Question 1

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320) , imports ($35) , exports ($22) , personal consumption expenditures ($2,460) , and government purchases ($470) .What is GDP in this economy?

Accepted Answer

A)  $3,250 billion
B)  $3,263 billion
C)  $3,237 billion
D)  $3,290 billionE) None of the above
F) B) and D)

Question 2

If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms.We refer to that adjustment as

Accepted Answer

A)  inflating GDP.
B)  deflating GDP.
C)  compounding GDP.
D)  indexing GDP.E) All of the above
F) B) and D)

Question 3

The gross domestic product (GDP)  concept accounts for society's valuation of the relative worth of goods and services by using

Accepted Answer

A)  a measure of physical weight.
B)  a measure of volume.
C)  a utility measure.
D)  a monetary measure.E) A) and B)
F) A) and C)

Question 4

Which of the following is not a component of GDP in the expenditures approach?

Accepted Answer

A)  government purchases
B)  workers' wages and other compensation
C)  gross private domestic investment
D)  the difference between exports and importsE) A) and B)
F) All of the above

Question 5

If depreciation (consumption of fixed capital)  exceeds gross domestic investment, we can conclude 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's production capacity is expanding.E) B) and C)
F) A) and D)

Question 6

The largest component of total expenditures in the United States is

Accepted Answer

A)  net exports.
B)  government purchases.
C)  consumption.
D)  gross investment.E) B) and C)
F) A) and D)

Question 7

"GDP price index" measures changes in the

Accepted Answer

A)  value of final output produced in the nation.
B)  prices of the output produced in the nation.
C)  amount of resources available in the nation.
D)  cost of resources employed in the nation.E) A) and D)
F) C) and D)

Question 8

In an economy that is experiencing inflation and output growth, nominal GDP will rise faster than real GDP.

Accepted Answer

A) True 
 B)False

Question 9

Which would be considered an investment according to economists?

Accepted Answer

A)  A fishing-company owner buys Google shares.
B)  A fishing company buys a few boats from another fishing company that was closing out.
C)  A fishing-company owner buys new fishing gear.
D)  A fishing-company owner buys fuel to run the boats.E) A) and D)
F) B) and C)

Question 10

In the reservoir analogy for stock versus flow, the stock of capital is similar to the

Accepted Answer

A)  quality of water.
B)  outflow of water.
C)  inflow of water.
D)  level of water.E) B) and C)
F) A) and D)

Question 11

Disposable income measures the before-tax income received by resource suppliers.

Accepted Answer

A) True 
 B)False

Question 12

In 1933, net private domestic investment was a minus $6.0 billion.This means that

Accepted Answer

A)  gross private domestic investment exceeded depreciation by $6.0 billion.
B)  the economy was expanding in that year.
C)  the production of 1933's GDP used up more capital goods than were produced in that year.
D)  the economy produced no capital goods at all in 1933.E) A) and B)
F) B) and C)

Question 13

In determining GDP by the expenditures method, it is appropriate to use net investment rather than gross investment as a measure of investment spending.

Accepted Answer

A) True 
 B)False

Question 14

Net exports are positive when exports are greater than imports.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion.GDP in year 2 is

Accepted Answer

A)  $180 billion.
B)  $190 billion.
C)  $200 billion.
D)  $210 billion.E) A) and D)
F) B) and C)

Question 16

A nation's capital stock was valued at $300 billion at the start of the year and $350 billion at the end.Consumption of private fixed capital in the year was $25 billion.Assuming stable prices, gross investment was

Accepted Answer

A)  $25 billion.
B)  $50 billion.
C)  $75 billion.
D)  $90 billion.E) B) and C)
F) C) and D)

Question 17

Money spent on the purchase of a new house is included in the GDP as a part of

Accepted Answer

A)  household expenditures on durable goods.
B)  personal consumption expenditures.
C)  personal saving.
D)  gross domestic private investment.E) A) and B)
F) A) and C)

Question 18

The consumption of fixed capital in each year's production is called

Accepted Answer

A)  indirect business taxes.
B)  inventory reduction.
C)  depreciation.
D)  net investment.E) None of the above
F) A) and B)

Question 19

If real GDP falls from one period to another, we can conclude that

Accepted Answer

A)  deflation occurred.
B)  inflation occurred.
C)  nominal GDP fell.
D)  none of these necessarily occurred.E) None of the above
F) A) and C)

Question 20

"Net foreign factor income" in the national income accounts refers to the difference between

Accepted Answer

A)  the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
B)  the value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
C)  the value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
D)  the income earned by Americans in the U.S.minus the income earned by foreigners in the U.S.E) A) and B)
F) A) and C)

Exam 27: Measuring Domestic Output and National Income

Which of the following is not a component of GDP in the expenditures approach?

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Net exports are positive when exports are greater than imports.

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The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320) , imports ($35) , exports ($22) , personal consumption expenditures ($2,460) , and government purchases ($470) .What is GDP in this economy?

Correct AnswerverifiedShow Answer

Disposable income measures the before-tax income received by resource suppliers.

Correct AnswerverifiedShow Answer

In the reservoir analogy for stock versus flow, the stock of capital is similar to the

Correct AnswerverifiedShow Answer

Which would be considered an investment according to economists?

Correct AnswerverifiedShow Answer

The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using

Correct AnswerverifiedShow Answer

"Net foreign factor income" in the national income accounts refers to the difference between

Correct AnswerverifiedShow Answer

The largest component of total expenditures in the United States is

Correct AnswerverifiedShow Answer

The consumption of fixed capital in each year's production is called

Correct AnswerverifiedShow Answer

"GDP price index" measures changes in the

Correct AnswerverifiedShow Answer

In 1933, net private domestic investment was a minus $6.0 billion.This means that

Correct AnswerverifiedShow Answer

If real GDP falls from one period to another, we can conclude that

Correct AnswerverifiedShow Answer

Money spent on the purchase of a new house is included in the GDP as a part of

Correct AnswerverifiedShow Answer

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that

Correct AnswerverifiedShow Answer

In determining GDP by the expenditures method, it is appropriate to use net investment rather than gross investment as a measure of investment spending.

Correct AnswerverifiedShow Answer

A nation's capital stock was valued at $300 billion at the start of the year and $350 billion at the end.Consumption of private fixed capital in the year was $25 billion.Assuming stable prices, gross investment was

Correct AnswerverifiedShow Answer

If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms.We refer to that adjustment as

Correct AnswerverifiedShow Answer

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion.GDP in year 2 is

Correct AnswerverifiedShow Answer

In an economy that is experiencing inflation and output growth, nominal GDP will rise faster than real GDP.

Correct AnswerverifiedShow Answer

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