Question 1

Which of the following is included in "compensation of employees" part of the income approach to measuring GDP?
I. Wages and salaries.
II. Pension fund contributions.
III. Social security contributions.

Accepted Answer

Compensation of employees includes wages and salaries, pension fund contributions, and social security contributions as they are all forms of compensation provided to employees.

Question 2

The largest component of national income is

Accepted Answer

Compensation of employees includes wages, salaries, and benefits paid to workers, which typically make up the largest portion of national income in most countries. Rental income, corporate profits, and proprietors' income are also significant components of national income, but they do not typically exceed compensation of employees in terms of overall size.

Question 3

In the national income accounts,net interest is the total interest payments received by households on loans made by them minus

Accepted Answer

Net interest is calculated by subtracting the interest payments made by households on their own borrowing from the interest payments received by households on loans made by them. The other options are unrelated to the calculation of net interest.

Question 4

An indirect tax is a tax paid by consumers

Accepted Answer

Indirect taxes are taxes that are imposed on goods and services, which are then passed on to consumers as part of the cost of the product. Therefore, consumers pay the tax when they purchase goods and services.

Question 5

$$\begin{array} { | l | c | } 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Gross investment } & 1300 \
\hline \begin{array} { l } 
\text { Personal consumption } \
\text { expenditure }
\end{array} & 1475 \
\hline \text { Depreciation } & 25 \
\hline \begin{array} { l } 
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 1315 \
\hline \text { U.S. imports } & 260 \
\hline \text { U.S. exports } & 249 \
\hline \text { Compensation of employees } & 65 \
\hline
\end{array}$$
-The above table gives data for a hypothetical nation.Gross domestic product is

Accepted Answer

Gross domestic product (GDP) is the total value of goods and services produced within a country's borders. It is calculated as the sum of gross investment, personal consumption expenditure, government expenditure on goods and services, and net exports (exports minus imports). 
In this case, GDP = 1300 + 1475 + 25 + 1315 + (249 - 260) = $4,079 billion. Therefore, the correct answer is B.

Question 6

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Corporate profits}\
\hline \text {Net interest}\
\hline \text {Indirect taxes less subsidies}\
\hline \text {Depreciation}\
\hline \text {Compensation of employees}\
\hline \text {Proprietor's income}\
\hline \text {Rental income}\
\hline \text {Personal consumption}\
\text {expenditure}\
\hline \text {Government expenditure on}\
\text {goods and services}\
\hline \text {Net exports of goods and}\
 \text {services}\
\hline
\end{array}
\begin{array}{c|}
\hline\$ 200 \
\hline 150 \
\hline 230 \
\hline 250 \
\hline 1,350 \
\hline 150 \
\hline 70 \
\hline\
 1,400 \
\hline\
500 \
\hline\
40\
\hline
\end{array}
\end{array}$

-Using the data in the above table,net private domestic investment equals

Accepted Answer

The answer of \(\begin{array}{c}
\begin{array}{|l|}
\hline \text {Corporate profits}\
\hline \text {Net interest}\
\hline...

Question 7

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Corporate profits}\
\hline \text {Net interest}\
\hline \text {Indirect taxes less subsidies}\
\hline \text {Depreciation}\
\hline \text {Compensation of employees}\
\hline \text {Proprietor's income}\
\hline \text {Rental income}\
\hline \text {Personal consumption}\
\text {expenditure}\
\hline \text {Government expenditure on}\
\text {goods and services}\
\hline \text {Net exports of goods and}\
 \text {services}\
\hline
\end{array}
\begin{array}{c|}
\hline\$ 200 \
\hline 150 \
\hline 230 \
\hline 250 \
\hline 1,350 \
\hline 150 \
\hline 70 \
\hline\
 1,400 \
\hline\
500 \
\hline\
40\
\hline
\end{array}
\end{array}$

-Using the data in the table above,gross domestic product equals

Accepted Answer

GDP is calculated by adding up all the components of spending in the economy: C (personal consumption expenditures) + I (gross private domestic investment) + G (government spending) + Xn (net exports: exports - imports). Using the data in the table, we can calculate GDP as:

GDP = 1,350 + (200 - 150) + 230 + 250 + 1,400 + 150 + 70 + PC + 500 + (-40)

where PC is personal consumption expenditure. To solve for PC, we can rearrange the equation as:

PC = GDP - 1,350 - (200 - 150) - 230 - 250 - 1,400 - 150 - 70 - 500 + 40

PC = GDP - 3,210

Substituting back into the original equation:

GDP = 1,350 + (200 - 150) + 230 + 250 + 1,400 + 150 + 70 + (GDP - 3,210) + 500 - 40

Solving for GDP:

GDP = $2,400

Therefore, the correct answer is D.

Question 8

When calculating the compensation of employees part of GDP,

Accepted Answer

Social security contributions are considered part of employee compensation and should be included in the calculation of GDP. Fringe benefits are also part of employee compensation and should be included. Taxes withheld on earnings are not considered part of employee compensation and should not be included. The value of vacation time may or may not be included, depending on the accounting method used for calculating employee compensation.

Question 9

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Corporate profits}\
\hline \text {Net interest}\
\hline \text {Indirect taxes less subsidies}\
\hline \text {Depreciation}\
\hline \text {Compensation of employees}\
\hline \text {Proprietor's income}\
\hline \text {Rental income}\
\hline \text {Personal consumption}\
\text {expenditure}\
\hline \text {Government expenditure on}\
\text {goods and services}\
\hline \text {Net exports of goods and}\
 \text {services}\
\hline
\end{array}
\begin{array}{c|}
\hline\$ 200 \
\hline 150 \
\hline 230 \
\hline 250 \
\hline 1,350 \
\hline 150 \
\hline 70 \
\hline\
 1,400 \
\hline\
500 \
\hline\
40\
\hline
\end{array}
\end{array}$

-Using the data in the above table,gross private domestic investment equals

Accepted Answer

The answer of \(\begin{array}{c}
\begin{array}{|l|}
\hline \text {Corporate profits}\
\hline \text {Net interest}\
\hline...

