Deck 3: Measuring the Economy 1: GDP and Economic Growth

Question 1

Refer to the above to answer this question.What is flow (2)?

A)Consumer goods and services.
B)Factor services.
C)Factor incomes.
D)Consumption.

Answer 1

Consumer goods and services.

Question 2

What is consumption?

A)The amount by which the capital stock is used up each year.
B)The amount by which the stock of consumer durables is used up each year.
C)The expenditure by households on goods and services.
D)The expenditure by firms on goods and services.

Answer 2

The expenditure by households on goods and services.

Question 3

Refer to the above to answer this question.What is flow (3)?

A)Consumer goods and services.
B)Factor services.
C)Factor incomes.
D)Consumption.

Answer 3

Factor services.

Question 4

Refer to the above to answer this question.What is flow (4)?

A)Consumer goods and services.
B)Factor services.
C)Factor incomes.
D)Consumption.

Question 5

What is an injection?

A)Any spending that is dependent on the current level of income.
B)Any flow of money that comes directly from financial intermediaries.
C)The flow of money that comes directly from the central bank.
D)Any spending that is not dependent on the current level of income.

Question 6

What is a leakage?

A)Income received within the circular flow that does not flow directly back.
B)Any spending that is dependent on the current level of income.
C)The total amount of income that goes to financial intermediaries.
D)Any spending that is not dependent on the current level of income.

Question 7

Which of the following is true in the factor market?

A)Businesses borrow funds from households.
B)Businesses sell resources to households.
C)Businesses buy consumer goods from households.
D)Businesses buy resources from households.

Question 8

What is the distinction between money and income?

A)They are synonymous.
B)Income is a stock concept and money is a flow concept.
C)Income is a flow concept and money is a stock concept.
D)Both can be used to purchase goods and services.

Question 9

What are the two basic markets shown by the simple circular flow model?

A)Capital goods and consumer goods.
B)Private and public goods.
C)Product and factor.
D)Household and business.
E)Competitive and monopolistic.

Question 10

All of the following,except one,are injections.Which is the exception?

A)Investment.
B)Taxes.
C)Exports.
D)Government purchases.

Question 11

What is income received within the circular flow which does not flow directly back to the business sector?

A)Dissavings.
B)Either investment or exports.
C)An injection.
D)A leakage.

Question 12

Which of the following are the earnings of factors of production expressed as an amount per period of time?

A)Money.
B)Income.
C)Either money or income.
D)Either money,income or investment.

Question 13

Refer to the above to answer this question.What is flow (1)?

A)Consumer goods and services.
B)Factor services.
C)Factor incomes.
D)Consumption.

Question 14

What is that portion of income which is not spent on consumption?

A)A leakage.
B)An injection.
C)Savings.
D)Dissavings.

Question 15

What is the product market?

A)The market for goods but not services.
B)The market for consumer goods and services.
C)The market for consumer goods and services and investment goods.
D)The market for consumer goods and services,investment goods and capital goods.

Question 16

What is the term for spending on new capital goods?

A)Consumer durables.
B)Investment.
C)Consumption.
D)Factor incomes.

Question 17

Which of the following is true of savings?

A)Savings occur for reasons similar to the reasons firms invest.
B)Savings take the form of money that is deposited with financial intermediaries.
C)Savings are defined as that portion of income which is not spent on consumption.
D)None of these.

Question 18

Which of the following is a medium of exchange which is widely accepted?

A)Money.
B)Income.
C)Either money or income.
D)Either money,income or investment.

Question 19

All of the following,except one,are examples of financial securities.Which is the exception?

A)A mortgage obtained from a bank.
B)A certificate of deposit.
C)A government bond.
D)An equity stock.

Question 20

What is the factor market?

A)The market for investment goods.
B)The market for investment goods and exports.
C)The market for consumer goods and services.
D)The market for factor services.

Question 21

All of the following,except one,are examples of a transfer payment.Which is the exception?

A)Income taxes.
B)Subsidies to business
C)Canadian pension payments.
D)Employment insurance benefits.

Question 22

Refer to the graph above to answer this question.What is flow (5)?

A)Imports.
B)Investment.
C)Exports.
D)Loanable funds.
E)Consumption.

Question 23

Refer to the graph above to answer this question.What is flow (9)?

A)Savings.
B)Imports.
C)Factor services.
D)Exports.

Question 24

Refer to the graph above to answer this question.What are flows (1)and (2)respectively?

A)Consumption expenditures and factor payments.
B)Consumption expenditures and goods and services.
C)Factor payments and factors.
D)Factor payments and goods and services.
E)Goods and services and consumption expenditures.

Question 25

What does the term final goods and services mean?

A)Those goods and services which are unsold and which are therefore added to inventories.
B)Those goods and services whose value has been adjusted for changes in the price level.
C)Those goods and services purchased by the ultimate consumer.
D)The value of all finished products.
E)The value of all goods and services produced minus the value of government services.

Question 26

Which of the following summations is GDP equal to?

A)C + Ig + G + Xn.
B)C + Ig + G - Xn.
C)C + In + G + Xn.
D)C - In - G - Xn.

Question 27

What is a transfer payment?

A)The payment made to convert one currency into another.
B)The transmission of money from one country to another.
C)The transfer of taxes from the private sector to the government.
D)A one-way transaction in which payment is made but no good or service flows back in return.

Question 28

What would be the result if intermediate goods and services were included in the calculation of GDP?

A)The GDP would have to be deflated by the inflation rate.
B)Real GDP would be greater than nominal GDP.
C)The GDP would be overstated.
D)The GDP would be understated.

Question 29

Refer to the graph above to answer this question.What is (8)?

A)Investment.
B)Savings.
C)Imports.
D)Financial intermediaries.

Question 30

All of the following,except one,are examples of investment.Which is the exception?

A)A graphic designer purchases new software.
B)A self-employed carpenter purchases tools for his trade.
C)A large auto factory purchases new machinery.
D)A mutual fund manager purchases additional stock of General Corporation.

Question 31

How is the GDP for Canada defined?

A)It is the value of all final goods and services produced in Canada in a given year.
B)It is the value of all goods and services produced by Canadians in a given year.
C)It is the value of all economic resources used in the production of a year's output.
D)It is the value of all goods and services,final and intermediate,produced in Canada in a given year.

Question 32

What is the value of production?

A)It always equals total expenditures.
B)At equilibrium,it equals total expenditures.
C)It equals C + I + X.
D)It depends on the rate of savings.
E)It is determined by inventory changes.

Question 33

How can GDP be calculated?

A)By adding together consumption,gross investment,government purchases,exports and imports.
B)By adding together gross investment,government purchases,consumption and net exports.
C)By adding together consumption,gross investment,wages and rents.
D)By adding together consumption,gross investment,government purchases,and subtracting imports.

Question 34

Refer to the graph above to answer this question.What is box (7)?

A)Exports.
B)Financial intermediaries.
C)Investments.
D)Savings.
E)Imports.

Question 35

All of the following,except one,are leakages.Which is the exception?

A)Savings.
B)Transfer payments.
C)Imports.
D)Taxes.

Question 36

Which of the following is true of aggregate expenditure?

A)It includes C,I,G and X but not IM.
B)It always equals Y.
C)It is the sum of all injections plus consumption.
D)It is equal to total income.

Question 37

Refer to the graph above to answer this question.What is flow (6)?

A)Exports.
B)Investments.
C)Savings.
D)Factor payments.

Question 38

Which of the following is a final good or service?

A)Fuel bought by a trucking company.
B)Fertilizer purchased by a farmer in Alberta.
C)A haircut.
D)The tires purchased by General Motors from Goodyear.
E)The shampoo purchased by a hairdresser for use in the shop.

Question 39

Under which circumstance will the level of national income expand?

A)If injections increase.
B)If savings expand.
C)If government spending is reduced.
D)If taxes increase.
E)None of these.

Question 40

Refer to the graph above to answer this question.What are flows (3)and (4)respectively?

A)Goods and services and factor payments.
B)Goods and services and factors.
C)Consumption expenditures and goods and services.
D)Goods and services and consumption expenditures.
E)Factor payments and factors.

Question 41

All of the following,except one,are considered investment.Which is the exception?

A)The purchase of a new brewing tank by a brewer.
B)The purchase of government bonds by an investment dealer.
C)The construction by a contractor of an irrigation ditch for a farm.
D)Residential construction.

Question 42

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of gross domestic product?

