Question 1

The table below shows total output for an economy over 2 years.   TABLE 20-5
-Refer to Table 20-5.If 2015 is the base year,the GDP deflator in 2015 was

Accepted Answer

A) 100. 
B) 102. 
C) 180. 
D) 193. 
E) 1000. 
A) 100. 
B) 102. 
C) 180. 
D) 193. 
E) 1000. A

Question 2

Which of the following statements about national -income accounting is correct?

Accepted Answer

A) The total value added in the economy is equal to the sum of all components in the circular flow of expenditure and income. 
B) The value of the expenditure on a nationʹs output is equal to the total income claims generated by producing that output. 
C) GDP on the expenditure side is calculated by adding up all the income claims generated by the act of production. 
D) GDP on the income side is calculated by adding up total expenditure for each of the main components of final output. 
E) GDP from the expenditure side and GDP from the income side differ by the amount of investment in the economy. 
A) The total value added in the economy is equal to the sum of all components in the circular flow of expenditure and income. 
B) The value of the expenditure on a nationʹs output is equal to the total income claims generated by producing that output. 
C) GDP on the expenditure side is calculated by adding up all the income claims generated by the act of production. 
D) GDP on the income side is calculated by adding up total expenditure for each of the main components of final output. 
E) GDP from the expenditure side and GDP from the income side differ by the amount of investment in the economy. B

Question 3

The table below shows total output for an economy over 2 years.   TABLE 20-5
-Refer to Table 20-5.The implicit GDP deflator in 2016,when 2015 is used as the base year,was approximately

Accepted Answer

A) 105. 
B) 160. 
C) 180. 
D) 193. 
E) 203. 
A) 105. 
B) 160. 
C) 180. 
D) 193. 
E) 203. C

Question 4

Consider the investment component (I)of GDP.To calculate the change in the value of inventories for the investment component of GDP,one should use their

Accepted Answer

A) cost of production at the time they were produced. 
B) cost of production minus the costs of labour and capital. 
C) current market value. 
D) market value at the time they were produced. 
E) value at the time the goods are sold and removed from inventory. 
A) cost of production at the time they were produced. 
B) cost of production minus the costs of labour and capital. 
C) current market value. 
D) market value at the time they were produced. 
E) value at the time the goods are sold and removed from inventory.

Question 5

Jodieʹs Bakery generates a yearly revenue of $6000.Throughout the year Jodie spends $1500 on flour,$1000 on fruit,$500 on sugar & spices,$1500 on butter,and employs an assistant whom she pays $1000.Calculate the value of the annual output produced by Jodieʹs Bakery using the value added method.

Accepted Answer

A) $1000 
B) $1500 
C) $4500 
D) $5000 
E) $6000 
A) $1000 
B) $1500 
C) $4500 
D) $5000 
E) $6000

Question 6

When calculating GDP from the expenditure side,Ga comprises

Accepted Answer

A) only expenditures made by the federal government. 
B) government purchases of goods and services,excluding transfer payments. 
C) only purchases of goods and not services. 
D) only expenditures made by provincial and local governments. 
E) government expenditures on goods and services,including transfer payments. 
A) only expenditures made by the federal government. 
B) government purchases of goods and services,excluding transfer payments. 
C) only purchases of goods and not services. 
D) only expenditures made by provincial and local governments. 
E) government expenditures on goods and services,including transfer payments.

Question 7

In national-income accounting,replacement investment is the investment that

Accepted Answer

A) is used in the calculation of GDP from the expenditure side. 
B) maintains the existing capital stock at a constant level. 
C) is equal to all existing capital stock in the country. 
D) when added to gross investment is equal to total saving. 
E) is done by the government. 
A) is used in the calculation of GDP from the expenditure side. 
B) maintains the existing capital stock at a constant level. 
C) is equal to all existing capital stock in the country. 
D) when added to gross investment is equal to total saving. 
E) is done by the government.

Question 8

When calculating GDP from the expenditure side,which of the following is true of the investment component,Ia?

