Question 1

Suppose the total market value of all final goods and services produced in a particular country is $600 billion and the total market value of final goods and services sold is $525 billion in 2020.We can conclude that:

Accepted Answer

A) GDP is $525 billion in 2020. 
B) NDI is $525 billion in 2020. 
C) GDP is $600 billion in 2020. 
D) inventories fell by $75 billion in 2020.

Question 2

Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5.The current year per unit prices of these three goods are A = $2, B = $3, and C = $1.Refer to the above information.If the per unit prices of the three goods each were $1 in a base year used to construct a GDP price index, then real GDP in the current year:

Accepted Answer

A) is $110. 
B) is $115. 
C) is $45. 
D) cannot be determined on the basis of this data.

Question 3

Refer to the information below.GDP is: All figures are in billions of dollars.

Accepted Answer

A) $422 
B) $467 
C) $417 
D) $402

Question 4

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result:

Accepted Answer

A) real GDP will rise more rapidly than nominal GDP. 
B) GDP will tend to increasingly understate the level of output through time. 
C) GDP will tend to increasingly overstate the level of output through time. 
D) the accuracy of GDP will be unaffected through time.

Question 5

Which of the following do national income accountants consider to be "investment"?

Accepted Answer

A) the purchase of an automobile for private, non-business use 
B) the purchase of a new house 
C) the purchase of corporate bonds 
D) the purchase of gold coins

Question 6

Wages, salaries, and supplementary labour income in Canada:

Accepted Answer

A) is about 30% of the income categories. 
B) is the smallest category in the calculation of the GDP by the income approach. 
C) is the largest category in the calculation of the GDP by the income approach. 
D) is the only category in the calculation of the GDP by the income approach.

Question 7

GDP data are criticized as being inaccurate measures of economic welfare because:

Accepted Answer

A) they do not take into account changes in the amount of leisure. 
B) they do not take into account changes in product quality. 
C) they do not take into account the adverse effects of economic activity on the environment. 
D) all of these.

Question 8

Of the countries listed in Image 7.2 Global Perspective the underground economy in 2016 as a percentage of GDP, which country has the highest percentage?

Accepted Answer

A) Sweden 
B) Germany 
C) Canada 
D) United States

Question 9

Gross domestic product is what type of measure?

Accepted Answer

A) Monetary 
B) Fiscal 
C) Physical 
D) Cash

Question 10

If depreciation (consumption of fixed capital) exceeds gross investment, it can be concluded that:

Accepted Answer

A) nominal GDP is rising but real GDP is declining. 
B) net investment is negative. 
C) the economy is importing more than it exports. 
D) the economy is expanding.

Question 11

The following are national income account data for a hypothetical economy in billions of dollars: government purchases ($1,050); personal consumption expenditures ($4,800); imports ($370); exports ($240); gross investment ($1,130).Personal consumption expenditures are approximately what percentage of this economy?

Accepted Answer

A) 60 percent 
B) 65 percent 
C) 70 percent 
D) 75 percent

Question 12

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.If year 2 is the base year, the price index for year 3 is:

Accepted Answer

A) 120 
B) 125 
C) 133 
D) 150

Question 13

In calculating GDP by the income approach, we should sum up:

Accepted Answer

A) wages, consumption, investment and rent. 
B) wages, rent, interest and profit income. 
C) wages, interest, investment, and exports. 
D) wages, profit income, investment, and consumption.

Question 14

Refer to the above diagram.Which of the following statements is correct?

Accepted Answer

A) The price index is greater than 100 for every year shown on the graph. 
B) Nominal GDP must be deflated in each year prior to 1992 to determine real GDP. 
C) Real GDP has grown in this economy, but nominal GDP has not. 
D) Nominal GDP must be deflated in each year since 1992 to determine real GDP.

Question 15

In an economy experiencing a declining production capacity:

Accepted Answer

A) the nation's stock of capital goods is expanding. 
B) net exports are necessarily zero. 
C) Net Investment exceeds GDP. 
D) depreciation exceeds gross investment.

Question 16

Which of the following of the countries listed and using Image 7.1 Global Perspective, which country had the highest GDP in 2016?

Accepted Answer

A) Japan 
B) Germany 
C) France 
D) United Kingdom

Question 17

The GDP figure by the income approach will be identical to the GDP by the expenditure approach if we add to the Net Domestic income:

Accepted Answer

A) the capital consumption allowances and the investment income. 
B) the capital consumption allowances and the interest payments to the owners of capital. 
C) the indirect taxes and the capital consumption allowances. 
D) profits of the corporations and the capital consumption allowances.

Question 18

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:

Accepted Answer

A) public transfer payments to households. 
B) the consumption of fixed capital. 
C) intermediate goods. 
D) the underground economy.

Question 19

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:

Accepted Answer

A) may have either increased or decreased. 
B) increased by $65 billion. 
C) increased by $55 billion. 
D) decreased by $55 billion.

Question 20

Some of the production of an economy creates pollution.As a result:

Accepted Answer

A) nominal GDP is greater than real GDP. 
B) real GDP is greater than nominal GDP. 
C) GDP tends to understate social welfare. 
D) GDP tends to overstate social welfare.

Exam 7: B: Measuring the Economys Output