Deck 5: Gdp: a Measure of Total Production and Income

Question 1

How are final goods and services valued when measuring nominal GDP?

A)At producer cost
B)At factor market prices
C)At foreign exchange parity
D)At current market prices
E)At base-year prices

Answer 1

D

Question 2

To calculate GDP it is necessary to add up the market value of all the ________ produced within a country during a year.

A)intermediate goods and services produced and all the final goods and services
B)intermediate goods and services
C)goods but not services
D)final goods and services
E)goods and services

Answer 2

D

Question 3

If you make dinner for yourself,

A)the market value of your dinner is added to GDP.
B)only the market value of the ingredients you purchased this year is added to GDP.
C)none of what you bought to prepare for dinner is included in GDP.
D)the difference between the cost of the ingredients you purchased this year and the market value of the dinner is added to GDP.
E)your service in preparing the meal is valued at a cook's wage and added to GDP.

Answer 3

B

Question 4

Wobet is a small country that produces only steak and potatoes.Steaks have a price of $10 each and potatoes have a price of $1 each.Suppose that Wobet produces 10 steaks and 20 potatoes in 2010.Using ________,Wobet has GDP equal to ________.

A)a price index;$120
B)market value;$120
C)market value;30 units
D)real value;$120
E)a market basket;30 units

Question 5

A restaurant buys fish to offer as a daily menu special.The purchase of the fish by the restaurant is

A)an investment.
B)a consumption expenditure.
C)part of net exports if the fish were caught beyond Australia's borders.
D)an example of government expenditures on goods and services.
E)an intermediate good.

Question 6

Which of the following is included in Germany's GDP?
I)BMWs produced in a German-owned factory in South Carolina
Ii)The value of the shares sold on the German stock exchange,the Frankfurt Stock Exchange
Iii)China produced by the English-owned Wedgewood Company at a factory in Berlin,Germany

A)i and ii
B)iii only
C)i and iii
D)ii only
E)None of the above answers is correct.

Question 7

Which of the following is NOT directly included in Australia's GDP?

A)Sales of sun block at Bondi Beach,Sydney.
B)Ticket sales to the Melbourne Aquarium.
C)Popcorn purchased by a movie theatre chain in Brisbane.
D)Movie tickets purchased by consumers in Perth.
E)Sales of meat pies at an AFL game in Adelaide.

Question 8

Which of the following is a final good or service?

A)A new replacement muffler installed by Midas Mufflers.
B)The CPUs purchased by Dell to be used in their computers.
C)The fertiliser purchased by farmers to produce wheat.
D)The chicken purchased by Nandos for use in their Peri Peri Chicken.
E)The CDs purchased by JB Hi Fi for sale to their customers.

Question 9

Which of the following is included in Australia's GDP?
I)The rental value of homes owned by Australian citizens
Ii)The production of Cotton On t-shirts by their suppliers in India
Iii)Tickets sold by Usher for concerts held in Sydney

A)i and iii
B)i only
C)i,ii and iii
D)ii and iii
E)ii only

Question 10

Gross domestic product is equal to the market value of all the final goods and services ________ in a given period of time.

A)produced and consumed within a country
B)consumed within a country
C)consumed by the citizens of a country
D)produced within a country
E)produced by the citizens of a country

Question 11

GDP includes the goods and services produced

A)by a country's citizens but not by non-citizens within the country's borders.
B)within a country's borders by citizens and non-citizens minus production abroad by the country's citizens.
C)within a country's borders by citizens and non-citizens plus goods produced abroad by the country's citizens.
D)by a country's legal citizens regardless of where in the world they are located.
E)within a country's borders by citizens and non-citizens.

Question 12

Which of the following would NOT be directly included in Australia's GDP in 2016?

A)The market value of restaurant meals sold in 2016.
B)Legal services provided to first-time home buyers during 2016.
C)The purchase of a new apartment in Docklands,Melbourne in 2016.
D)The value of the Falcons produced in 2016 at the Ford plant located in Geelong,Victoria.
E)The market value of the jet fuel bought by Qantas to use for its flights in 2016.

Question 13

GDP is best defined as the ________ in a given time period.

A)market value of the final goods and services consumed by a nation's citizens
B)number of goods and services produced within a country
C)number of final goods and services produced within a country
D)market value of the final goods and services produced within a country
E)market value of all the goods and services produced within a country

Question 14

Gross domestic product measures the

A)market value of the final goods and services produced in a given year within a country.
B)quantity of the goods and services produced in a given year,listed item by item,within a country.
C)market value of domestic labour in a given year within a country.
D)income of the business sector within a country.
E)market value of the final goods and services consumed by households in a given year within a country.

