Deck 20: Measuring GDP and Economic Growth

Question 1

Which one of the following is an expenditure flow from households to firms?

A)goods and services
B)factor services
C)payments for goods and services
D)payments for factor services
E)loans

Answer 1

payments for goods and services

Question 2

In calculating GDP,economists use the value of final goods and services because

A)by using final goods and services, they avoid double counting.
B)final goods can be exported to other countries.
C)intermediate goods are imported from other countries.
D)GDP is underestimated if intermediate goods are used instead.
E)none of the above.

Answer 2

by using final goods and services, they avoid double counting.

Question 3

For the aggregate economy,income equals

A)expenditure, but these are not generally equal to GDP.
B)GDP, but expenditure is generally less than these.
C)expenditure equals GDP.
D)expenditure equals GDP only if there is no government or foreign sectors.
E)expenditure equals GDP only if there is no depreciation.

Answer 3

expenditure equals GDP.

Question 4

The circular flow diagram illustrates the expenditures made by

A)households only.
B)households and firms only.
C)households and investors only.
D)firms, households, and governments only.
E)households, firms, governments, and the rest of the world.

Question 5

Complete the following sentence.Net exports equals

A)exports divided by imports.
B)exports plus imports.
C)exports minus imports.
D)imports minus exports.
E)foreign borrowing by residents of Canada minus domestic borrowing by nonresidents of Canada.

Question 6

Which one of the following flows from firms to households?

A)goods and services
B)factor services
C)payments for goods and services
D)payments for loans
E)loans

Question 7

Which of the following is not correct?

A)Investment is the purchase of new plant, equipment, and buildings and the additions to inventories.
B)Net investment equals gross investment minus depreciation.
C)Depreciation decreases the value of a firm's capital.
D)Gross investment is the amount by which the value of capital increases.
E)Gross investment is the total amount spent buying new capital and replacing depreciated capital.

Question 8

SaskWidget produces plastic parts.At the beginning of the year,they held $24 million worth of capital.At the end of the year,they held $20 million worth of capital.One can conclude that

A)net investment increased by $4 million.
B)gross investment decreased by $4 million.
C)gross investment increased by $4 million.
D)depreciation exceeded gross investment by $4 million.
E)depreciation equals $4 million.

Question 9

The change in capital from year to year is equal to

A)gross investment.
B)gross investment minus net investment.
C)savings.
D)net investment minus depreciation
E)gross investment minus depreciation.

Question 10

One of the reasons why real GDP grows is that

A)prices increase.
B)governments collect more taxes.
C)capital grows as a result of investment.
D)imports increase.
E)people have more income.

Question 11

Which of the following statements is true?

A)Final goods and services produced abroad by Canadians are part of Canadian GDP.
B)Final goods and services produced in Canada by foreigners are part of the foreign country's GDP.
C)Final goods and services produced in Canada by foreigners are part of Canada's GDP.
D)Final goods and services produced in Canada by foreigners are imports.
E)Final goods and services produced in Canada by foreigners are exports.

Question 12

Which one of the following is false?

A)Y = C + I + G + M - X
B)Y - C - I - G - X + M = 0
C)X - M = Y - C - I - G
D)Y + M = C + I + G + X
E)Y = C + I + G + X - M

Question 13

In the circular flow model,

A)households are sellers of factor services in goods markets.
B)households are buyers of goods and services in the factor markets.
C)firms are sellers of the factors in factor markets.
D)firms are sellers of goods and services in goods markets.
E)firms are buyers of goods and services in final markets.

Question 14

Which of the following would be an example of a consumption expenditure?

A)More spending by the government on children's programs.
B)An increase in welfare payments to single mothers.
C)The purchase of a new car by the IPSCO steel company.
D)The purchase of a new car by the Singh household.
E)All of the above.

Question 15

The purchasers in the goods markets are

A)households and government only.
B)households and firms only.
C)households and net exporters only.
D)households, firms, and government only.
E)households, firms, government, and those who import our goods.

Question 16

Gross domestic product is

A)the final value of all goods produced in a country in a given time period.
B)the market value of all goods and services produced in a country during a given time period.
C)the market value of all the final goods and services produced in a country during a given time period.
D)the average value of output produced in a country in a given time period.
E)the market value of all the intermediate goods and services produced in a country during a given time period.

