Question 1

Explain the difference between final and intermediate goods,and give an example of each.

Accepted Answer

Goods are considered to be "final goods" when they reach their final point of sale in the given year.The textbook example of a final good is the woolen coat bought from a retail store by one of its customers."Intermediate goods" are goods produced during the year that will be used in the production of something else.In the woolen coat example,the value of the wool sold by the sheep rancher was not counted when it was sold to the cloth manufacturer because it would be used in the process of producing the cloth and later the coat.In other words,at the wool stage,the product had not reached its final point of sale for that year.
Other examples would include all sorts of raw materials and wholesale goods as intermediate goods.Any consumer purchase of a good or service domestically produced in the given year would be a final expenditure in the GDP accounts.

Question 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 3

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

Accepted Answer

The first method involves computing a price index.This index is a ratio of the price of a market basket in a given year to the price of the same market basket in a base year,with the ratio multiplied by 100.To obtain real GDP,divide nominal GDP by the price index and multiply by 100.
In the second method,nominal GDP is broken down into prices and quantities for each year.Real GDP is found by using base-year prices and multiplying them times each year's physical quantities.The GDP price index for a particular year is the ratio of nominal to real GDP for that year.

Question 4

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

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Question 5

Firms A-E are involved in the production of some good.What is the total value added by all the firms in the production of this good? What did each firm add separately in value and what does it total?

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Question 6

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

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Question 7

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 8

Discuss the pros and cons of GDP as a measure of the economy's output performance and as a measure of its standard of living.

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Question 9

If Canada doubled its real GDP,it would be a much less liveable society than it is today.Explain this view.

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Question 10

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

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Question 11

Define GDP and its characteristics.

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Question 12

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

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Question 13

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

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Question 14

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 15

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.

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The answer of The next four questions refer to the...

Question 16

Which of the following are included and which are excluded in calculating this year's GDP? Explain in each instance.
(a)A monthly scholarship cheque received by an economics student.
(b)The purchase of a new corncrib by a farmer.
(c)The purchase of a used tractor by a farmer.
(d)The cashing in of a savings bond.
(e)The services of a mechanic in fixing the radiator in his own car.
(f)Canada Pension Plan cheques received by a retired person.
(g)An increase in business inventories.
(h)Government purchase of missiles.
(i)A barber's income.
(j)Income received from interest on a corporate bond.
(k)Cash received from selling a corporate bond.

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Question 17

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 18

Differentiate between nominal and real GDP.

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Question 19

The expanding "underground" economy creates problems for economic policy makers.Explain.

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Question 20

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

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Exam 7: Measuring the Economys Output