978-1259723223 Test Bank TBChap027 Part 1

Chapter 27 Measuring Domestic Output and National Income Answer Key

Multiple Choice Questions

1. The National Income and Product Accounts (NIPA) help economists and policymakers

to

2. The agency responsible for compiling the National Income Product Accounts for the

U.S. economy is the

3. The system that measures the economy’s overall performance is formally known as

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AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

Di f f i culty:

02 Medium

Learning Objective: 27-01 Explain how gross domestic product (GDP) is defined and

measured.

Test Bank: I

Topic:

Assessing the Economys Performance

4. A nation’s gross domestic product (GDP)

5. A nation’s gross domestic product (GDP)

6. GDP is the

7. Suppose Smith pays $100 to Jones.

8. Suppose the total monetary value of all final goods and services produced in a particular

country in 2015 is $500 billion and the total monetary value of final goods and services

sold is $450 billion. We can conclude that

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D. inventories in 2015 fell by $50 billion.

AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

Di f f i culty:

02 Medium

Learning Objective: 27-01 Explain how gross domestic product (GDP) is defined and

measured.

Test Bank: I

Topic:

Assessing the Economys Performance

9. National income accountants can avoid multiple counting by

10. Gross domestic product (GDP) measures and reports output

11. By summing the dollar value of all market transactions in the economy, we would

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A. determine the market value of all resources used in the production process.

B.

obtain a sum substantially larger than the GDP.

C. determine value added for the economy.

D. measure GDP.

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A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

Difficulty:

02 Medium

Learning Objective: 27-01 Explain how gross domestic product (GDP) is defined and

measured.

Test Bank: I

Topic:

Assessing the Economys Performance

12. Final goods and services refers to

13. If intermediate goods and services were included in GDP,

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measured.

Test Bank: I

Topic:

Assessing the Economys Performance

14. Which of the following is a final good or service?

15. Which of the following is an intermediate good?

16. Tom Atoe grows fruits and vegetables for home consumption. This activity is

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A c c e s s i b i l i t y :

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Blooms: Understand

Difficulty:

02 Medium

Learning Objective: 27-01 Explain how gross domestic product (GDP) is defined and

measured.

Test Bank: I

Topic:

Assessing the Economys Performance

17. The value added of a firm is the market value of

18. Alejandro Scoobertini owns a store specializing in soccer jerseys. In 2016, he

purchased $150,000 worth of jerseys from manufacturers, employed one worker for

$40,000, purchased $20,000 worth of supplies from an office supply store, and sold

jerseys for $280,000. Based on this information, what was the value added at Alejandro’s

store in 2016?

19. Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he

sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to

Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total

contribution to GDP of this series of transactions is

20. Which of the following transactions would be included in GDP?

21. Value added refers to

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AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

Difficulty:

02 Medium

Learning Objective: 27-01 Explain how gross domestic product (GDP) is defined and

measured.

Test Bank: I

Topic:

Assessing the Economys Performance

22. Assume that a manufacturer of stereo speakers purchases $40 worth of components for

each speaker. The completed speaker sells for $70. The value added by the manufacturer

for each speaker is

23. Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix

concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by

Setup Corporation is

24. Value added can be determined by

25. If depreciation exceeds gross investment,

26. The concept of net domestic investment refers to

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A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

Di f f i culty:

02 Medium

Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

27. If depreciation (consumption of fixed capital) exceeds gross domestic investment, we

can conclude that

28. When an economy’s production capacity is expanding,

29.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds

gross investment Economy C: gross investment exceeds depreciation

Based on this information, positive net investment is occurring in

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A. economy A only.

B. economy B only.

C.

economy C only.

D. economies A and B only.

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Blooms: Understand

Difficulty:

02 Medium

Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

30.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds

gross investment Economy C: gross investment exceeds depreciation

Other things equal, the information suggests that the production capacity in economy

31. In 1933, net private domestic investment was a minus $6.0 billion. This means that

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Di f f i culty:

02 Medium

Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

32. An economy is enlarging its stock of capital goods

33. If in some year gross investment was $120 billion and net investment was $65 billion,

then in that year the country’s capital stock

34. GDP can be calculated by summing

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D. consumption, investment, government purchases, and imports.

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Blooms: Understand

Difficulty:

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Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

35. In national income accounting, the consumption category of expenditures includes

purchases of

36. In national income accounting, the consumption category of expenditures includes

purchases of

37. Net exports are

38. Net exports are negative when

39. Which of the following is not economic investment?

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written consent of McGraw-Hill Education.

Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

40. Which of the following do national income accountants consider to be investment?

41. National income accountants define investment to include

42. Suppose that inventories were $40 billion in 2015 and $50 billion in 2016. In 2016,

national income accountants would

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D. subtract $45 billion (= $90/2) from other elements of investment in calculating total

investment.

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Blooms: Understand

Di f f i culty:

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Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

43. Suppose that inventories were $80 billion in 2015 and $70 billion in 2016. In 2016,

national income accountants would

44. 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

27–18

written consent of McGraw-Hill Education.

Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

45. 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

46. If the economy adds to its inventory of goods during some year,

47. The smallest component of aggregate spending in the United States is

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D. consumption.

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Blooms: Understand

Difficulty:

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Learning Objective: 27-02 Describe how expenditures on goods and services can be

summed to determine GDP.

Test Bank: I

Topic:

The Expenditures Approach

48. In calculating GDP, governmental transfer payments, such as Social Security or

unemployment compensation, are

49. The largest component of total expenditures in the United States is

50. Government purchases include government spending on

51. In national income accounting, government purchases include

52. Transfer payments are