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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.
27-82
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written consent of McGraw-Hill Education.
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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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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.
27-85
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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
27-88
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
27-89
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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
27-92
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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
27-95
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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?
27-96
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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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written consent of McGraw-Hill Education.
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
