Question 1

Suppose a nation's nominal GDP was $972 billion in 2017 and the general price index was 90 in 2017.To make the value of GDP in 2017 comparable with the value of GDP in the base year, the value of GDP in 2017 must be:

Accepted Answer

A) adjusted downward to $678 billion. 
B) deflated to $896 billion. 
C) inflated to $1,080 billion. 
D) deflated to $1,080 billion.

Question 2

If real GDP rises and the GDP price index has increased:

Accepted Answer

A) the percentage increase in nominal GDP must have been less than the percentage increase in the price level. 
B) nominal GDP may have either increased or decreased. 
C) nominal GDP must have increased. 
D) nominal GDP must have fallen.

Question 3

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2.In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

Accepted Answer

A) True 
 B)False

Question 4

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.

Question 5

Following is data for a hypothetical economy.The base year is 2002 (Price index = 100).  Refer to the above data.From 2003 to 2006, prices rose by:

Accepted Answer

A) 3 percent. 
B) 7 percent. 
C) 9 percent. 
D) 10.7 percent.

Question 6

Suppose the total market value of all final goods and services produced in a particular country is $600 billion and the total market value of final goods and services sold is $525 billion in 2020.We can conclude that:

Accepted Answer

A) GDP is $525 billion in 2020. 
B) NDI is $525 billion in 2020. 
C) GDP is $600 billion in 2020. 
D) inventories fell by $75 billion in 2020.

Question 7

An economy is enlarging its stock of capital goods:

Accepted Answer

A) when net investment exceeds gross investment. 
B) when gross investment exceeds replacement investment. 
C) whenever gross investment is positive. 
D) when replacement investment exceeds gross investment.

Question 8

The current GDP price index used by Statistics Canada is referred to as the chain-weighted index, because by using both the previous year prices and current prices it links each year to the prior year.

Accepted Answer

A) True 
 B)False

Question 9

Following is data for a hypothetical economy.The base year is 2002 (Price index = 100).  Refer to the above data.From 2005 to 2006, prices rose by approximately:

Accepted Answer

A) 2 percent. 
B) 4.2 percent. 
C) 6 percent. 
D) 7 percent.

Question 10

Net income from farms and unincorporated businesses is defined as:

Accepted Answer

A) the earnings of investment of corporate businesses. 
B) the earnings of corporate stock holders. 
C) the earnings of government received from farmers. 
D) the earnings of farmers and proprietors from their own businesses.

Question 11

The following are national income account data for a hypothetical economy in billions of dollars: gross investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470).What is GDP in this economy?

Accepted Answer

A) $3,237 billion 
B) $3,263 billion 
C) $3,273 billion 
D) $3,290 billion

Exam 7: Part B: Measuring the Economys Output