978-1259723223 Test Bank TBChap027 Part 9

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Learning Objective: 27-06 List and explain some limitations of the GDP measure.

Test Bank: II

Topic:

Shortcomings of GDP

314. Which of the following government agencies estimates and compiles the U.S. GDP

accounts?

315. The U.S. Customs Service is a main source of data for

316. The U.S. Office of Personnel Management and the Census Bureau’s Survey of

Government Finance are two of the main sources of data for

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

Keyboard Navigation

Blooms: Remember

Dif f i c u l t y:

01 Easy

Learning Objective: 27-06 List and explain some limitations of the GDP measure.

Test Bank: II

Topic:

Shortcomings of GDP

317. A statistic called Gross Output (GO) sums together the value of economic activity

taking place in each of the four stages of a productive economy, namely,

True / False Questions

318. U.S. gross domestic product (GDP) measures the market value of all goods and

services produced by Americans in one year.

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

GDP in 2016.

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

Keyboard Navigation

Blooms: Understand

Difficu 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

320. The value added in an industry includes the wages earned by workers in the industry.

321. Personal consumption expenditures include expenditures for new houses.

322. The value of a sale of a share of stock is considered to be an investment in national

income accounting.

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summed to determine GDP.

Test Bank: II

Topic:

The Expenditures Approach

323. Gross private domestic investment can be divided into replacement investment and

net investment.

324. If gross investment is positive, it means that firm (or the economy) must be expanding.

325. Changes in business inventories are included as part of investment in the national

income accounts.

326. In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2. In

calculating total investment for Year 2, national income accountants would increase it by

$50 billion.

327. If the University of Missouri, a public school, builds a new laboratory, then it will be

counted as part of Ig in GDP.

328. Government purchases are the largest component of aggregate expenditures in the

United States.

329. When U.S. households buy new imported European and Japanese cars, the total value

of the cars is counted as part of C in the GDP accounts.

330. Net exports are positive when exports are greater than imports.

331. In the expenditures approach, transfer payments such as unemployment compensation

are included in the G component of GDP.

332. In 2014, China’s GDP was bigger than that of the Unites States.

FA LSE

333. National income (NI) is estimated as the sum of four categories of income (wages,

rent, interest, profits) plus taxes on production and imports.

334. Personal income (PI) is the income that households are free to spend or save as they

please.

335. Disposable income (DI) includes transfer payments like Social Security benefits and

unemployment benefits.

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

Keyboard Navigation

Blooms: Understand

Difficu lty :

02 Medium

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

national income, personal income, and disposable income.

Test Bank: II

Topic:

Other National Accounts

336. In an economy that is experiencing inflation and output growth, nominal GDP will

rise faster than real GDP.

337. If nominal GDP in one year is $5,000 billion and the price index is 135, then the real

GDP that year would be $3,704 billion.

338. To adjust nominal GDP for a given year in order to obtain real GDP, we multiply the

nominal GDP by the price index.

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Difficu lty :

02 Medium

Learning Objective: 27-05 Discuss the nature and function of a GDP price index and

describe the difference between nominal GDP and real GDP.

Test Bank: II

Topic:

Nominal GDP versus Real GDP

339. The value of a price index in the base year is always 100.

340. Do–it-yourself activities of people are a big part of the “underground economy.”

341. When businesses have to install antipollution equipment to clean up their wastes, they

are adding to GDP.

342. GDP tends to understate economic welfare because it does not take into account

increases in leisure.

343. All activities included in GDP serve to enrich society.

344. Most activities in the so-called underground economy are illegal activities, such as

drugs or gambling.

345. The statistic called Gross Output (GO) is bigger than GDP, because GO sums up the

values in all stages of a productive economy, whereas GDP accounts only for the final

stage.

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AACSB: Knowledge Application

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

Keyboard Navigation

Blooms: Remember

Di f f i cu lty:

01 Easy

Learning Objective: 27-06 List and explain some limitations of the GDP measure.

Test Bank: II

Topic:

Shortcomings of GDP