Question 17

Of the following items,which one would be considered as investment in the National Income and Expenditure Accounts?

A)The purchase of a new van by a potter who packs it with his wares and travels to art shows on weekends.
B)The purchase of 100 shares of Bell Canada stock on the Toronto Stock Exchange.
C)The purchase of a 100-year-old house that was put on the protected historic sites list.
D)The purchase of a Canadian government bond.
E)All of the above.

Question 18

Which one of the following is true?

A)Y = C + I + G + M - X
B)I + G + X = Y + I + M
C)Y = C + S + I
D)Y + M = C + I + G
E)Y = C + I + G + X - M

Question 19

Suppose the economy's capital increases over the year.It must be true that

A)net investment was greater than gross investment.
B)net investment was positive.
C)depreciation was greater than net investment.
D)depreciation was greater than gross investment.
E)depreciation is less than zero.

Question 20

Which one of the following is an income flow from firms to households?

A)goods and services
B)factor services
C)payments for goods and services
D)payments for factor services
E)loans

Question 21

Which one of the following would not be counted as part of this year's GDP?

A)The lumber you purchase when building bookshelves for your room.
B)The government bond you buy for your newborn niece.
C)The purchase of a new personal computer that was produced in the current year.
D)The purchase of wheat that was produced in the current year by a Saskatchewan farmer.
E)The purchase of a house that was produced in the current year.

Question 22

An art collector recently sold a piece of pottery for $300.He had purchased it for $200 two years earlier.How will the most recent sale affect GDP?

A)GDP will increase by $100.
B)GDP will not change.
C)GDP will increase by $300.
D)GDP will increase by $200.
E)GDP 2 years ago must be adjusted downwards by $200, and current GDP will rise by $300.

Question 23

Which of the following adds to Canadian GDP?

A)I shovel my own driveway.
B)I sell my used Honda.
C)The production and sale of flour to a bakery.
D)The purchase of a CD made in China.
E)The ice cream I buy from my grocery store.

Question 24

In calculating GDP,all of the following are excluded except

A)the value of intermediate goods.
B)the value of all homes built in the year in question.
C)the value of used goods.
D)purchases of stocks and bonds.
E)subsidies from the government.

Question 25

Use the figure below to answer the following questions.

Figure 20.1.1
Refer to Figure 20.1.1,which shows the circular flow of expenditure and income for Venus.During 2012,A was $100,B was $50,C was $30 and D was $10.How much is GDP?

A)$75
B)$50
C)$90
D)$100
E)None of the above

Question 26

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500.At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1.Peter's depreciation in 2012 is

A)$2,300.
B)$800.
C)zero.
D)$1,000.
E)$3,000.

Question 27

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500.At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1.Peter's capital at the end of 2012 is

A)$7,000.
B)$9,600.
C)$4,400.
D)$7,600.
E)$4,000.

Question 28

The value of intermediate goods is not counted in GDP

A)to keep from including goods that reduce society's welfare.
B)because of the tremendous difficulty in keeping track of all the intermediate goods produced in an economy as large as that of Canada.
C)because they are only sold in factor markets.
D)to avoid counting their value twice and overstating the value of GDP.
E)because they are not consumed in the current year.

Question 29

Use the figure below to answer the following questions.

Figure 20.1.1
Refer to Figure 20.1.1,which shows the circular flow of expenditure and income for Venus.During 2012,A was $100,B was $50,C was $30 and D was $10.How much is net exports?

A)$10
B)$25
C)$30
D)$50
E)None of the above

Question 30

From the following list,choose the item that would be included in a current measure of GDP.

A)the purchase of a previously owned house that was built last year
B)a social security cheque for $500
C)the purchase of 10 litres of gasoline for your car
D)a $2,000 cheque from your Aunt Grace
E)income from the sale of your Canadian Snowfun stocks

Question 31

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500.At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1.Peter's net investment in 2012 is

A)$2,000.
B)$3,800.
C)$1,800.
D)$7,800.
E)$1,500.

Question 32

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500.At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1.Peter's gross investment in 2012 is

A)$2,800.
B)$3,800.
C)$1,800.
D)$7,800.
E)$5,800.

Question 33

Use the figure below to answer the following questions.

Figure 20.1.1
Refer to Figure 20.1.1,which shows the circular flow of expenditure and income for Venus.During 2012,A was $100,B was $50,C was $30 and D was $10.What is aggregate income?

