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Exam 7: Measuring Domestic Output and National Income

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Question 61

Multiple Choice

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Suppose that inventories were $40 billion in year 1 and $50 billion in year 2. For year 2, national income accountants would

A) add $10 billion to other elements of investment in calculating total investment.
B) subtract $10 billion from other elements of investment in calculating total investment.
C) add $45 billion (= $90/2) to other elements of investment in calculating total investment.
D) subtract $45 billion (= $90/2) from other elements of investment in calculating total investment.

E) B) and C)
F) A) and D)

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Question 62

Multiple Choice

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"Net foreign factor income" in the national income accounts refers to the difference between

A) the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
B) the value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
C) the value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
D) the income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.

E) B) and D)
F) None of the above

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Question 63

Multiple Choice

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If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals

The value of U.S. imports is

A price index is

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is

Environmental pollution is accounted for in

In determining real GDP, economists adjust the nominal GDP by using the

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by

Disinvestment occurs when

$\begin{array} { | l | r | } \hline \text { Consumption of Fixed Capital } & \$ 25 \\\hline \text { Government Purchases } & 315 \\\hline \text { US imports } & 260 \\\hline \text { Personal Taxes } & 45 \\\hline \text { Transfer Payments } & 247 \\\hline \text { US Exports } & 249 \\\hline \text { Personal Consumption Expenditures } & 475 \\\hline \text { Net Foreign Factor Income } & 5 \\\hline \text { Gross Private Domestic Investment } & 300 \\\hline \text { Taxes on Production and Imports } & 245 \\\hline \text { Undistributed Corporate Profits } & 60 \\\hline \text { Social Security Contributions } & 240 \\\hline \text { Corporate Income Taxes } & 65 \\\hline \text { Statistical Discrepancy } & 40 \\\hline\end{array}$ Refer to the accompanying national income data (in billions of dollars) . Personal income is

$\begin{array} { | l | c | } \hline \text { Government Purchases } & \$ 15 \\\hline \text { Consumption } & 90 \\\hline \text { Gross Investment } & 20 \\\hline \text { Consumption of Fixed Capital (depreciation) } & 5 \\\hline \text { Exports } & 8 \\\hline \text { Imports } & 12 \\\hline\end{array}$ Refer to the accompanying data (all ?gures in billions of dollars) . GDP is

Which of the following is not a component of GDP in the expenditures approach?

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end. Consumption of fixed capital in the year was $35 billion. Assuming stable prices, net Investment was

$\begin{array} { | l | r | } \hline \text { Consumption of Fixed Capital } & \$ 25 \\\hline \text { Government Purchases } & 315 \\\hline \text { US imports } & 260 \\\hline \text { Personal Taxes } & 45 \\\hline \text { Transfer Payments } & 247 \\\hline \text { US Exports } & 249 \\\hline \text { Personal Consumption Expenditures } & 475 \\\hline \text { Net Foreign Factor Income } & 5 \\\hline \text { Gross Private Domestic Investment } & 300 \\\hline \text { Taxes on Production and Imports } & 245 \\\hline \text { Undistributed Corporate Profits } & 60 \\\hline \text { Social Security Contributions } & 240 \\\hline \text { Corporate Income Taxes } & 65 \\\hline \text { Statistical Discrepancy } & 40 \\\hline\end{array}$ Refer to the accompanying national income data (in billions of dollars) . Gross domestic product is

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

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

Welfare payments to low-income families are included in national income.

$\begin{array} { | c | c | c | c | } \hline \text { Year } & \text { Units of Output } & \text { Price of Bagel per Unit } & \text { Price Index } ( \text { Year } 1 = 100 ) \\\hline 1 & 10 & \$ 10 & 100 \\\hline 2 & 12 & 20 & 200 \\\hline 3 & 15 & 30 & 300 \\\hline 4 & 20 & 40 & 400 \\\hline\end{array}$ The table contains data for a hypothetical single-product economy. Real GDP in year 4 is