Accepted Answer

A) it excludes expansions of existing factories 
B) it only includes business fixed investment 
C) it includes the transfer of houses between individuals 
D) it includes changes in inventories 
E) it only includes decumulation of inventories 
A) it excludes expansions of existing factories 
B) it only includes business fixed investment 
C) it includes the transfer of houses between individuals 
D) it includes changes in inventories 
E) it only includes decumulation of inventories

Question 9

A farmer raises free-range chickens,which he sells to a company for $1000.That company sells the ʺprocessedʺ chickens to a grocery store for $1600,which in turn produces roasted chickens which are sold to the public for
$2400.Based on this information,the value of total output is equal to

Accepted Answer

A) $1400. 
B) $1600. 
C) $2400. 
D) $4000. 
E) $5000. 
A) $1400. 
B) $1600. 
C) $2400. 
D) $4000. 
E) $5000.

Question 10

Suppose a Canadian firm imports $5000 worth of frisbees from China and sells them for $10 000.The effect on GDP would be

Accepted Answer

A) to decrease the value of GDP by $15 000. 
B) to increase the value of GDP by $15 000. 
C) to increase the value of GDP by $10 000. 
D) to increase the value of GDP by $5000. 
E) No effect on GDP since the frisbees were produced outside of Canada. 
A) to decrease the value of GDP by $15 000. 
B) to increase the value of GDP by $15 000. 
C) to increase the value of GDP by $10 000. 
D) to increase the value of GDP by $5000. 
E) No effect on GDP since the frisbees were produced outside of Canada.

Question 11

In national-income accounting,ʺdouble countingʺ

Accepted Answer

A) occurs when the value of some output is omitted in the calculation of national income. 
B) means that pre-tax and after-tax GDP will be different. 
C) occurs when the value of output is counted more than once in the calculation of national income. 
D) means that consumption will always be less than GDP. 
E) leads to an underestimation of GDP in any given period. 
A) occurs when the value of some output is omitted in the calculation of national income. 
B) means that pre-tax and after-tax GDP will be different. 
C) occurs when the value of output is counted more than once in the calculation of national income. 
D) means that consumption will always be less than GDP. 
E) leads to an underestimation of GDP in any given period.

Question 12

In national-income accounting,the concept of net domestic income is useful because it

Accepted Answer

A) does not include inventory investment. 
B) includes government transfer payments. 
C) includes all goods produced but not exchanged in markets. 
D) excludes the value of output that is used as replacement investment. 
E) represents national income plus depreciation. 
A) does not include inventory investment. 
B) includes government transfer payments. 
C) includes all goods produced but not exchanged in markets. 
D) excludes the value of output that is used as replacement investment. 
E) represents national income plus depreciation.

Question 13

Consider the circular flow of expenditure and income in the Canadian economy.Which of the following is a withdrawal from the circular flow?

Accepted Answer

A) The Alberta provincial government purchases water bomber aircraft for fighting forest fires. 
B) Canadian barley is exported to the European Union. 
C) The Toronto transit authority buys subway cars from Mexico. 
D) A Toyota plant in Canada exports new vehicles to the United States. 
E) You spend your savings to pay for university tuition. 
A) The Alberta provincial government purchases water bomber aircraft for fighting forest fires. 
B) Canadian barley is exported to the European Union. 
C) The Toronto transit authority buys subway cars from Mexico. 
D) A Toyota plant in Canada exports new vehicles to the United States. 
E) You spend your savings to pay for university tuition.

Question 14

The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2005 and 2015.   TABLE 20-6
-Refer to Table 20-6.What is the real GDP for 2005 if 2015 is the base year?

Accepted Answer

A) $6750 
B) $7975 
C) $9000 
D) $10 500 
E) $20 100 
A) $6750 
B) $7975 
C) $9000 
D) $10 500 
E) $20 100

Question 15

The table below includes data for a one-year period required to calculate GDP from the income side for a teeny-tiny economy.   TABLE 20-4
-Refer to Table 20-4.When calculating GDP from the income side,we need to add together the following items from the data provided:

Accepted Answer

A) interest and investment income,business profits,depreciation,indirect taxes less subsidies. 
B) wages and salaries,business profits,indirect taxes less subsidies. 
C) investment expenditure,consumption expenditure,net exports. 
D) interest and investment income,business profits,depreciation. 
E) wages and salaries,interest and investment income,business profits,depreciation,indirect taxes less subsidies. 
A) interest and investment income,business profits,depreciation,indirect taxes less subsidies. 
B) wages and salaries,business profits,indirect taxes less subsidies. 
C) investment expenditure,consumption expenditure,net exports. 
D) interest and investment income,business profits,depreciation. 
E) wages and salaries,interest and investment income,business profits,depreciation,indirect taxes less subsidies.

