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Exam 26: Measuring Domestic Output and National Income

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Question 1

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National income accountants can avoid multiple counting by:

A) including transfer payments in their calculations.
B) only counting final goods.
C) counting both intermediate and final goods.
D) only counting intermediate goods.

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Question 2

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A large underground economy results in an:

A) understated GDP.
B) overstated GDP.
C) understated GDP price index.
D) overstated GDP price index.

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Question 3

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NDP can be determined by adding taxes on production and imports to GDP.

When an economy's production capacity is expanding:

Tom Atoe grows fruits and vegetables for home consumption.This activity is:

GDP excludes:

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

Answer the question on the basis of the following data.All figures are in billions of dollars: $\begin{array}{llcc} \text {Government Purchases } &\$15 \\ \text {Consumption } &90\\ \text { Gross Investment } &20\\ \text { Consumption of Fixed Capital} &5\\ \text { Exports} &8\\ \text { Imports } &12\\\end{array}$ Refer to the data.GDP is:

Which of the following best defines national income?

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.The national income is:

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

The National Income and Product Accounts (NIPA) help economists and policymakers to:

Answer the question on the basis of the following national income data for the economy.All figures are in billions of dollars. $\begin{array} { l r } \text { Personal Consumption Expenditures } & \$ 400 \\\text { Government Purchases } & 128 \\\text { Gross Private Domestic Investment } & 88 \\\text { Net Exports } & 7 \\\text { Net Foreign Factor Income } & 0 \\\text { Consumption of Fixed Capital } & 43 \\\text { Taxes on Production and Imports } & 50 \\\text { Compensation of Employees } & 369 \\\text { Rents } & 12 \\\text { Interest } & 15 \\\text { Proprietors' Income } & 52 \\\text { Corporate Income Taxes } & 36 \\\text { Dividends } & 24 \\\text { Undistributed Corporate Profits } & 22 \\\text { Statistical Discrepancy } & 0\end{array}$ Refer to the data.The national income is:

Use the following table for a hypothetical single-product economy. $\begin{array}{c}\begin{array}{c}\\\underline{\text { Year }} \\ 1 \\2 \\3 \\4\end{array}\begin{array}{c}\text {Units of}\\\underline{\text { Output}}\\10\\12\\15\\20\end{array}\begin{array}{c}\text { Price of Bagel}\\\underline{\text { Per Unit}}\\\$ 10\\20\\ 30\\ 40\end{array}\begin{array}{c}\text {Price Index}\\\underline{\text {( Year 1=100) }}\\100\\200\\300\\400\end{array}\end{array}$ Refer to the data.Nominal GDP in year 3 is:

The largest component of national income is:

Answer the question on the basis of the following data.All figures are in billions of dollars: $\begin{array}{llcc} \text {Government Purchases } &\$15 \\ \text {Consumption } &90\\ \text { Gross Investment } &20\\ \text { Consumption of Fixed Capital} &5\\ \text { Exports} &8\\ \text { Imports } &12\\\end{array}$ Refer to the data.NDP (net domestic product) is:

Welfare payments to low-income families are included in national income.

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array} { l r } \text { Gross Investment } & \$ 18 \\\text { National Income } & 100 \\\text { Net Exports } & 2 \\\text { Personal Income } & 85 \\\text { Personal Consumption Expenditures } & 70 \\\text { Saving } & 5 \\\text { Government Purchases } & 20 \\\text { Net Domestic Product } & 105 \\\text { Statistical Discrepancy } & 0\end{array}$ Refer to the data.From this information we can conclude that the net foreign factor income is:

Answer the question on the basis of the following information: Only three goods are produced in an economy in the following amounts: A = 10,B = 30,C = 5.The current year per unit prices of these three goods are A = $2,B = $3,and C = $1. (Advanced analysis) Refer to the information.If the per unit prices of the three goods were each $1 in a base year used to construct a GDP price index,then the GDP price index in the current year is:

In the second quarter (three-month period) of 2001,U.S.nominal GDP increased but U.S.real GDP declined.We can conclude that: