Question 1

The difference between Gross National Product and Net National Product is:&#10;A) Net national income&#10;B) Net property income from abroad&#10;C) Depreciation&#10;D) Appreciation

Accepted Answer

The difference between Gross National Product (GNP) and Net National Product (NNP) is depreciation. Depreciation accounts for the wear and tear on capital goods over time, and NNP is derived by subtracting depreciation from GNP to reflect the net production value after accounting for the loss in value of capital goods.

Question 2

To adjust &#34;market prices&#34; to &#34;factor cost&#34;:&#10;A) Add indirect taxes.&#10;B) Add subsidies.&#10;C) Deduct indirect taxes and deduct subsidies.&#10;D) Deduct indirect taxes and add subsidies.

Accepted Answer

To adjust market prices to factor cost, you need to deduct indirect taxes (since they increase the market price but do not contribute to the factor cost) and add subsidies (since they decrease the market price but do contribute to the factor cost).

Question 3

Real national income as opposed to nominal national income:&#10;A) Is adjusted for depreciation.&#10;B) Is adjusted for the number of people in the economy.&#10;C) Is adjusted for inflation.&#10;D) Is adjusted for the quality of the products.

Accepted Answer

Real national income is adjusted for inflation to reflect the true value of goods and services produced in an economy, allowing for comparisons over time by removing the effects of price changes.

Question 4

If the amount of Do It Yourself activity increases in an economy instead of employing others to do the work:&#10;A) National income will increase.&#10;B) The quality of life will necessarily be worse.&#10;C) National income falls.&#10;D) The economy is worse off.

Accepted Answer

When individuals engage in Do It Yourself (DIY) activities instead of hiring others, the transactions that would have been recorded as part of the national income do not occur. This leads to a decrease in the measured national income because the economic value of professional services that would have been paid for and included in national income calculations is replaced by unpaid personal effort.

Question 5

The real GDP per capita shows:&#10;A) The total income in the economy&#10;B) The average income in the economy per person adjusted for inflation&#10;C) The total wealth of the economy&#10;D) The average wealth in the economy

Accepted Answer

Real GDP per capita is a measure that divides the inflation-adjusted output of a country by its total population, providing an average income per person that accounts for changes in the price level, thus reflecting the average income in the economy per person adjusted for inflation.

Question 6

A higher GNP per capita must mean that the country's happiness has increased.

Accepted Answer

GNP per capita measures the economic output and income of a country per person, but it does not directly account for factors like happiness, well-being, or quality of life, which can be influenced by many other variables beyond economic performance.

Question 7

The bigger the Gini coefficient the more equal income distribution is.

Accepted Answer

The Gini coefficient measures income inequality, so a higher Gini coefficient indicates greater inequality, not more equal income distribution.

Question 8

The ______ curve shows the distribution of income within an economy.

Accepted Answer

The answer of The ______ curve shows the distribution of...

Question 9

There are ______ different ways of measuring national income.&#10;A) Two&#10;B) Three&#10;C) Four&#10;D) Five

Accepted Answer

There are three primary methods for measuring national income: the output (or production) method, the income method, and the expenditure method. Each approach offers a different perspective on the total economic activity within a country.

Question 10

Higher standards of living are not associated with increases in real income per capita.

Accepted Answer

Higher standards of living are typically associated with increases in real income per capita, as it allows individuals to afford more goods and services, improving their overall quality of life.

Question 11

To measure the distribution of income in the economy we can use the:&#10;A) Income curve&#10;B) PPF&#10;C) Distribution coefficient&#10;D) Lorenz curve

Accepted Answer

The answer of To measure the distribution of income in...

Deck 19: National Income and the Standard of Living