Question 16

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

Accepted Answer

A) it includes government subsidies to private firms 
B) it is based on the governmentʹs planned spending 
C) it includes employment insurance and employment benefits 
D) it excludes transfer payments 
E) it only includes federal government expenditures 
A) it includes government subsidies to private firms 
B) it is based on the governmentʹs planned spending 
C) it includes employment insurance and employment benefits 
D) it excludes transfer payments 
E) it only includes federal government expenditures

Question 17

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

Question 18

When calculating GDP from the expenditure side,ʺactual consumption expendituresʺ includes

Accepted Answer

A) a tractor purchased by an Ontario farmer. 
B) fees paid by Google Canada to a Toronto law firm. 
C) robotic paint equipment purchased by Bombardier. 
D) snow-plow equipment purchased by the City of Montreal. 
E) Canadian fashion designs purchased by a Swiss department store. 
A) a tractor purchased by an Ontario farmer. 
B) fees paid by Google Canada to a Toronto law firm. 
C) robotic paint equipment purchased by Bombardier. 
D) snow-plow equipment purchased by the City of Montreal. 
E) Canadian fashion designs purchased by a Swiss department store.

Question 19

In national-income accounting,the term ʺfixed investmentʺ refers to

Accepted Answer

A) total gross investment minus depreciation. 
B) the existing capital stock. 
C) the creation of new plant and equipment. 
D) investment in stocks and bonds. 
E) capital stock that has been repaired. 
A) total gross investment minus depreciation. 
B) the existing capital stock. 
C) the creation of new plant and equipment. 
D) investment in stocks and bonds. 
E) capital stock that has been repaired.

Question 20

The table below shows total output for an economy over 2 years.   TABLE 20-5
-Refer to Table 20-5.The real GDP in 2016,expressed in 2015 prices,was

Accepted Answer

A) $700. 
B) $840. 
C) $970. 
D) $1010. 
E) $1740. 
A) $700. 
B) $840. 
C) $970. 
D) $1010. 
E) $1740.

Exam 20: The Measurement of National Income

The table below shows total output for an economy over 2 years. TABLE 20-5 -Refer to Table 20-5.If 2015 is the base year,the GDP deflator in 2015 was

Which of the following statements about national -income accounting is correct?

The table below shows total output for an economy over 2 years. TABLE 20-5 -Refer to Table 20-5.The implicit GDP deflator in 2016,when 2015 is used as the base year,was approximately

Consider the investment component (I)of GDP.To calculate the change in the value of inventories for the investment component of GDP,one should use their

Jodieʹs Bakery generates a yearly revenue of $6000.Throughout the year Jodie spends $1500 on flour,$1000 on fruit,$500 on sugar & spices,$1500 on butter,and employs an assistant whom she pays $1000.Calculate the value of the annual output produced by Jodieʹs Bakery using the value added method.

When calculating GDP from the expenditure side,Ga comprises

In national-income accounting,replacement investment is the investment that

When calculating GDP from the expenditure side,which of the following is true of the investment component,Ia?

A farmer raises free-range chickens,which he sells to a company for $1000.That company sells the ʺprocessedʺ chickens to a grocery store for $1600,which in turn produces roasted chickens which are sold to the public for $2400.Based on this information,the value of total output is equal to

Suppose a Canadian firm imports $5000 worth of frisbees from China and sells them for $10 000.The effect on GDP would be

In national-income accounting,ʺdouble countingʺ

In national-income accounting,the concept of net domestic income is useful because it

Consider the circular flow of expenditure and income in the Canadian economy.Which of the following is a withdrawal from the circular flow?

The table below shows the total output and prices for an economy that produces only two goods,potatoes and oil.Data is provided for the years 2005 and 2015. TABLE 20-6 -Refer to Table 20-6.What is the real GDP for 2005 if 2015 is the base year?

The table below includes data for a one-year period required to calculate GDP from the income side for a teeny-tiny economy. TABLE 20-4 -Refer to Table 20-4.When calculating GDP from the income side,we need to add together the following items from the data provided:

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

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

When calculating GDP from the expenditure side,ʺactual consumption expendituresʺ includes

In national-income accounting,the term ʺfixed investmentʺ refers to

The table below shows total output for an economy over 2 years. TABLE 20-5 -Refer to Table 20-5.The real GDP in 2016,expressed in 2015 prices,was

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