Question 1

The Bahamas is a chain of islands whose economy relies heavily on tourism. The majority of the hotels and resorts in the island are owned by foreign countries. Which do you think is larger, Bahamas' GDP or GNP? Explain.

Accepted Answer

The answer of The Bahamas is a chain of islands...

Question 2

When a country is experiencing persistent deflation, then:

Accepted Answer

A)  real GDP is greater than nominal GDP before the base year. 
B)  real GDP is less than nominal GDP before the base year. 
C)  real GDP is greater than nominal GDP after the base year. 
D)  both B and C are correct.

Question 3

In the product market of the circular flow diagram, households:

Accepted Answer

A)  pay for goods and services supplied to these markets. 
B)  earn income for goods and services supplied to these markets. 
C)  earn income for goods and services demanded from these markets. 
D)  pay for goods and services demanded from these markets.

Question 4

Refer to Application 1, "Using Value Added to Measure the True Size of Wal- Mart," to answer the following questions:
-From Application 1, Wal- Mart's 2008 sales were roughly equal to the GDP of , the largest economy in the world.

Accepted Answer

A)  Belgium; 28th 
B)  Japan; 2nd 
C)  China; 3rd 
D)  Ukraine; 53rd

Question 5

Refer to Application 1, "Using Value Added to Measure the True Size of Wal- Mart," to answer the following questions:
-Using information from Application 1, explain how you would calculate Wal- Mart's "value added" for the year 2008?

Accepted Answer

The answer of Refer to Application 1, "Using Value Added...

Question 6

Explain the relationship among gross investment, net investment, and depreciation.

Accepted Answer

The answer of Explain the relationship among gross investment, net...

Question 7

For developed countries like the United States, GDP will always exceed GNP.

Accepted Answer

A) True 
 B)False

Question 8

In the circular flow diagram, firms _______ inputs and households _______ goods and services.

Accepted Answer

A)  supply; supply 
B)  supply; demand 
C)  demand; supply 
D)  demand; demand

Question 9

If a country's exports equal $500 billion, while its imports equal $750 billion, then the country's net exports equal _______ and the economy is experiencing a trade _______.

Accepted Answer

A)  - 250 billion, surplus. 
B)  250 billion, deficit 
C)  250 billion, balance 
D)  - $250 billion, deficit

Question 10

If gross investment in 2009 is $600 billion and depreciation in 2009 is $50 billion, net investment in 2009 is:

Accepted Answer

A)  $550 billion. 
B)  $50 billion. 
C)  $600 billion. 
D)  none of the above

Question 11

The single largest expenditure component in GDP is:

Accepted Answer

A)  consumption expenditures. 
B)  private investment expenditures. 
C)  net exports. 
D)  government purchases.

Question 12

Transfer payments are subtracted from national income to get to personal income.

Accepted Answer

A) True 
 B)False

Question 13

Explain why we must take into account changes in business inventories when calculating GDP.

Accepted Answer

The answer of Explain why we must take into account...

Question 14

The most recent recession that the U.S. experienced started in:

Accepted Answer

A)  December 2008. 
B)  December 2007. 
C)  November 2001. 
D)  March 2001.

Question 15

Suppose you buy paid $40,000 for a new BMW from your local dealership. The car was built completely in Germany. Suppose that the dealer paid $25,000 for the car, how would your purchase be recorded in US GDP accounts? By how much would US GDP increase as a result of your purchase?

Accepted Answer

The answer of Suppose you buy paid $40,000 for a...

Question 16

Which of the following would not be included in GDP?

Accepted Answer

A)  the purchase of a used car 
B)  the sale of Firestone tires to Ford Motor company 
C)  the sale of stocks 
D)  None of the above would be included in GDP.

Question 17

Refer to Application 2, "Comparing the Severity of Recessions," to answer the following questions:
-According to the application, during the recession that started in 2007, unemployments that rose from:

Accepted Answer

A)  6.9 to 9.1 percent. 
B)  4.6 percent to 10 percent. 
C)  4.9 percent to 8.5 percent. 
D)  3.5 to 15.3 percent.

Question 18

The total market value of all final goods and services produced within a country in a given year is the:

Accepted Answer

A)  gross domestic product. 
B)  gross national product. 
C)  national income. 
D)  net national product.

Question 19

If national income is $645 billion, indirect taxes are $20 billion, and subsidies are $15 billion, then net national product is:

Accepted Answer

A)  $167 billion. 
B)  $645 billion. 
C)  $685 billion. 
D)  $650 billion.

Question 20

The U.S. experienced a recession that ended in November 2001. In December 2001, the U.S. was in a:

Accepted Answer

A)  peak. 
B)  trough. 
C)  recession. 
D)  period of expansion.

Exam 5: Measuring a Nations Production and Income