Question 1

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

Accepted Answer

A)  the services of used-car dealers
B)  the child-care services provided by stay-at-home parents
C)  the construction of new houses
D)  government expenditures on military equipmentE) C) and D)
F) A) and D)

Question 2

Business inventories increase when firms produce

Accepted Answer

A)  more than they sell, and the inventory increase is added to GDP.
B)  less than they sell, and the inventory increase is added to GDP.
C)  more than they sell, and the inventory increase is subtracted from GDP.
D)  less than they sell, and the inventory increase is subtracted from GDP.E) C) and D)
F) B) and C)

Question 3

In national income accounting, the consumption category of expenditures includes purchases of

Accepted Answer

A)  both new and used consumer goods.
B)  consumer durable goods and consumer nondurable goods but not services.
C)  consumer durable goods, consumer nondurable goods, and services.
D)  changes in business inventories.E) A) and C)
F) A) and D)

Question 4

When gross private domestic investment exceeds depreciation, it can be concluded that

Accepted Answer

A)  net investment is positive.
B)  net investment is negative.
C)  the economy is exporting more than it imports.
D)  the economy is importing more than it exports.E) B) and C)
F) A) and B)

Question 5

In calculating the GDP, national income accountants

Accepted Answer

A)  treat inventory changes as an adjustment to personal consumption expenditures.
B)  ignore inventories because they do not represent final goods.
C)  subtract increases in inventories or add decreases in inventories.
D)  add increases in inventories or subtract decreases in inventories.27-8E) B) and C)
F) A) and D)

Question 6

All activities included in GDP serve to enrich society.

Accepted Answer

A) True 
 B)False

Question 7

A distinguishing characteristic of public transfer payments is that

Accepted Answer

A)  they include wages to government workers.
B)  they are counted as part of government purchases in the calculation of the gross domestic product.
C)  they include the cost of maintaining public parks.
D)  they involve no contribution to current production in return.E) B) and D)
F) None of the above

Question 8

In November 2016, Econland Motors produced an automobile that was delivered to a local dealership in December 2016.The auto was then sold to Sharon Smith for personal use in February 2017.Following national income accounting practices, this auto would be counted as part of

Accepted Answer

A)  consumption in 2016 and consumption in 2017.
B)  consumption in 2016 and investment in 2017.
C)  negative investment in 2016 and consumption in 2017.
D)  investment in 2016 and negative investment in 2017.E) A) and B)
F) B) and C)

Question 9

The National Income and Product Accounts (NIPA)  for the U.S.are compiled by the

Accepted Answer

A)  National Bureau of Economic Research.
B)  Bureau of Economic Analysis.
C)  National Census Bureau.
D)  Council of Economic Advisers.E) A) and D)
F) B) and C)

Question 10

"Corporate profits" in the national income accounts consists of the following, except

Accepted Answer

A)  retained earnings.
B)  interest.
C)  dividends.
D)  corporate income taxes.E) B) and C)
F) All of the above

Question 11

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately

Accepted Answer

A)  $3,846 billion.
B)  $3,925 billion.
C)  $4,108 billion.
D)  $4,379 billion.E) B) and D)
F) None of the above

Question 12

Government purchases in national income accounts would include payments for

Accepted Answer

A)  Social Security checks to retirees.
B)  salaries for current U.S.military officers.
C)  public assistance for welfare recipients.
D)  unemployment benefits.E) B) and C)
F) A) and D)

Question 13

National income (NI) is estimated as the sum of four categories of income (wages, rent, interest, profits) plus taxes on production and imports.

Accepted Answer

A) True 
 B)False

Question 14

Historically, real GDP has increased less rapidly than nominal GDP because

Accepted Answer

A)  price indices have not reflected improvements in product quality.
B)  the general price level has increased.
C)  technological progress has resulted in more efficient production.
D)  the general price level has decreased.E) C) and D)
F) B) and C)

Question 15

Do-it-yourself activities of people are a big part of the "underground economy."

Accepted Answer

A) True 
 B)False

Question 16

Nominal GDP differs from real GDP because

Accepted Answer

A)  nominal GDP is based on constant prices.
B)  real GDP is based on current prices.
C)  real GDP results from adjusting for changes in the price level.
D)  nominal GDP results from adjusting for changes in the price level.E) All of the above
F) A) and D)

Question 17

In an economy, the value of inventories was $75 billion in 2016 and $63 billion in 2017.In calculating total investment for 2017, national income accountants would

Accepted Answer

A)  decrease it by $75 billion.
B)  increase it by $63 billion.
C)  decrease it by $12 billion.
D)  increase it by $138 billion.E) None of the above
F) A) and D)

Question 18

A product that was produced in 2016 and not sold until 2017 is counted as part of GDP in 2016.

Accepted Answer

A) True 
 B)False

Question 19

Net exports are

Accepted Answer

A)  that portion of consumption and investment goods sent to other countries.
B)  exports plus imports.
C)  exports less imports.
D)  imports less exports.E) A) and C)
F) B) and C)

Question 20

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because

Accepted Answer

A)  of changes in trade deficits and surpluses.
B)  the length of the workweek has declined historically.
C)  the price level may change over time.
D)  depreciation may be greater or smaller than gross investment.E) A) and B)
F) C) and D)

Exam 27: Measuring Domestic Output and National Income

In November 2016, Econland Motors produced an automobile that was delivered to a local dealership in December 2016.The auto was then sold to Sharon Smith for personal use in February 2017.Following national income accounting practices, this auto would be counted as part of

Correct AnswerverifiedShow Answer

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

Correct AnswerverifiedShow Answer

Business inventories increase when firms produce

Correct AnswerverifiedShow Answer

"Corporate profits" in the national income accounts consists of the following, except

Correct AnswerverifiedShow Answer

Net exports are

Correct AnswerverifiedShow Answer

A distinguishing characteristic of public transfer payments is that

Correct AnswerverifiedShow Answer

Nominal GDP differs from real GDP because

Correct AnswerverifiedShow Answer

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because

Correct AnswerverifiedShow Answer

When gross private domestic investment exceeds depreciation, it can be concluded that

Correct AnswerverifiedShow Answer

National income (NI) is estimated as the sum of four categories of income (wages, rent, interest, profits) plus taxes on production and imports.

Correct AnswerverifiedShow Answer

Historically, real GDP has increased less rapidly than nominal GDP because

Correct AnswerverifiedShow Answer

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately

Correct AnswerverifiedShow Answer

Do-it-yourself activities of people are a big part of the "underground economy."

Correct AnswerverifiedShow Answer

A product that was produced in 2016 and not sold until 2017 is counted as part of GDP in 2016.

Correct AnswerverifiedShow Answer

In an economy, the value of inventories was $75 billion in 2016 and $63 billion in 2017.In calculating total investment for 2017, national income accountants would

Correct AnswerverifiedShow Answer

All activities included in GDP serve to enrich society.

Correct AnswerverifiedShow Answer

In calculating the GDP, national income accountants

Correct AnswerverifiedShow Answer

In national income accounting, the consumption category of expenditures includes purchases of

Correct AnswerverifiedShow Answer

The National Income and Product Accounts (NIPA) for the U.S.are compiled by the

Correct AnswerverifiedShow Answer

Government purchases in national income accounts would include payments for

Correct AnswerverifiedShow Answer

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