Question 1

Which of the following statements regarding investment is correct?

Accepted Answer

A)  Housing construction is classified as investment expenditure rather than consumption expenditure.
B)  Rental payments are included as investment expenditures.
C)  Depreciation refers to funds used to increase the existing stock of capital.
D)  The capital stock includes investment in stocks and bonds.
E)  The accumulation of inventories does not count as current investment.F) B) and C)
G) C) and D)

Question 2

Suppose that nominal national income in some country fell from $100 billion to $95 billion during the year. Over the same period, inflation was 5 percent. Therefore the real national income in this country

Accepted Answer

A)  fell by 10 percent.
B)  fell by 5 percent.
C)  was unaffected.
D)  rose by 5 percent.
E)  rose by 10 percent.F) A) and B)
G) A) and C)

Question 3

In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200 worth of shoes. The value added from these transactions is

Accepted Answer

A)  $ 800.
B)  $2300.
C)  $2500.
D)  $1200.
E)  $1000.F) B) and C)
G) A) and E)

Question 4

As a measure of Canadian economic activity GDP is to GNP. As a measure of the income accruing to Canadian residents, GDP is to GNP.

Accepted Answer

A)  equivalent ; inferior
B)  superior ; equivalent
C)  inferior ; equivalent
D)  inferior ; superior
E)  superior ; inferiorF) B) and D)
G) C) and D)

Question 5

In the national income and product accounts, a reduction of inventories counts as

Accepted Answer

A)  saving.
B)  positive investment.
C)  depreciation.
D)  consumption.
E)  negative investment.F) B) and D)
G) B) and C)

Question 6

The change in the country's capital stock during a year is equal to

Accepted Answer

A)  gross fixed investment.
B)  net change in inventories plus capital consumption allowance.
C)  gross investment.
D)  capital consumption allowance.
E)  net investment.F) B) and D)
G) C) and E)

Question 7

An example of an item that would be excluded from a measure of GDP from the expenditure side is

Accepted Answer

A)  a new truck purchased by a furniture- delivery company.
B)  government pension payments to a retired person.
C)  the purchase of windows by an automobile assembly plant.
D)  the purchase of a tattoo for Mary Smith's ankle.
E)  fertilizer purchased by Farmer Jones to increase crop yields.F) A) and D)
G) B) and E)

Question 8

The term "investment" in macroeconomics means

Accepted Answer

A)  the production of goods not for immediate consumption use.
B)  the total amount of capital goods in the country.
C)  money spent in markets for financial capital.
D)  the production of goods for immediate consumption.
E)  the same thing as profits.F) A) and D)
G) B) and E)

Question 9

Which of the following is included in current calculations of GDP?

Accepted Answer

A)  volunteer work
B)  the value of vegetables consumed by the home gardener
C)  the value of a vintage automobile purchased from the previous owner
D)  computers produced here and exported to Europe
E)  welfare paymentsF) C) and D)
G) B) and C)

Question 10

One reason that real GDP tends to overstate the economic well- being of the country's residents is that it ignores

Accepted Answer

A)  transactions such as teenaged- babysitting services.
B)  the costs of increased leisure time.
C)  the tips that waiters receive.
D)  the market- based activity done from the home.
E)  the economic "bads" associated with production, such as pollution.F) C) and D)
G) C) and E)

Question 11

Suppose that the nominal national income in some country increased by 10 percent during the year, when inflation was 5 percent. Therefore the real national income

Accepted Answer

A)  fell by 10 percent.
B)  fell by 5 percent.
C)  was unaffected.
D)  rose by 5 percent.
E)  rose by 10 percent.F) A) and C)
G) C) and D)

Question 12

Measures of GDP may understate the economic well- being of people in developing countries if those countries tend to

Accepted Answer

A)  import much more than they export.
B)  emphasize agricultural and resource- based production.
C)  have a high degree of foreign direct investment.
D)  have very high rates of pollution.
E)  have a large share of non-market activities.F) B) and D)
G) A) and D)

Question 13

To calculate GDP from the income side, one must add together wages,

Accepted Answer

A)  interest, rent, depreciation, profits and indirect taxes net of subsidies.
B)  government income, interest, and profits.
C)  consumption and depreciation.
D)  investment, rent, depreciation, profits and indirect taxes net of subsidies.
E)  net exports, depreciation, and profits.F) B) and E)
G) B) and C)

Question 14

One major reason that GDP is an inaccurate measure of the true level of economic activity is that

Accepted Answer

A)  it is statistically very inaccurate.
B)  it cannot be adjusted for changes in prices.
C)  it includes net exports.
D)  people frequently buy things they do not want.
E)  it does not include non- market activities.F) A) and C)
G) B) and E)

Question 15

In national- income accounting, which of the following transactions by households is considered to be an investment expenditure?

Accepted Answer

A)  the purchase of an imported car
B)  the purchase of a DVD player
C)  the purchase of a Guaranteed Investment Certificate (GI
C)  
D)  payment for the construction of a custom- built new home
E)  the purchase of a government bondF) A) and B)
G) A) and C)

Question 16

In recent years, several large Canadian mining companies have been bought by foreign companies. If some of the profits generated at these Canadian mines which previously flowed to Canadian owners are now remitted to foreign owners, then which of the following statements best describes the impact of the change in ownership?

Accepted Answer

A)  There is no change in either Canadian GDP or GNP.
B)  Canadian GNP falls and Canadian GDP is unaffected.
C)  The gap between Canadian GNP and GDP becomes smaller.
D)  Canadian GNP remains constant and Canadian GDP falls.
E)  Canadian GNP is larger than Canadian GDP by an increased amount.F) A) and D)
G) B) and C)

Question 17

Statistics Canada excludes from GDP the value of goods and services exchanged "under the counter" because

Accepted Answer

A)  these goods are all intermediate goods.
B)  satisfactory methods for their measurement have not been developed.
C)  these goods do not contribute to well- being.
D)  Statistics Canada is responsible for making an ethical decision about which activities to exclude from national income measures.
E)  their production has zero opportunity cost.F) A) and D)
G) A) and B)

Question 18

When calculating GDP from the expenditure side, which of the following is true of the government purchases component, Ga?

Accepted Answer

A)  it is based on the government's planned spending
B)  it excludes transfer payments
C)  it only includes federal government expenditures
D)  it excludes government investment expenditure
E)  it includes employment insurance and employment benefitsF) A) and E)
G) B) and C)

Question 19

Suppose national accounting was done by adding up the market values of all outputs of all firms. This approach would

Accepted Answer

A)  accurately reflect the value of production in the economy.
B)  obtain gross domestic product.
C)  overestimate the value of production in the economy.
D)  obtain gross national product.
E)  underestimate the value of production in the economy.F) C) and E)
G) A) and C)

Question 20

Of the following possibilities, the best measure of the average material living standards of domestic residents is

Accepted Answer

A)  per capita GNP.
B)  per capita net exports.
C)  GNP.
D)  per capita GDP.
E)  GDP.F) B) and E)
G) C) and E)

Exam 20: The Measurement of National Income

One major reason that GDP is an inaccurate measure of the true level of economic activity is that

Correct Answer
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The change in the country's capital stock during a year is equal to

Correct Answer
verified

One reason that real GDP tends to overstate the economic well- being of the country's residents is that it ignores

Correct Answer
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Of the following possibilities, the best measure of the average material living standards of domestic residents is

Correct Answer
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Which of the following is included in current calculations of GDP?

Correct Answer
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Statistics Canada excludes from GDP the value of goods and services exchanged "under the counter" because

Correct Answer
verified

In the national income and product accounts, a reduction of inventories counts as

Correct Answer
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Which of the following statements regarding investment is correct?

Correct Answer
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Measures of GDP may understate the economic well- being of people in developing countries if those countries tend to

Correct Answer
verified

In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200 worth of shoes. The value added from these transactions is

Correct Answer
verified

Suppose national accounting was done by adding up the market values of all outputs of all firms. This approach would

Correct Answer
verified

An example of an item that would be excluded from a measure of GDP from the expenditure side is

Correct Answer
verified

In national- income accounting, which of the following transactions by households is considered to be an investment expenditure?

Correct Answer
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When calculating GDP from the expenditure side, which of the following is true of the government purchases component, G_a?

Correct Answer
verified

Suppose that nominal national income in some country fell from $100 billion to $95 billion during the year. Over the same period, inflation was 5 percent. Therefore the real national income in this country

Correct Answer
verified

As a measure of Canadian economic activity GDP is to GNP. As a measure of the income accruing to Canadian residents, GDP is to GNP.

Correct Answer
verified

Suppose that the nominal national income in some country increased by 10 percent during the year, when inflation was 5 percent. Therefore the real national income

Correct Answer
verified

The term "investment" in macroeconomics means

Correct Answer
verified

To calculate GDP from the income side, one must add together wages,

Correct Answer
verified

Exam 20: The Measurement of National Income

One major reason that GDP is an inaccurate measure of the true level of economic activity is that

Correct AnswerverifiedShow Answer

The change in the country's capital stock during a year is equal to

Correct AnswerverifiedShow Answer

One reason that real GDP tends to overstate the economic well- being of the country's residents is that it ignores

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Of the following possibilities, the best measure of the average material living standards of domestic residents is

Correct AnswerverifiedShow Answer

Which of the following is included in current calculations of GDP?

Correct AnswerverifiedShow Answer

Statistics Canada excludes from GDP the value of goods and services exchanged "under the counter" because

Correct AnswerverifiedShow Answer

In the national income and product accounts, a reduction of inventories counts as

Correct AnswerverifiedShow Answer

Which of the following statements regarding investment is correct?

Correct AnswerverifiedShow Answer

Measures of GDP may understate the economic well- being of people in developing countries if those countries tend to

Correct AnswerverifiedShow Answer

In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200 worth of shoes. The value added from these transactions is

Correct AnswerverifiedShow Answer

Suppose national accounting was done by adding up the market values of all outputs of all firms. This approach would

Correct AnswerverifiedShow Answer

An example of an item that would be excluded from a measure of GDP from the expenditure side is

Correct AnswerverifiedShow Answer

In national- income accounting, which of the following transactions by households is considered to be an investment expenditure?

Correct AnswerverifiedShow Answer

When calculating GDP from the expenditure side, which of the following is true of the government purchases component, Ga?

Correct AnswerverifiedShow Answer

Suppose that nominal national income in some country fell from $100 billion to $95 billion during the year. Over the same period, inflation was 5 percent. Therefore the real national income in this country

Correct AnswerverifiedShow Answer

As a measure of Canadian economic activity GDP is to GNP. As a measure of the income accruing to Canadian residents, GDP is to GNP.

Correct AnswerverifiedShow Answer

Suppose that the nominal national income in some country increased by 10 percent during the year, when inflation was 5 percent. Therefore the real national income

Correct AnswerverifiedShow Answer

The term "investment" in macroeconomics means

Correct AnswerverifiedShow Answer

To calculate GDP from the income side, one must add together wages,

Correct AnswerverifiedShow Answer

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When calculating GDP from the expenditure side, which of the following is true of the government purchases component, G_a?

Correct Answer
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