Question 15

Gross domestic product is the market value of all ________ produced within a country in a given period of time.

A)final goods
B)final goods and services
C)final services
D)intermediate goods
E)intermediate services

Question 16

A measure of a country's production is its

A)general daily product.
B)gross domestic product.
C)general domestic production.
D)gross total output.
E)gross daily production.

Question 17

Which of the following is classified as a final good or service?
I)Oranges bought by Boost Juice to use in fresh juices.
Ii)Software to be installed in a new Dell computer.
Iii)Your purchase of an online subscription to The Australian newspaper.

A)iii only
B)ii only
C)i,ii and iii
D)i and ii
E)ii and iii

Question 18

Consumption expenditure includes spending

A)on office supplies by firms.
B)on intermediate goods and services by firms.
C)by households and spending on office supplies by firms.
D)by households.
E)by governments when they are buying goods and services that consumers also buy.

Question 19

Which of the following is classified as an intermediate good?
I)Your purchase of a Big Mac.
Ii)McDonald's purchase of pickles.
Iii)A McDonald's restaurant owner's interest payment for the loan on her building.

A)ii only
B)ii and iii
C)i,ii and iii
D)i only
E)i and iii

Question 20

Gross domestic product is defined as the market value of all the final goods and services produced during a given time period

A)within and outside a country by that country's citizens.
B)by citizens of the country,regardless of their place of residence.
C)by only legal residents of the country.
D)within a country.
E)within a county minus the market value of all the final goods and services produced by that country's citizens outside the country.

Question 21

Net exports of goods and services are equal to the value of

A)domestic consumption minus the value of exports.
B)domestic consumption minus the value of imports.
C)exports plus the value of imports.
D)imports minus the value of exports.
E)exports minus the value of imports.

Question 22

Which of the following is included as investment in GDP?
I)Cars produced during the year but unsold at the end of the year.
Ii New capital equipment produced and purchased during the year.
Iii)Purchases of a company's shares and bonds.

A)i and ii
B)i,ii and iii
C)iii only
D)i only
E)ii only

Question 23

Government expenditures on goods and services include i.the local Library's purchase of new books.
Ii)ACT's road maintenance.
Iii)the State of Victoria's payment of wages to correctional service officers.

A)i and iii
B)i only
C)i,ii and iii
D)i and ii
E)ii and iii

Question 24

In measuring GDP,which of the following is included?

A)The value of shares and bonds bought and sold.
B)The value of preparing meals at home.
C)The value of increases in business inventories.
D)The value of used goods when they are sold.
E)The value of durable consumption goods but not the value of nondurable consumption goods.

Question 25

The purchase of iron ore by China is classified in Australian GDP accounts as

A)import expenditure.
B)investment expenditure.
C)export expenditure.
D)consumption expenditure.
E)government expenditure.

Question 26

Gross domestic product equals

A)Y = C + I + G - NX.
B)Y = C + I + G + NX.
C)Y = C - I + G + NX.
D)Y = C - I - G - NX.
E)Y = C + I - G + NX.

Question 27

If a firm does not sell all of the goods it produces in a given time period,then the goods

A)do not count in GDP for that time period but always count next period.
B)count in GDP in the period they are sold to the final user.
C)count positively in GDP as inventory investment.
D)count negatively in GDP as inventory investment.
E)do not count in GDP ever.

Question 28

If last year net exports of goods and services was negative.This means that

A)there was an error made when calculating net exports of goods and services.
B)consumption expenditure plus investment was less than the value of exports plus the value of imports.
C)consumption expenditure plus investment plus government expenditures on goods and services was less than the value of exports plus the value of imports.
D)the value of exports was less than the value of imports.
E)the value of exports was greater than the value of imports.

Question 29

Australia's net exports include

A)the sale of BHP-Billiton shares on the ASX.
B)sales of iron ore to China.
C)Honda automobiles produced and sold in Japan.
D)the sale of state government securities to Australian citizens.
E)the production of Koala Bear teddies in China that are sold in China.

Question 30

In calculating GDP,we must

A)add the value of the goods produced outside of Australia by local firms.
B)add the market value of imports and subtract the market value of exports.
C)add the market value of exports and subtract the market value of imports.
D)exclude net exports of goods and services (NX).
E)subtract the market value of imports,because these goods are produced in a country other than Australia,and subtract the market value of exports,because these goods are consumed in a country other than Australia.

Question 31

Last year in Candamica,consumption expenditure was $20 billion,interest,rent and profit were $2.5 billion,government expenditure on goods and services was $7 billion,net exports of goods and services was $5 billion,and investment was $2 billion.Hence total expenditure was

A)$34 billion.
B)$36.5 billion.
C)$34.5 billion.
D)$24.5 billion.
E)Unable to be determine without information about imports.

Question 32

Investment is the expenditure done by

A)the rest of the world.
B)firms.
C)governments.
D)savers.
E)Both answers A and B are correct.

Question 33

Economists define investment to include purchases of

A)capital goods,such as tools,instruments and buildings.
B)capital goods,equity stocks and bonds.
C)capital goods,equity stocks and inventories.
D)capital goods and inventories.
E)capital goods,household durable goods and inventories.

Question 34

Investment is defined as the purchase of

A)financial assets and inventories only.
B)new capital goods but not additions to inventories.
C)any financial asset only.
D)additions to inventories only.
E)new capital goods and additions to inventories.

Question 35

Net exports of goods and services are defined as the

A)value of exports minus the income we receive from foreigners.
B)income we receive from selling goods to foreigners.
C)value of exports plus the income we receive from foreigners.
D)value of the goods we sell to foreigners.
E)value of exports minus the value of imports.

Question 36

Kelly's Surf Shop orders 5,000 new surfboards at the beginning of the year but only sells 4,500 by the end of the year.How are the 500 unsold surfboards accounted for in gross domestic product?

A)They will be included in the government spending category of GDP.
B)They will be included in the durable consumption category of GDP.
C)They will be included in the inventory investment category of GDP.
D)They will be included in the nondurable consumption category of GDP.
E)They will be included in the residential investment category of GDP.

Question 37

Consumption goods and services include

A)pensions provided by the government.
B)new homes and existing homes (as long as improvements have been made to the existing home).
C)new and used textbooks as long as they are sold via stores or online.
D)washing machines and tickets to NRL games.
E)None of the above.

Question 38

When measuring GDP,

A)only the federal government's expenditure on goods and services is included.
B)the government sector is counted,and the value of the government sector in GDP is equal to its tax revenue.
C)the expenditure on goods and services by all levels of government are included.
D)the government sector is not included because it is the public sector not the private sector.
E)the government sector is not counted because it does not produce goods and services.

Question 39

Investment includes

A)Harvey Norman's purchase of camera surveillance in all stores.
B)student purchases of laptops.
C)your purchases of shares in BHP-Billiton.
D)wages paid to police officers.
E)the local Library's purchase of new books.

Question 40

Which of the following expenditure components of GDP can be negative or positive?

A)Investment
B)Government expenditure on goods and services
C)Consumption expenditure
D)Net exports of goods and services
E)None of the above because expenditure can never be negative.

Question 41

The abbreviation "GDP" stands for

A)General Domestic Prices.
B)Great Domestic Prices.
C)Gross Domestic Prices.
D)Government's Domestic Politics.
E)Gross Domestic Product.

Question 42

Net exports of goods and services increase when

A)imports of goods and services increase and exports of goods and services do not change.
B)exports of goods and services decrease and imports of goods and services do not change.
C)consumption expenditure increases.
D)consumption expenditure decreases.
E)exports of goods and services increase and imports of goods and services do not change.

Question 43

The following table reports transactions that occurred in Whoville.Nominal GDP in Whoville is ________.

A)$195
B)$545
C)$320
D)$120
E)$395

Question 44

In 2013/14,Australian GDP was

A)$1,583 million using the expenditure approach.
B)$1,583 million using the income approach.
C)$1,289 million using the expenditure approach and $1,458 million using the income approach.
D)$2 trillion using the income approach and $1 trillion using the expenditure approach.
E)Both A and B are correct.

Question 45

The following are all final goods EXCEPT

A)Nike shoes used by a basketball player.
B)flour used by the baker to make cupcakes.
C)bread eaten by a family for lunch.
D)a computer used by Intel to design new computer chips.
E)pencils used by a 6th grader in class.

Question 46

Total expenditure equals total income

A)because firms pay out everything they receive as income to the factors of production.
B)only if firms sell all the goods they produce in a given time period.
C)if firms do not save for future investment.
D)only if net taxes equals government expenditures on goods and services.
E)if firms earn zero profit.

