Question 1

In calculating GDP, national income accountants:

Accepted Answer

A)  treat inventory changes as an adjustment to personal consumption expenditures.
B)  ignore inventories because they do not represent final goods.
C)  subtract increases in inventories and add decreases in inventories.
D)  add increases in inventories and subtract decreases in inventories.E) A) and B)
F) B) and D)

Question 2

In a typical year which of the following measures of aggregate output and income is likely to be the smallest?

Accepted Answer

A)  gross domestic product
B)  net domestic income
C)  disposable income
D)  personal incomeE) A) and B)
F) A) and C)

Question 3

To calculate the real GDP, Statistics Canada has started to consider both the quantities and prices in the base year and the following year and then average the two.

Accepted Answer

A) True 
 B)False

Question 4

GDP may be defined as:

Accepted Answer

A)  the monetary value of all goods and services (final, intermediate, and non-market)  produced in a given year.
B)  total resource income less taxes, saving, and spending on exports.
C)  the economic value of all economic resources used in the production of a year's output.
D)  the market value of all final goods and services produced within country in a specific year.E) A) and B)
F) A) and C)

Question 5

The value of Canadian imports is:

Accepted Answer

A)  added to exports when calculating GDP because imports reflect spending by Canadians.
B)  subtracted from exports when calculating GDP because imports do not entail spending by Canadians.
C)  subtracted from exports when calculating GDP because imports do not entail production in Canada.
D)  added when calculating GDP because imports do not entail production in Canada.E) All of the above
F) B) and C)

Question 6

Historically, real GDP has increased less rapidly than nominal GDP because:

Accepted Answer

A)  price indices have not reflected improvements in product quality.
B)  the general price level has increased.
C)  technological progress has resulted in more efficient production.
D)  the general price level has declined.E) All of the above
F) B) and D)

Question 7

Suppose ZZZ Corporation issues new common stock worth $25 million in 2020.It uses $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, there is an increase in gross investment by:

Accepted Answer

A)  $7 million.
B)  $25 million.
C)  $18 million.
D)  $11 million.E) C) and D)
F) B) and C)

Question 8

Interest on the public debt is included as a part of government purchases in determining GDP by the expenditures method.

Accepted Answer

A) True 
 B)False

Question 9

Net exports are negative when:

Accepted Answer

A)  a nation's imports exceed its exports.
B)  the economy's stock of capital goods is declining.
C)  depreciation exceeds domestic investment.
D)  a nation's exports exceed its imports.E) B) and D)
F) None of the above

Question 10

A distinguishing characteristic of public transfer payments is that:

Accepted Answer

A)  they are used to subsidize the major transportation carriers to reduce transportation costs.
B)  they are counted as part of government purchases in the calculation of the gross domestic product.
C)  there is a tax on the amount of the subsidy above a certain income level.
D)  the recipients make no contribution to current production in return for them.E) B) and D)
F) A) and D)

Question 11

Interest and investment income includes:

Accepted Answer

A)  retained earnings.
B)  interest on bonds and loans of money capital and rental income received by households and inputted rent.
C)  taxes which are levied on the corporations' net earnings.
D)  Interest paid to the households for their investment.E) None of the above
F) A) and C)

Question 12

In calculating GDP, governmental transfer payments, such as welfare payments, are:

Accepted Answer

A)  not counted.
B)  counted as investment spending.
C)  counted as government spending.
D)  counted as consumption spending.E) A) and B)
F) None of the above

Question 13

The GDP deflator or price index equals:

Accepted Answer

A)  gross private domestic investment less the consumption of fixed capital.
B)  gross national product less net foreign factor income earned in the United States.
C)  nominal GDP divided by real GDP.
D)  real GDP divided by nominal GDP.E) All of the above
F) None of the above

Question 14

In Year 1, inventories rose by $25 billion.In Year 2, inventories fell by $20 billion.In calculating total investment, national income accountants would have:

Accepted Answer

A)  decreased it by $25 billion in Year 1 and increased it by $20 billion in Year 2.
B)  decreased it by $25 billion in Year 1 and increased it by $5 billion in Year 2.
C)  increased it by $25 billion in Year 1 and decreased it by $5 billion in Year 2.
D)  increased it by $25 billion in Year 1 and decreased it by $20 billion in Year 2.E) A) and B)
F) A) and C)

Question 15

Nominal GDP is:

Accepted Answer

A)  the sum of all monetary transactions which occur in the economy in a year.
B)  the sum of all monetary transactions involving final goods and services which occur in the economy in a year.
C)  the amount of production which occurs when the economy is operating at full employment.
D)  money GDP adjusted for inflation.E) C) and D)
F) B) and D)

Question 16

As of the publication date of the text, what years is currently being used by Statistics Canada as the base year for calculating the price index?

Accepted Answer

A)  2001
B)  2007
C)  2010
D)  2017E) A) and D)
F) B) and C)

Question 17

If we add up the figures for wages, rent, interest and profit:

Accepted Answer

A)  the figure is not equal to the GDP by the expenditure approach because it does not include the amount of investment.
B)  the figure is not equal to the GDP by the expenditure approach because the Canadian national accounts do not reflect each of these four factors of income and also because a few adjustments are necessary.
C)  we obtain a figure which is equal to the GDP by the expenditure approach.
D)  it does not reflect the actual figure for the GDP by the expenditure approach because it does not include the amount of consumption.E) B) and C)
F) B) and D)

Question 18

Refer to the above diagram.The base year used in determining the price indices for this economy:

Accepted Answer

A)  cannot be determined from the information given.
B)  is some year before 1992.
C)  is more recent than 1992.
D)  is 1992.E) None of the above
F) B) and C)

Question 19

Which of the following best defines disposable income?

Accepted Answer

A)  income received by households less personal taxes
B)  the before-tax income received by households
C)  all income earned by resource suppliers for their current contributions to production
D)  the market value of the annual output net of consumption of fixed capitalE) A) and D)
F) None of the above

Question 20

GDP excludes expenditures by:

Accepted Answer

A)  businesses on pollution control equipment.
B)  business for travel and entertainment.
C)  government on military hardware.
D)  consumers on used automobiles.E) A) and D)
F) C) and D)

Exam 7: B: Measuring the Economys Output

To calculate the real GDP, Statistics Canada has started to consider both the quantities and prices in the base year and the following year and then average the two.

Correct AnswerverifiedShow Answer

Historically, real GDP has increased less rapidly than nominal GDP because:

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In Year 1, inventories rose by $25 billion.In Year 2, inventories fell by $20 billion.In calculating total investment, national income accountants would have:

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In a typical year which of the following measures of aggregate output and income is likely to be the smallest?

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As of the publication date of the text, what years is currently being used by Statistics Canada as the base year for calculating the price index?

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Nominal GDP is:

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Refer to the above diagram.The base year used in determining the price indices for this economy:

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Net exports are negative when:

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Suppose ZZZ Corporation issues new common stock worth $25 million in 2020.It uses $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result, there is an increase in gross investment by:

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If we add up the figures for wages, rent, interest and profit:

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The GDP deflator or price index equals:

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A distinguishing characteristic of public transfer payments is that:

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Interest and investment income includes:

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GDP may be defined as:

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Interest on the public debt is included as a part of government purchases in determining GDP by the expenditures method.

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The value of Canadian imports is:

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In calculating GDP, governmental transfer payments, such as welfare payments, are:

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In calculating GDP, national income accountants:

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Which of the following best defines disposable income?

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GDP excludes expenditures by:

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