978-1259723223 Test Bank TBChap027 Part 5

component of the U.S. GDP?

164. (Last Word) Which of the following is a source of data for the investment component

of U.S. GDP?

True / False Questions

165. Within the circular flow model, the level of total resource income and total spending

on output will be approximately equal.

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measured.

Test Bank: I

Topic:

Assessing the Economys Performance

166. In determining GDP by the expenditures method, it is appropriate to use net

investment rather than gross investment as a measure of investment spending.

167. Gross private domestic investment exceeds depreciation in an economy that

experiences expanding production capacity.

168. Interest on the public debt is included as a part of government purchases in

determining GDP by the expenditures method.

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Topic:

The Expenditures Approach

169. All expenditures on new construction are included as investment in calculating GDP.

170. Exports are subtracted from imports in calculating U.S. GDP because exports are not

available for domestic consumption.

171. The purchase of Wal-Mart stock is a part of gross investment but not of net

investment.

172. The simplest way to calculate GDP is to sum the total sales of all business firms.

173. Personal income usually exceeds disposable income.

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

175. Disposable income measures the before-tax income received by resource suppliers.

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Blooms: Understand

Diffi cult y:

02 Medium

Learning Objective: 27-04 Describe the relationships among GDP, net domestic product,

national income, personal income, and disposable income.

Test Bank: I

Topic:

Other National Accounts

176. NDP can be determined by adding taxes on production and imports to GDP.

177. If nominal GDP is 150 and the GDP price index is 200, real GDP is 75.

178. If real GDP is 50 and nominal GDP is 100, the GDP price index is 200.

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Topic:

Nominal GDP versus Real GDP

179. Real GDP accounts for changes in product quality; nominal GDP does not.

180. Gross output (GO) reflects the overall status of the productive side of the economy

better than GDP does.

Multiple Choice Questions

181. Which of the following is a primary use for national income accounts?

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

183. GDP is the market value of

184. The gross domestic product (GDP) concept accounts for society’s valuation of the

relative worth of goods and services by using

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Diff icu lty :

02 Medium

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

measured.

Test Bank: II

Topic:

Assessing the Economys Performance

185. To avoid multiple counting in national income accounts,

186. Adding the market value of all final and intermediate goods and services in an

economy in a given year would result in

187. An example of final goods in national income accounts would be

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D. seedlings and saplings purchased for resale by Wendy’s Garden Center.

188. The following are examples of final goods in national income accounting, except

189. An example of intermediate goods would be

190. All of the following are examples of intermediate goods, except

191. The total volume of business sales in our economy is several times larger than GDP

because

192. Value added by a firm is the market value of the firm’s output minus the

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measured.

Test Bank: II

Topic:

Assessing the Economys Performance

193. A business buys $5,000 worth of inputs from other firms in order to produce a

product. The business makes 100 units of the product and each of them sells for $65. The

value added by the business to these products is

194.

Stage of Production

Sales Value of Materials or Products

Firm A

$800

Firm B

1,250

Firm C

1,850

Firm D

2,600

Firm E

3,800

Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is

purchased and used as an input by Firm C, and so on down the line through Firm E, which

produces the end product. (See the accompanying table.) The total value added by Firms

A–E from the production of the end product described here is

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Blooms: Understand

Diff icu lty :

02 Medium

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

measured.

Test Bank: II

Topic:

Assessing the Economys Performance

195. Subtracting the purchase of intermediate products and supplies from the value of the

sales of final products determines the amount of

196.

Total Revenue

$50,000

Total Cost

45,000

Supplies

$10,000

Wages and Salaries

35,000

Profit

5,000

Consider the accompanying data for a firm over a period of time. The contribution of the

firm to domestic output by the value-added method is

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197. Which of the following is a private transfer payment?

198. Which of the following is included in GDP?

199. The sale of a used automobile would not be included in GDP of the current year

because it is a

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A. nonmarket transaction.

B.

nonproduction transaction.

C. purely financial transaction.

D. private transfer payment.

200. U.S. GDP in 2015 was about

201. The two ways of looking at GDP are the

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Topic:

Assessing the Economys Performance

202. Which of the following is included in the expenditures approach to GDP?

203. The largest expenditure component of GDP is

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

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Diffi cult y:

02 Medium

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

summed to determine GDP.

Test Bank: II

Topic:

The Expenditures Approach

205. Which of the following is not included in personal consumption expenditures?

206. Money spent on the purchase of a new house is included in the GDP as a part of

207. The value of corporate stocks and bonds traded in a given year is

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C. included in the calculation of net private domestic investment.

D. included in the calculation of gross private domestic investment.

208. Which would be considered an investment according to economists?

209. Gross domestic private investment, as defined in national income accounts, would

include the following, except

210. Business inventories increase when firms produce

211. 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

212. 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

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AACSB: Knowledge Application

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

Keyboard Navigation

Blooms: Understand

Diffi cult y:

02 Medium

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

summed to determine GDP.

Test Bank: II

Topic:

The Expenditures Approach

213. When gross investment is positive, net investment

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

that

215. A nation’s capital stock was valued at $500 billion at the start of the year and $575

billion at the end. Consumption of private fixed capital in the year was $35 billion.

Assuming stable prices, net investment was

216. A nation’s capital stock was valued at $300 billion at the start of the year and $350

billion at the end. Consumption of private fixed capital in the year was $25 billion.

Assuming stable prices, gross investment was

217. The consumption of fixed capital in each year’s production is called