A)$25
B)$50
C)$75
D)$90
E)$100

Question 34

Use the figure below to answer the following questions.

Figure 20.1.1
Refer to Figure 20.1.1,which shows the circular flow of expenditure and income for Venus.During 2012,A was $100,B was $50,C was $30 and D was $10.How much is aggregate expenditure?

A)$50
B)$75
C)$90
D)$100
E)None of the above

Question 35

Capital in year 2012 equals capital in year 2011

A)minus depreciation.
B)plus net investment plus depreciation.
C)plus gross investment.
D)plus net investment.
E)plus net investment minus depreciation.

Question 36

How much would the production of a kayak add to GDP if the shell costs $250,the paint costs $20,the finisher costs $35,the manufacturer sold it to the dealer for $500,and the dealer sold it to his customer for $800?

A)$1,605
B)$1,300
C)$500
D)$305
E)$800

Question 37

Stock and bond sales are not included in GDP because they

A)do not occur in the year in which the production represented by them takes place.
B)represent corporate production.
C)represent indebtedness.
D)are not goods and services.
E)are not sold in the country in which they are produced.

Question 38

Which of the following would not be included in GDP for 2011?

A)A car produced in 2011 and held in inventory until 2012.
B)A car produced in 2011 and sold in 2012.
C)The value of all cars produced in 2011.
D)A car produced in January of 2011 and sold in November of 2011.
E)A car produced in 2010 and sold in 2011.

Question 39

Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500.At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1.Peter's capital at the beginning of 2012 is

A)$8,100.
B)$7,000.
C)$3,100.
D)$7,600.
E)$5,000.

Question 40

Intermediate goods are

A)sold to their ultimate user.
B)produced by one firm, bought by another firm, and used as a component of a final good or service.
C)included directly in the measure of GDP.
D)capital.
E)purchased this year but consumed in future years.

Question 41

Use the table below to answer the following questions.
Table 20.2.1
Data From Eastland

Refer to Table 20.2.1.From the data in the table,what is total income in Eastland?

A)$1,120
B)$1,180
C)$1,360
D)$1,420
E)$1,280

Question 42

Which of the following are equal to one another?
I.aggregate production
II.aggregate expenditure
III.aggregate income

A)I equals II, but I does not equal III.
B)I equals III, but I does not equal II.
C)II equals III, but II does not equal I.
D)III equals II, but III does not equal I
E)I equals II equals III.

Question 43

Suppose Mail Boxes Etc.buys a new copier for its store for $1,000.A year later,when the firm wants to upgrade to a new copier,it finds that the old copier is only worth $750.Over the year the copier was used,________ has occurred.

A)depreciation
B)demarcation
C)devaluation
D)denouement
E)disparity

Question 44

Use the table below to answer the following questions.
Table 20.2.2

Refer to Table 20.2.2.Gross domestic product equals

A)$3,050.
B)$3,150.
C)$3,400.
D)$5,600.
E)$5,050.

Question 45

A hypothetical economy produced four final goods during the year: plates,TVs,bicycles,and computers.Forty plates were produced and sold for $10 each.Five TVs were produced and sold for $300 each.Fifty bicycles were produced and sold for $100 each.Three computers were produced and sold for $750 each.With this information,one could determine

A)gross investment for this economy.
B)net investment for this economy.
C)indirect taxes less subsidies for this economy.
D)whether factors had been fully employed in this economy.
E)total income for this economy.

Question 46

Use the table below to answer the following questions.
Table 20.2.2

Refer to Table 20.2.2.Net domestic income at market prices equals

A)$3,050.
B)$3,150.
C)$3,400.
D)$4,650.
E)$2,650.

Question 47

To measure GDP,Statistics Canada uses

A)the expenditure approach.
B)the income approach.
C)the value-added approach.
D)only A and B.
E)A, B and C.

Question 48

The expenditure approach measures GDP by adding together

A)wages, salaries and supplementary labour income, and other factor incomes.
B)wages, salaries and supplementary labour income, other factor income, subsidies paid by the government, indirect taxes paid, and income of nonfarm unincorporated businesses.
C)compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and capital consumption expenditures, and by subtracting subsidies paid by the government.
D)the total expenditures of consumers, firms, net exporters, and by governments at all levels.
E)the total expenditures of consumers and firms.