Question 47

In order to measure gross domestic product,we can follow

A)only one approach: the circular flow approach.
B)two approaches: the expenditure approach and the income approach.
C)only one approach: the national accounts approach.
D)three approaches: the expenditure approach,the income approach,and the production approach.
E)three approaches: the expenditure approach,the income approach,and the market-based approach.

Question 48

The table above gives data for a nation.What is the amount of the country's GDP?

A)$6,200 billion
B)$5,800 billion
C)$6,900 billion
D)$6,600 billion
E)$6,000 billion

Question 49

In the circular flow,how are the "value of production","income",and "expenditures" related?

A)They have no relationship to each other.
B)Expenditures on GDP equal the value of production which equals income.
C)Once tax payments are subtracted at each stage,they are equal.
D)Once net exports of goods and services are subtracted from GDP,all three are equal.
E)Value of production always equals income but expenditures are smaller because households save some of their income and do not spend it.

Question 50

The expenditure approach to measuring GDP is done by using data on only

A)consumption expenditure and investment.
B)consumption expenditure,investment,government expenditure on goods and services,and net exports of goods and services.
C)consumption expenditure,investment and government expenditures.
D)consumption expenditure.
E)wages,rent,interest and profit.

Question 51

In comparing the magnitudes of the components of GDP according to the expenditure approach,we see that in Australia,

A)investment is less than government expenditure on goods and services.
B)investment is larger than government expenditure on goods and services.
C)government expenditure on goods and services is the largest category.
D)investment is the largest category.
E)investment,government expenditure on goods and services,and consumption expenditure are all about the same size.

Question 52

The circular flow shows that GDP measures i.total income.
Ii)total expenditures.
Iii)price changes.

A)i only
B)ii only
C)iii only
D)i and ii
E)i,ii and iii

Question 53

If consumption was 70 per cent of GDP and investment and government expenditure were both 18 Pre cent each, then we see that

A)GDP can be over 100 per cent because it is "gross" rather than "net."
B)exports must be more than imports.
C)we must subtract depreciation from investment so that the components of GDP do not exceed .
D)exports must be less than imports.
E)the error is due to rounding.

Question 54

Investment is defined as

A)what consumers do with their savings.
B)the purchase of a stock or bond.
C)spending on capital goods by governments.
D)financial capital.
E)the purchase of new capital goods by firms.

Question 55

Everything else the same,if government expenditure increases by $400 billion and imports increase by $400 billion,then GDP

A)decreases by $400 billion.
B)decreases by $200 billion.
C)increases by $400 billion.
D)does not change.
E)increases by $200 billion.

Question 56

Because of the circular flows of expenditure and income in the economy,total ________ equals total ________ equals total ________.

A)investment;income;consumption
B)expenditure;income;value of production
C)expenditure;investment;income
D)consumption;expenditure;value of production
E)consumption;investment;expenditure

Question 57

The value of used goods ________ counted as part of GDP ________.

A)is;as long as used goods are classified as investment goods
B)is not;because most fall in value and would cause a decrease in the value of GDP
C)may be;as long as their value has risen
D)is;as long as used goods are classified as consumption goods
E)is not;because used goods were counted during the period when they were counted as new goods

Question 58

Suppose that business firms spend $500 million on new capital equipment this year.Of this $500 million,$300 million was spent on domestically produced capital and $200 million was spent on foreign-produced capital.All else being equal,these transactions contribute ________ to GDP.

A)$800 million
B)$0
C)$500 million
D)$200 million
E)$300 million

Question 59

The largest expenditure category in Australia is

A)government expenditure on goods and services.
B)net exports of goods and services.
C)wages.
D)investment.
E)consumption expenditure.

Question 60

The table above gives data for a nation.The value of the country's net exports of goods and services shows that the country's

A)value of its imports exceeded the value of its exports.
B)net exports of goods and services are decreasing.
C)value of its imports is negative.
D)value of its imports must equal zero.
E)value of its exports exceeded the value of its imports.

Question 61

The income approach to measuring GDP is based on summing

A)the values of final goods,intermediate goods and services,used goods,and financial assets.
B)wages,interest,rent and profits.
C)the production of each industry.
D)consumption expenditure and wages.
E)consumption expenditure,investment,government expenditures on goods and services,and net exports of goods and services.

Question 62

________ is most likely to contribute to an improvement in our living standard.

A)An increase in the price level
B)A decrease in nominal GDP
C)An increase in real GDP
D)An increase in depreciation
E)An increase in the GDP deflator combined with a decrease in nominal GDP

Question 63

The expenditure approach values ________ and the income approach values ________.

