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Exam 26: Measuring Domestic Output and National Income

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Question 51

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Assume an economy that makes only one product and that year 3 is the base year.Output and price data for a five-year period are as follows.Answer the question on the basis of these data. $\begin{array}{c}\begin{array}{c}\\\underline{\text { Year }} \\1 \\2 \\3 \\4 \\5\end{array}\begin{array}{c}\text { Units of}\\\underline{\text { Output}}\\3 \\4 \\6 \\7 \\8\end{array}\begin{array}{c}\text { Price Per } \\\underline{\text { Unit } }\\ \$ 3 \\4 \\5 \\7 \\8\end{array}\end{array}$ Refer to the data.In determining real GDP,the nominal GDP for:

A) each year must be multiplied by the relevant price index.
B) years 1 and 2 must be inflated.
C) years 4 and 5 must be inflated.
D) years 1 and 2 must be deflated.

E) None of the above
F) All of the above

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Question 52

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Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array} { l r } \text { Proprietors' Income } & \$ 20 \\\text { Compensation of Employees } & 300 \\\text { Consumption of Fixed Capital } & 15 \\\text { Gross Investment } & 80 \\\text { Rents } & 10 \\\text { Interest } & 20 \\\text { Exports } & 30 \\\text { Imports } & 50 \\\text { Corporate Profits } & 25 \\\text { Taxes on Production and Imports } & 5 \\\text { Net Foreign Factor Income } & 0 \\\text { Statistical Discrepancy } & 0\end{array}$ Refer to the data.Net domestic product is:

A) $395.
B) $380.
C) $375.
D) $360.

E) All of the above
F) A) and B)

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Question 53

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Real GDP accounts for changes in product quality;nominal GDP does not.

Arthur sells $100 worth of cotton to Bob.Bob turns the cotton into cloth,which he sells to Camille for $300.Camille uses the cloth to make prom dresses that she sells to Donita for $700.Donita sells the dresses for $1,200 to kids attending the prom.The total contribution to GDP of this series of transactions is:

Which of the following activities is excluded from GDP,causing GDP to understate a nation's well-being?

National income accountants define investment to include:

The largest component of total expenditures in the United States is:

Transfer payments are:

All expenditures on new construction are included as investment in calculating GDP.

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array}{llcc} \text { Gross Private Domestic Investment} & \$46 \\ \text { Exports of the U.S. } &9\\ \text {Disposable Income } &190\\ \text { Personal Saving } &10\\ \text {Government Purchases } &84\\ \text { Net Foreign Factor Income } &10\\ \text { Consumption of Fixed Capital } &52 \\ \text {Dividends } &13\\ \text { Imports of the U.S.} &12\\ \text {Taxes on Production and Imports } &22\\ \text { Personal Taxes} &38\\ \text {Social Security Contributions } &23\\ \text { Statistical Discrepancy} &0\end{array}$ The economy characterized by the data is:

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array}{llcc} \text { Gross Private Domestic Investment} & \$46 \\ \text { Exports of the U.S. } &9\\ \text {Disposable Income } &190\\ \text { Personal Saving } &10\\ \text {Government Purchases } &84\\ \text { Net Foreign Factor Income } &10\\ \text { Consumption of Fixed Capital } &52 \\ \text {Dividends } &13\\ \text { Imports of the U.S.} &12\\ \text {Taxes on Production and Imports } &22\\ \text { Personal Taxes} &38\\ \text {Social Security Contributions } &23\\ \text { Statistical Discrepancy} &0\end{array}$ Refer to the data.Personal income is:

Within the circular flow model,the level of total resource income and total spending on output will be approximately equal.

National income measures:

Setup Corporation buys $100,000 of sand,rock,and cement to produce ready-mix concrete.It sells 10,000 cubic yards of concrete at $30 a cubic yard.The value added by Setup Corporation is:

If personal income exceeds national income in a particular year,we can conclude that:

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion.We can conclude that:

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion.On the basis of this information,we:

Final goods and services refer to:

The growth of GDP may understate changes in the economy's economic well-being over time if the:

The smallest component of aggregate spending in the United States is: