Question 1

In an economy, the value of inventories rose from $275 billion in 2020 to $300 billion in 2021.In calculating the total investment for 2021, national income accountants would increase it by $25 billion.

Accepted Answer

A) True 
 B)False

Question 2

All figures are in billions of dollars.  Refer to the above information.Canadian imports:

Accepted Answer

A)  cannot be calculated
B)  are $26.
C)  are $16.
D)  are $11.E) B) and D)
F) C) and D)

Question 3

The term "real GDP" refers to:

Accepted Answer

A)  the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income.
B)  GDP data which embody changes in the price level, but not changes in physical output.
C)  GDP data which reflect changes in both physical output and the price level.
D)  GDP data which have been adjusted for changes in the price level.E) B) and C)
F) B) and D)

Question 4

In comparing GDP data over a period of years a difference between nominal and real GDP may arise because:

Accepted Answer

A)  of changes in our trade deficits and surpluses.
B)  the length of the workweek has declined historically.
C)  the price level may change over time.
D)  depreciation may be greater or smaller than gross investment.E) All of the above
F) C) and D)

Question 5

The fact that nominal GDP has risen faster than real GDP:

Accepted Answer

A)  suggests that the base year of the GDP price index has been shifted.
B)  tells us nothing about what has happened to the price level.
C)  suggests that the general price level has fallen.
D)  suggests that the general price level has risen.E) B) and D)
F) A) and D)

Question 6

GDP excludes:

Accepted Answer

A)  the market value of household production.
B)  the production of illegal goods.
C)  off-the-books production.
D)  all of the above.E) B) and D)
F) All of the above

Question 7

Welfare payments to families with dependent children are included in GDP.

Accepted Answer

A) True 
 B)False

Question 8

Profits of private corporations are divided into:

Accepted Answer

A)  corporate income taxes, dividends and undistributed corporate profits.
B)  corporate income taxes, investment and distributed corporate profits.
C)  dividends, distributed and undistributed corporate profits.
D)  supplementary labour income, dividends, and distributed corporate profits.E) A) and D)
F) B) and D)

Question 9

GDP excludes most non-market transactions.Therefore, GDP tends to:

Accepted Answer

A)  underestimate the rate of inflation in the economy.
B)  overestimate the rate of inflation in the economy.
C)  overestimate the amount of production of the economy.
D)  underestimate the amount of production in the economy.E) All of the above
F) B) and D)

Question 10

Disposable income differs from personal income by:

Accepted Answer

A)  personal taxes.
B)  personal saving.
C)  transfer payments.
D)  personal consumption expenditures.E) A) and D)
F) A) and C)

Question 11

Nondurable goods are products:

Accepted Answer

A)  with expected lives of over three years.
B)  with expected lives of less than three years.
C)  with expected lives of over 2 years.
D)  with expected lives of under 2 years.E) B) and C)
F) A) and D)

Question 12

When an economy's production capacity is expanding:

Accepted Answer

A)  nominal GDP, but not necessarily real GDP, is rising.
B)  net exports is always a positive amount.
C)  disposable income exceeds personal income.
D)  gross investment exceeds depreciation.E) A) and D)
F) B) and C)

Question 13

Economists define investment to include:

Accepted Answer

A)  any increase in business inventories.
B)  the addition of cash to a savings account.
C)  the purchase of common or preferred stock.
D)  the purchase of any durable good, for example, an automobile or a refrigerator.E) All of the above
F) B) and C)

Question 14

For the above economy, the real GDP in year 3 is:

Accepted Answer

A)  $520
B)  $485
C)  $576
D)  $480E) None of the above
F) A) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Nominal GDP is adjusted for price changes through the use of:

Accepted Answer

A)  the Consumer Price Index (CPI) .
B)  the Producer Price Index (PPI) .
C)  the GDP price index.
D)  exchange rates.E) A) and B)
F) A) and C)

Question 17

In national income accounting, G stands for:

Accepted Answer

A)  government purchases.
B)  gross investment.
C)  government transfer payments.
D)  gross saving.E) A) and C)
F) A) and B)

Question 18

Assume an economy which is producing only one product.Output and price data for a three-year period are as follows.  Refer to the above data.If year 2 is chosen as the base year, real GDP for year 1 is:

Accepted Answer

A)  $25
B)  $100
C)  $50
D)  $80E) B) and C)
F) A) and B)

Question 19

Refer to the information below.Personal income is: All figures are in billions of dollars.

Accepted Answer

A)  $184
B)  $221
C)  $202
D)  $228E) A) and D)
F) None of the above

Question 20

Durable goods are products with expected lives of less than three years.

Accepted Answer

A) True 
 B)False

Exam 7: B: Measuring the Economys Output

When an economy's production capacity is expanding:

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All figures are in billions of dollars. Refer to the above information.Canadian imports:

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Economists define investment to include:

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GDP excludes most non-market transactions.Therefore, GDP tends to:

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In an economy, the value of inventories rose from $275 billion in 2020 to $300 billion in 2021.In calculating the total investment for 2021, national income accountants would increase it by $25 billion.

Correct AnswerverifiedShow Answer

In national income accounting, G stands for:

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The fact that nominal GDP has risen faster than real GDP:

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Assume an economy which is producing only one product.Output and price data for a three-year period are as follows. Refer to the above data.If year 2 is chosen as the base year, real GDP for year 1 is:

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Durable goods are products with expected lives of less than three years.

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

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Profits of private corporations are divided into:

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Nondurable goods are products:

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For the above economy, the real GDP in year 3 is:

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GDP excludes:

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The term "real GDP" refers to:

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Welfare payments to families with dependent children are included in GDP.

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Refer to the information below.Personal income is: All figures are in billions of dollars.

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Nominal GDP is adjusted for price changes through the use of:

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In comparing GDP data over a period of years a difference between nominal and real GDP may arise because:

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Disposable income differs from personal income by:

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