A)goods and services at market prices;goods and services at factor prices
B)only goods at market prices;only services at factor prices
C)goods and services at market prices;services at factor prices
D)goods and services at factor prices;goods and services at market prices
E)services only at factor prices;goods only at market prices

Question 64

Which of the following is/are included in mixed income?
I)Payments made for the use of land.
Ii)Wages,interest,rent and profit earned by people who run their own business.
Iii)Payments made by households for their borrowing.

A)i and ii only
B)ii only
C)i,ii and iii
D)ii and iii only
E)iii only

Question 65

Recently,the ABS made adjustments to how GDP is calculated that included placing software purchases into the category of

A)intermediate goods because software is not a final good.
B)investment and now directly counts software purchases as part of GDP.
C)inventory and now software purchases are not directly counted as part of GDP.
D)net exports of goods and services because most software is written abroad.
E)net operating surplus.

Question 66

Spending on financial assets ________ counted as part of GDP ________.

A)may be;as long as their value increases
B)is not;because their purchase is not spending on goods or services
C)is;because the cash exchanged represents an expenditure
D)is;as long as their purchase produces income
E)is not;because interest must be paid on them

Question 67

Nominal GDP measures the value of goods and services produced in a given year,valued using

A)base-year prices.
B)constant prices.
C)future prices.
D)no prices.
E)prices of the same year.

Question 68

Real GDP is the value of final goods and services produced in a year

A)expressed in the prices of a base year.
B)minus depreciation.
C)during a recession.
D)minus the value of all the intermediate goods produced.
E)expressed in the prices of that same year.

Question 69

Real GDP measures the value of goods and services produced in a given year,valued using

A)real rather than nominal prices.
B)prices that prevail the same year.
C)no prices.
D)future prices.
E)base-year prices.

Question 70

According to the income approach to measuring GDP,the largest income category is

A)consumption expenditure.
B)profits.
C)interest.
D)wages.
E)rent.

Question 71

If you buy a five-year-old TV from a friend,the amount you paid for the TV is

A)not included in this year's GDP.
B)always added to investment but not consumption.
C)always added to consumption expenditures but not investment.
D)added to investment if the TV is expected to last more than 5 additional years and added to consumption if the TV is expected to last less than 5 additional years.
E)included in this year's GDP only if the TV set was manufactured in Australia.

Question 72

The purchase of 500 Westpac shares by a Super fund

A)is not counted as part of GDP.
B)is counted as consumption expenditure.
C)is counted as investment in the GDP accounts.
D)is counted as part of import expenditure in the GDP accounts because Westpac is a foreign firm.
E)is counted as part of export expenditure in the GDP accounts because Westpac is a foreign firm.

Question 73

When calculating GDP,purchases of used goods are

A)not included.
B)included at the original price.
C)included at the (current)used price.
D)included by taking the original price and subtracting the (current)used price.
E)included at the original price minus any depreciation.

Question 74

The income approach values goods and services at factor cost.To get market values we must add

A)subsidies and subtract indirect taxes.
B)wages.
C)net operating surplus.
D)indirect taxes and subtract subsidies.
E)interest,rent and profit.

Question 75

The income approach measures GDP by summing

A)C + I + G + NX.
B)the total production of all final goods and services produced in a year within a country's borders.
C)the wealth of households,business and government.
D)the incomes paid to households for the resources they own.
E)Both answers A and D are correct.

Question 76

Adding wages,interest,rent and profits yields

A)net domestic product at factor cost.
B)total expenditure.
C)gross domestic product.
D)gross domestic product at factor cost.
E)GNP.

Question 77

Nominal GDP is GDP

A)after adjusting for any price changes.
B)that ignores depreciation.
C)using current market values.
D)minus depreciation.
E)during a recession.

Question 78

If the income and expenditure approaches do NOT add to exactly the same estimate of GDP,the difference is called

A)a statistical discrepancy.
B)direct taxes.
C)a subsidy.
D)depreciation.
E)All of the above.

Question 79

The main influence on consumption expenditure is disposable income,which is

A)the income received by households less subsidies paid to the government.
B)the income received by government minus taxes.
C)the income received by individuals less company taxes.
D)the income received by households minus individual income taxes paid.
E)Answers A and C are correct.

Question 80

To calculate net national product we must

A)subtract depreciation.
B)subtract indirect taxes less subsidies.
C)add consumption expenditure.
D)add investment.
E)subtract investment.