A)$354
B)$329
C)$349
D)$319

Question 43

What is the result if the inventory of goods grows from one year to the next?

A)Gross investment will exceed net investment by the amount of the inventory increase.
B)The value of the inventory at the end of the current year should be part of the year's GDP.
C)Inventories are not included in GDP since GDP measures only the value of goods and services actually sold in a year.
D)It will be necessary to add the additional inventory to aggregate expenditures to obtain this year's GDP.
E)It will be necessary to subtract the additional inventory to aggregate expenditures to obtain this year's GDP.

Question 44

In 2017 the Fancy Footwork Shoe Company delivered $1,000 worth of fancy shoes to a retail outlet.Only $200 worth were sold by the retail outlet in 2017.The remaining $800 worth of inventory,unsold in 2017,was eventually sold during 2018.What would the analysis of the national income accountants be?

A)The consumption in 2017 is $1,000.
B)The disinvestment in 2017 is $800 and consumption in 2017 is $200.
C)The consumption in 2018 is $800 and disinvestment in 2018 is $800.
D)The investment in 2017 is $200 and disinvestment in 2018 is $800.
E)The investment in 2017 is $800 and disinvestment in 2018 is $200.

Question 45

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of disposable income?

A)$210
B)$225
C)$220
D)$230
E)$215

Question 46

If the corporate gross profits of an economy are $47 (billions),corporate profits taxes are $18 and dividends are $12,what is the value of undistributed profits?

A)$17.
B)$41.
C)$53.
D)$77.

Question 47

Which of the following statements is relevant to the value of Canadian imports?

A)The imports figure is added to exports when calculating GDP because imports represent spending by Canadians.
B)The imports figure is subtracted from exports when calculating GDP because imports do not entail spending by Canadians.
C)The imports figure is subtracted from exports when calculating GDP because imports do not involve production activity in Canada.
D)The imports figure is added when calculating GDP because imports do not involve production activity in Canada.
E)The imports figure is added when calculating GDP,but subtracted when calculating GNP.

Question 48

What can be concluded if,in a certain year,net investment is minus $5.8 billion?

A)That gross investment exceeds depreciation by $5.8 billion.
B)That the economy is expanding.
C)That depreciation exceeds gross investment by $5.8 billion.
D)That the economy produced no capital goods at all in the year in question.
E)That more capital goods were produced than were used up in production.

Question 49

What does the term investment refer to as defined in national income accounting?

A)The spending by firms on new machinery and equipment.
B)The value of all construction.
C)The changes in business inventories from one year to the next.
D)The spending by firms on new machinery and equipment,the value of all construction,and the changes in business inventories from one year to the next.

Question 50

Use the data to answer this question.What is the value of X_N (net exports)? Net foreign factor income - 5
National income 275
Government spending on goods and services 85
Indirect taxes 40
Gross investment 70
Consumption 180
Depreciation 35

A)+ 10.
B)- 10.
C)+ 20.
D)+ 35.
E)- 45.

Question 51

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of personal income?

A)$280
B)$290
C)$275
D)$285
E)$270

Question 52

If in a given year gross investment is $95 billion and net investment is $40 billion,what has happened to the country's capital stock in that year?

A)It may have either increased or decreased.
B)It increased by $55 billion.
C)It decreased by $135 billion
D)It increased by $135 billion.
E)It increased by $40 billion.

Question 53

What can be concluded if depreciation is greater than gross investment?

A)That nominal GDP is rising but real GDP is remaining the same.
B)That net investment is negative.
C)That net investment is positive.
D)That the economy is expanding.
E)That real GDP is rising but nominal GDP is remaining the same.

Question 54

How are exports and imports treated when determining GDP?

A)Exports are subtracted,but imports are added.
B)Both exports and imports are subtracted.
C)Both exports and imports are added.
D)Exports are added,but imports are subtracted.
E)Only exports are considered.

Question 55

In calculating GDP,how do national income accountants treat inventories?

A)They ignore inventories since they want to measure only the value of goods actually sold during the year.
B)They ignore inventories because inventories do not represent final goods.
C)They subtract increases in inventories or add decreases in inventories.
D)They add increases in inventories or subtract decreases in inventories.
E)They include the value of inventories at the end of the accounting period.

Question 56

What does national income measure?

