.1 -Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2014, A was $100, B was $50, C was $30 and D was $10. What is aggregate income?

When we use PPP we can make valid international comparisons of real GDP because we

Government expenditure on goods and services

Use the table below to answer the following questions. Table 20.2.3 -Refer to Table 20.2.3. Consider the economy represented in the table. Total income, in millions of dollars, is

Use the table below to answer the following questions. Table 20.2.4 -Refer to Table 20.2.4. Gross investment is equal to

In the Canadian economy, market prices and factor costs would be the same except for

In the circular flow diagram, aggregate expenditure includes

Suppose the economy's capital increases over the year. It must be true that

Use the figure below to answer the following questions. Figure 20.3.1 -Refer to Figure 20.3.1. In the figure, the distance between points T and U represents

Net domestic income at market prices equals

Which one of the following would not be counted as part of this year's GDP?

Net domestic income at market prices equals GDP (income approach)minus

The purchasers in the goods markets are

Which one of the following is an expenditure flow from households to firms?

A south sea island produces only coconuts. In 2005, the price of a coconut is $2.00 and the quantity produced is 400. In 2012, the price of a coconut is $1.50 and the quantity produced is 350. 2005 is the reference base year. Real GDP in 2012 in terms of base-year prices is

Use the table below to answer the following question. Table 20.2.9 -Refer to Table 20.2.9. The base year is 2013 and the table gives the quantities produced and the prices in 2013 and 2014. Nominal GDP in 2013 is

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