Exam 7: Part A: Measuring the Economys Output

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The next four questions refer to the following price and output data over a five-year period for an economy that produces only one good.Assume that year 2 is the base year. (a) If year 2 is the base year, give the price index for year 3.(b) Give the nominal GDP for year 4.(c) What is the real GDP for year 4? (d) Tell which years you would deflate nominal GDP and which years you would inflate nominal GDP in finding real GDP.

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Question 1

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(a) 4/3 $\times$ 100 = 133.
(b) Nominal GDP = 36 $\times$ $5 = $180.
(c) Real GDP = $180/167 = $107.78.
(d) You would deflate nominal GDP for years where the price index is more than 100, that is, for years 3, 4, and 5.You would inflate the nominal GDP for year 1 since the price index is less than 100 relative to the base year 2.

The following table shows the price of a specific stereo receiver for a five-year period.Using Year 3 as the base year, calculate the price index for each year.

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Question 2

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Year 1 112/160 = 70
Year 2 144/160= 90
Year 3 160/160 = 100
Year 4 176/160 = 110
Year 5 200/160 = 125

Of what use is national income accounting to economists and to policy makers?

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Question 3

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There are three basic reasons for the importance of national income accounting.First, it gives us a measure of the state of the economy at a particular point in time.Second, it permits us to track the condition of the economy over time to see whether it has changed.Third, it provides the basis for making economic policy decisions.

Identify at least four transactions and other variables, which are not included in the GDP.

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Question 4

The following is a list of figures for a given year in billions of dollars.Using this data, compute: (a) GDP by the Expenditure Method; (b) GDP by the Income Method; (c) Net exports; and (d) Net Investment.

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Question 5

What are the two basic ways of deriving real GDP from nominal GDP?

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Question 6

Define the four categories of expenditures, which comprise GDP.

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Question 7

Define net exports.

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Question 8

Net investment can be positive, negative, or zero, but gross investment can never be less than zero.Explain.

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Question 9

How is a price index computed?

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Question 10

Give the three categories, which comprise gross investment; and explain the difference between them.

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Question 11

What are the components of net domestic income at factor cost? What is the relative share of GDP in 2011 going to: Wages, salaries and supplementary labour income; and to Profits of corporations and government enterprises before taxes?

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Question 12

What is the relationship between real GDP, nominal GDP, and the price index?

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Question 13

The following data show nominal GDP and the appropriate price index for several years.Compute real GDP for each year and indicate whether you have "inflated" or "deflated" nominal GDP in finding real GDP.All GDP are in billions.

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Question 14

Differentiate between nominal and real GDP.

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Question 15

Why do economists worry about "multiple counting" and calculate only the "value added" in the production process?

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Question 16

What adjustments need to be made to go from net domestic income at factor cost to GDP?

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Question 17

When would a fixed based price index cause GDP growth to be overstated?

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Question 18

What is the definition of GDP? How would the value of output produced at a Canadian-owned factory in Canada and a foreign-owned factory in Canada be treated in GDP accounting?

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Question 19

The following is a list of figures for a given year in billions of dollars.Using this data, compute: (a) GDP by the Expenditure Method; (b) GDP by the Income Method; (c) Net exports; and (d) Net Investment.

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Question 20

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Exam 7: Part A: Measuring the Economys Output

The following table shows the price of a specific stereo receiver for a five-year period.Using Year 3 as the base year, calculate the price index for each year.

Of what use is national income accounting to economists and to policy makers?

Identify at least four transactions and other variables, which are not included in the GDP.

The following is a list of figures for a given year in billions of dollars.Using this data, compute: (a) GDP by the Expenditure Method; (b) GDP by the Income Method; (c) Net exports; and (d) Net Investment.

What are the two basic ways of deriving real GDP from nominal GDP?

Define the four categories of expenditures, which comprise GDP.

Define net exports.

Net investment can be positive, negative, or zero, but gross investment can never be less than zero.Explain.

How is a price index computed?

Give the three categories, which comprise gross investment; and explain the difference between them.

What are the components of net domestic income at factor cost? What is the relative share of GDP in 2011 going to: Wages, salaries and supplementary labour income; and to Profits of corporations and government enterprises before taxes?

What is the relationship between real GDP, nominal GDP, and the price index?

The following data show nominal GDP and the appropriate price index for several years.Compute real GDP for each year and indicate whether you have "inflated" or "deflated" nominal GDP in finding real GDP.All GDP are in billions.

Differentiate between nominal and real GDP.

Why do economists worry about "multiple counting" and calculate only the "value added" in the production process?

What adjustments need to be made to go from net domestic income at factor cost to GDP?

When would a fixed based price index cause GDP growth to be overstated?

What is the definition of GDP? How would the value of output produced at a Canadian-owned factory in Canada and a foreign-owned factory in Canada be treated in GDP accounting?

The following is a list of figures for a given year in billions of dollars.Using this data, compute: (a) GDP by the Expenditure Method; (b) GDP by the Income Method; (c) Net exports; and (d) Net Investment.

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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