Question 10

The presence of ________ creates a difference in the value between the market price and the factor cost of a product.

Accepted Answer

The presence of indirect taxes and subsidies creates a difference between the market price and the factor cost of a product. Indirect taxes increase the market price of a product, while subsidies decrease the factor cost of producing a product. This difference can result in either a higher or lower price for consumers, depending on the direction and magnitude of the taxes and subsidies.

Question 11

$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Item}\
\hline \text {Net interest}\
\hline \text {Government}\
\text {expenditure on goods}\
\text {and services}\
\hline \text {Compensation of}\
\text {employees}\
\hline \text {Rental income}\
\hline \text {Proprietors' income}\
\hline \text {Indirect taxes minus}\
\text {subsidies}\
\hline \text {Corporate profits}\
\hline \text {Exports of goods and}\
\text {services}\
\hline \text {Imports of goods and}\
\text {services}\
\hline \text {Depreciation}\
\hline
\end{array}
\begin{array}{c|}
\hline \text { Dollars } \
\hline 239 \
\hline\
 136 \
\
\hline\
 1,735 \
\hline 37 \
\hline 128 \
\hline\
 259 \
\hline 194 \
\hline\
 249 \
\hline\
 289 \
\hline 333 \
\hline
\end{array}
\end{array}$

-Using the data in the above table,gross domestic product as calculated by the income approach equals ________.

Accepted Answer

Gross Domestic Product (GDP) by the income approach is calculated by summing up all incomes in the economy, including wages, interest, rent, and profits. Without the specific data from the table, it's impossible to calculate or verify the exact figure. However, based on the information given in the question (though the table data is missing), the correct answer is chosen as per the instruction.

Question 12

An indirect tax is exemplified by

Accepted Answer

A sales tax is an example of an indirect tax as it is imposed on the seller but ultimately paid by the consumer in the form of higher prices. An income tax is a direct tax as it is imposed on the individual or entity that earns the income. A subsidy is a form of financial assistance from the government to support a particular industry or group and is not a tax.

Question 13

$\begin{array}{c}
\begin{array}{|l|}
\hline\
 \text {Item}\
\hline \text {Personal income}\
\hline \text {Net domestic income}\
\text { at factor cost}\
\hline \text {Government}\
\text {expenditure on goods}\
\text {and services}\
\hline \text {Depreciation}\
\hline \text {Gross private domestic}\
\text {investment}\
\hline \text {Indirect taxes}\
\hline \text {Subsidies}\
\hline 
\end{array}
\begin{array}{c|}
\hline\text { Billions of } \
\text { dollars }\
\hline 1,200 \
\hline\
 2,100 \
\hline\
 400 \
\
\hline 200 \
\hline\
 100 \
\hline 600 \
\hline 100\
\hline 
\end{array}
\end{array}$

-The above table shows some national income accounting data for a nation.In this nation,gross domestic product is equal to ________ billion.

Accepted Answer

The answer of \(\begin{array}{c}
\begin{array}{|l|}
\hline\
 \text {Item}\
\hline \text {Personal income}\
\hline \text...

Question 14

Rental income includes

Accepted Answer

Rental income includes both the payment for the use of land and the payment for the use of all rented inputs, such as buildings or equipment. While it is true that most houses are occupied by their owners, there are still many rental properties that generate rental income.

Question 15

Which of the following is included in the category of corporate profits when measuring GDP?
I. Profits paid as dividends.
II. Undistributed profits.
III. Income received by owners and operators of businesses.

Accepted Answer

Corporate profits, when measuring GDP, include both profits paid as dividends (I) and undistributed profits (II). Income received by owners and operators of businesses (III) is not categorized under corporate profits but rather under the income approach to GDP, specifically as part of proprietors' income.

Question 16

Compensation paid to employees represented ________ of GDP for the United States in 2012.

Accepted Answer

In 2012, compensation paid to employees in the United States represented more than 50 percent of GDP, as labor compensation typically constitutes a significant portion of GDP.

Question 17

The sum of compensation to employees,rental income,corporate profits,net interest,and proprietors' income is

Accepted Answer

The answer of The sum of compensation to employees,rental income,corporate...

Question 18

Which of the following best represents an indirect tax?

Accepted Answer

Sales taxes are considered an indirect tax because they are not directly applied to income or property, but rather added onto the price of goods and services.

Question 19

Looking at the components of the income approach we see that

Accepted Answer

The income approach to measuring Gross Domestic Product (GDP) primarily consists of various income components that together represent the total income earned in an economy. Among these components, compensation of employees (which includes wages, salaries, and benefits) is typically the largest category, reflecting the significant share of income that goes to labor in most economies.

Question 20

Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include

Accepted Answer

Valuing goods at market prices takes into account any indirect taxes (such as sales tax) that may have been imposed on the good, as well as any subsidies that may have been provided to the producer. In contrast, valuing goods at their factor costs only takes into account the direct costs of producing the good, such as wages and materials. Therefore, indirect taxes and subsidies are the main factors that differentiate the two methods of valuation.

Quiz 4: Measuring GDP and Economic Growth

Which of the following is included in "compensation of employees" part of the income approach to measuring GDP? I. Wages and salaries. II. Pension fund contributions. III. Social security contributions.