Question 49

Use the table below to answer the following questions.
Table 20.2.1
Data From Eastland

Refer to Table 20.2.1.From the information given in the table,the value of gross domestic product is

A)$1,280.
B)$1,290.
C)$1,360.
D)$1,120.
E)$1,100.

Question 50

Use the table below to answer the following questions.
Table 20.2.1
Data From Eastland

Refer to Table 20.2.1.From the information given in the table,the value of net domestic income at factor cost is

A)$1,280.
B)$1,290.
C)$1,360.
D)$1,060.
E)$1,100.

Question 51

In the circular flow diagram,aggregate expenditure includes ________.

A)consumption expenditure, saving, investment and government expenditure
B)saving, investment, and taxes
C)consumption expenditure, investment, government expenditure, and exports
D)consumption expenditure, investment, government expenditure and net exports
E)government expenditure, transfer payments, and taxes

Question 52

Use the table below to answer the following questions.
Table 20.2.3

Refer to Table 20.2.3.Consider the economy represented in the table.GDP in this economy,in millions of dollars,is

A)$1,150,000
B)$850,000.
C)$1,350,000.
D)$1,050,000.
E)none of the above.

Question 53

Use the table below to answer the following questions.
Table 20.2.1
Data From Eastland

Refer to Table 20.2.1.From the data in the table,what additional data are needed to compute net domestic income at market prices?

A)statistical discrepancy
B)transfer payments
C)subsidies
D)depreciation
E)net taxes

Question 54

Which one of the following would be included in the calculation of GDP by the expenditure approach?

A)the purchase of 20 shares of a new issue of IBM stock
B)the purchase of an original eighteenth century work of art
C)the value of your brother's services when he mows the lawn for the family
D)the cost of adding a new kitchen to your house
E)the income you pay to your gardener

Question 55

The largest component of GDP using the expenditure approach is

A)investment
B)consumption expenditure
C)exports
D)government expenditure
E)imports

Question 56

A bakery uses flour to produce bread.
When calculating GDP,we include ________,because when we add the value of the flour to the value of the loaf of bread to calculate GDP,the result is ________.

A)only the value of the bread sold in a store;double counting
B)only the value of the flour used to produce the bread;double counting
C)both the value of the bread sold in a store and the value of the flour used to produce the bread;double counting
D)both the value of the bread sold in a store and the value of the flour used to produce the bread;the true value of the economy's output
E)none of the above

Question 57

The firm that printed your textbook bought the paper from XYZ Paper Mills.
This purchase of paper ________ part of GDP because the paper is ________ good.

A)is not;a final
B)is not;an intermediate
C)is;an intermediate
D)is;a final
E)is;a nonrenewable

Question 58

Suppose the economy of Econoworld produces only two goods,kayaks and birdseed.In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each.The value of nominal GDP for this year is

A)$20,000.
B)$300.
C)$20,300.
D)$23,000.
E)20 kayaks plus 10 bags of birdseed.

Question 59

Which one of the following is not an example of investment in the expenditure approach to measuring GDP? General Motors

A)buys a new auto stamping machine.
B)adds 500 new cars to inventories.
C)buys shares in another company.
D)builds another assembly plant.
E)replaces some worn-out stamping machines.

Question 60

Which of the following relationships is correct?

A)Gross Investment = Net Investment + Depreciation
B)Consumption expenditure = Net Investment - Depreciation
C)Net Investment = Gross Investment + Depreciation
D)Depreciation = Gross Investment - Consumption expenditure
E)Saving = Gross Investment - Taxes

Question 61

Real GDP will increase only if the

A)average level of prices rises.
B)quantity of goods and services produced increases.
C)unemployment rate rises.
D)employment rate rises.
E)employment rate falls.

Question 62

In recent history,real GDP has risen less rapidly than nominal GDP.This is because

A)the general price level fell.
B)capital increased.
C)the goal of zero population growth has been reached.
D)the general price level rose.
E)the level of population rose.

Question 63

Use the table below to answer the following questions.
Table 20.2.3

Refer to Table 20.2.3.Consider the economy represented in the table.Total income,in millions of dollars,is

A)$800,000.
B)$850,000.
C)$1,350,000.
D)$1,050,000.
E)none of the above.

Question 64

Use the table below to answer the following questions.
Table 20.2.4

Refer to Table 20.2.4.Gross domestic product is equal to

A)$2,400.
B)$1,920.
C)$2,150.
D)$1,940.
E)$2,350.