A)The value of a country's GDP expressed in "real" terms.
B)The after-tax income of all suppliers.
C)The total earnings of all the factors of production.
D)The total tax revenue received by the government.

Question 57

Use the data to answer this question.What is the value of national income?

A)304.
B)316.
C)338.
D)544.

Question 58

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of GDP?

A)$368
B)$382
C)$357
D)$377
E)$399

Question 59

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of national income?

A)$352
B)$339
C)$347
D)$322
E)$332

Question 60

What does the concept of net investment refer to?

A)The amount of capital stock used up in producing the current year's GDP.
B)The difference between the book value and the replacement value of all capital stock.
C)Gross investment less exported capital goods.
D)Total investment less the amount of capital goods used up in producing the year's output.
E)The amount of depreciation plus the amount of new investment during a given year.

Question 61

Below are some national income data:

Refer to the information above to answer this question.What is the value of depreciation?

A)$28
B)$64
C)$39
D)$53

Question 62

Below are some national income data:

Refer to the information above to answer this question.What is the value of personal consumption expenditures?

A)$230
B)$200
C)$270
D)$260

Question 63

Below is a national income statement for the economy:

Refer to the information above to answer this question.What is the value of Net Domestic Income at basic prices?

A)$427
B)$450
C)$471
D)$419
E)$439

Question 64

Below is a national income statement for the economy:

Refer to the national income statement above to answer this question.What is the value of national income?

A)$561
B)$573
C)$580
D)$530
E)$543

Question 65

Below is a national income statement for the economy:

Refer to the national income statement above to answer this question.What is the value of net investment?

A)$35
B)$65
C)$38
D)$62
E)It cannot be determined from the data given.

Question 66

Below is a national income statement for the economy:

Refer to the information above to answer this question.What is the value of net investment?

A)$12
B)$30
C)$42
D)$18
E)$74

Question 67

Below is a national income statement for the economy:

Refer to the information above to answer this question.What is the GDP for this economy?

A)$394
B)$438
C)$400
D)$540
E)$562

Question 68

Generally speaking,which of the following measures of aggregate output and income is usually the smallest?

A)National income.
B)Personal income.
C)Disposable income.
D)Gross domestic product.

Question 69

Below is a national income statement for the economy:

Refer to the information above to answer this question.What is the value of National Income?

A)$493
B)$439
C)$451
D)$460
E)$427

Question 70

Generally speaking,what is the smallest component of aggregate spending?

A)Net exports.
B)Investment.
C)Government purchases of goods and services.
D)Consumption.
E)Wages,interest,rents and profits.

Question 71

Below is a national income statement for the economy:

Refer to the information above to answer this question.What is the value of disposable income?

A)$353
B)$433
C)$331
D)$380
E)$363

Question 72

Which of the following best defines disposable income?

A)The after-tax income received by households.
B)The before-tax income received by households.
C)All income earned by resource suppliers from whatever source.
D)The money value of all final goods and services produced minus all sales taxes.
E)Consumption expenditures less personal savings.

Question 73

Below is a national income statement for the economy:

Refer to the national income statement above to answer this question.What is the gross domestic product for this economy?

A)$584
B)$592
C)$609
D)$636
E)$623

Question 74

What is the largest component of aggregate expenditures in a typical market economy?

A)Government purchases of goods and services.
B)Net exports.
C)Consumption.
D)Net investment.
E)Gross investment.

Question 75

Below are some national income data:

Refer to the information above to answer this question.What is the value of gross domestic product?

A)$375
B)$358
C)$351
D)$365

Question 76

In which of the following GDP statistics are government transfer payments included?

A)Personal income
B)GDP
C)GDI
D)National income
E)Transfer payments are excluded from all national income statistics.

Question 77

Below are some national income data:

Refer to the information above to answer this question.What is the figure for personal income?

A)$260
B)$220
C)$300
D)$280
E)It cannot be calculated

Question 78

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the value of national income?

A)$240
B)$282
C)$283
D)$230

Question 79

Below are some national income data:

Refer to the information above to answer this question.What is the value of Canadian imports?

A)$10
B)$3
C)$8
D)$20

Question 80

Below are some national income data (all figures in $ billions):

Refer to the information above to answer this question.What is the figure for personal income?

A)$253.
B)$197.
C)$240.
D)$230.
E)It cannot be calculated.