Question 65

To obtain the factor cost of a good from its market price

A)add indirect taxes and subtract subsidies.
B)subtract indirect taxes and add subsidies.
C)subtract both indirect taxes and subsidies.
D)add both indirect taxes and subsidies.
E)subtract depreciation.

Question 66

To derive net domestic income at market prices from gross domestic product,we

A)subtract gross investment from GDP.
B)subtract the statistical discrepancy from GDP.
C)add the statistical discrepancy to GDP.
D)subtract depreciation from GDP.
E)add depreciation to GDP.

Question 67

Use the table below to answer the following questions.
Table 20.2.4

Refer to Table 20.2.4.Net investment is equal to

A)$250.
B)$210.
C)$510.
D)$560.
E)$150.

Question 68

If you want to investigate the claim that more goods and services were produced in the economy during 2011 than 2012,what should you look at?

A)real GDP
B)nominal GDP
C)intermediate GDP
D)GDP calculated using the expenditure approach
E)either B or D

Question 69

Use the table below to answer the following questions.
Table 20.2.3

The sum of wages,salaries and supplementary labour income,and other factor incomes is

A)gross domestic product.
B)gross domestic income.
C)net domestic income at factor cost.
D)net domestic product.
E)total output of the economy.

Question 70

Use the table below to answer the following questions.
Table 20.2.3

Net domestic income at market prices can be derived by which one of the following? GDP (income approach)minus

A)taxes.
B)corporate profits.
C)subsidies.
D)consumption expenditure.
E)depreciation.

Question 71

Wages,salaries,and supplementary labour income are components of which approach to measuring GDP?

A)income approach
B)expenditure approach
C)injections approach
D)output approach
E)value-added approach

Question 72

If nominal GDP increased by 11 percent during a year while real GDP increased by only 5 percent,then the

A)price level decreased by 6 percent.
B)price level increased by 16 percent.
C)price level remained steady but real output fell by 6 percent.
D)unemployment rate fell during the year.
E)price level increased by 6 percent.

Question 73

Real GDP equals

A)nominal GDP minus the value of intermediate goods.
B)nominal GDP adjusted for the depreciation of capital.
C)the value of final goods and services produced in a given year when valued at the prices of a reference base year.
D)nominal GDP minus the value of goods exported to foreign countries.
E)nominal GDP minus the rate of inflation.

Question 74

Use the table below to answer the following questions.
Table 20.2.3

In the Canadian economy,market prices and factor costs would be the same except for

A)depreciation.
B)exports.
C)personal taxes.
D)indirect taxes and subsidies.
E)capital consumption.

Question 75

Use the table below to answer the following questions.
Table 20.2.4

Refer to Table 20.2.4.Gross investment is equal to

A)$460.
B)$260.
C)$400.
D)$560.
E)$250.

Question 76

Suppose in current dollar terms,GDP increased by approximately 7 percent between one period and the next,but real GDP fell by 2 percent.Which one of the following explanations is most likely?

A)Prices fell by 9 percent.
B)Prices fell by 2 percent.
C)Output rose by 2 percent.
D)Prices increased by 7 percent.
E)Prices increased by 9 percent.

Question 77

Use the table below to answer the following questions.
Table 20.2.4

Refer to Table 20.2.4.Net domestic income at market prices is equal to

A)$2,150.
B)$1,920.
C)$2,400.
D)$1,940.
E)$2,350.

Question 78

Which approach to measuring GDP is being used when Statistics Canada sums wages,salaries and supplementary labour income,and other factor incomes?

A)opportunity cost approach
B)expenditure approach
C)value-added approach
D)factor cost approach
E)income approach

Question 79

Which approach to measuring GDP is being used when Statistics Canada sums spending on goods and services for consumer goods,government,business investments and exports,net of imports?

A)value added
B)income
C)factor cost
D)expenditure
E)opportunity cost

Question 80

Use the table below to answer the following questions.
Table 20.2.3

Net domestic income at market prices equals

A)consumption expenditure plus government expenditure plus net exports plus investment.
B)consumption expenditure plus government expenditure plus exports plus personal taxes.
C)indirect business taxes plus personal income plus net exports.
D)all incomes plus indirect taxes minus subsidies.
E)all incomes minus depreciation.