Deck 8: Measures of Economic Activity

Question 1

When an economy's capital stock is expanding:

A)GNI, but not necessarily GDP, is rising
B)net exports is a positive amount
C)GNI exceeds GDP
D)GDP exceeds GNI
E)gross investment exceeds depreciation

Answer 1

E

Question 2

Which of the following is an intermediate product?

A)the purchase of gasoline for a holiday to Florida
B)the purchase of a pizza by a hungry student
C)the purchase of a family TV
D)the purchase of roller blades by a teacher
E)the purchase of pencils by a politician who is writing her memoirs

Answer 2

E

Question 3

Assume a manufacturer of stereo speakers purchases $40 worth of components for each speaker.The completed speaker sells for $70.The value added by the manufacturer for each speaker is:

A)$110
B)$30
C)$40
D)$70
E)-$40

Answer 3

B

Question 4

If Holmes pays Weiss $190,then:

A)we can say with certainty that GDP has increased by $190
B)we can say with certainty that GDP has increased, but we cannot determine the amount
C)we can say with certainty that GNI has increased, but we can't say whether GDP has increased or decreased
D)we need more information to determine whether GDP has changed or not
E)GDP and GNI have definitely stayed the same

Question 5

A nation's capital stock will decline when:

A)gross investment exceeds net investment
B)net investment is positive, but less than gross investment
C)gross investment exceeds depreciation
D)depreciation exceeds gross investment
E)gross investment is positive, but less than net investment

Question 6

BGF Corporation buys $100 000 of sand,rock,and cement to produce ready-to-mix concrete.It sells 10 000 cubic meters of concrete at $30 per cubic meter.The value added by BGF Corporation is:

A)$300 000
B)$100 000
C)$200 000
D)$500 000
E)$0

Question 7

Economists define investment to include:

A)any increase in business inventories
B)the addition of cash to a savings account
C)the purchase of common or preferred stock
D)the purchase of any durable good
E)the purchase of any non-durable good

Question 8

The term "final products" refers to:

A)products that are unsold and, therefore, added to inventories
B)products whose value has been adjusted for inflation
C)products to be purchased by ultimate users that are not intended for resale or further processing
D)consumer products, as opposed to investment products
E)investment products, as opposed to consumer products

Question 9

If intermediate goods and services were included in GDP,then:

A)GDP would not have to be adjusted for net exports
B)GNI would exceed GDP
C)GDP would be overstated
D)GDP would be understated
E)GDP would have to be adjusted for depreciation

Question 10

Which of the following is a final product?

A)diesel fuel bought for a delivery truck
B)a haircut
C)fertilizer purchased by a farm supplier
D)Prius windows purchased by a Toyota assembly plant
E)expenditures on stationery by an insurance company

Question 11

National income accountants can avoid double counting by:

A)including government transfer payments in their calculations
B)counting both intermediate and final products
C)counting only final products
D)counting only intermediate products
E)subtracting taxes from their calculations

Question 12

Which of the following is not considered to be part of gross investment?

A)the purchase of a lathe by the Ajax Manufacturing Company
B)the purchase of 100 shares of BMO by a retired business executive
C)the construction of a suburban housing project
D)the building of a nursery school
E)the increase in inventories by an auto company

Question 13

GDP may be defined as:

A)the monetary value of all final goods and services produced within a nation in a given year
B)GNI minus all non-income charges against output
C)the monetary value of the capital stock used in the production of a year's output
D)the monetary value of all goods and services, both final and intermediate, produced in a given year
E)the total monetary earnings of households supplying resources in the Canadian economy

Question 14

Suppose that the total market value of all final goods and services produced in a particular country in a given year is $500 billion,and the total market value of final goods and services sold is $450 billion.We can conclude that:

A)inventories have increased by $50 billion
B)GDP is $450 billion
C)GNI is $450 billion
D)inventories have fallen by $50 billion
E)GDP is $50 billion

Question 15

By adding up the dollar value of all sales in the economy during a given year,we would:

A)be determining the market value of all resources used in the production process
B)be measuring GNI
C)be determining value added for the economy
D)be measuring GDP
E)obtain a sum substantially larger than GDP

Question 16

GDP includes:

A)neither intermediate nor final products
B)both intermediate and final products
C)intermediate, but not final, products
D)final, but not intermediate, products
E)all natural resources

Question 17

"Value added" refers to:

A)any increase in GDP that has been adjusted for negative environmental effects
B)the excess of a country's exports over its imports
C)the excess of gross investment over net investment
D)the difference between GDP and GNI
E)the difference between the value of a business's output and the value of the resources that it has purchased from others

Question 18

In 1933,net investment was -$5.8 billion.This meant that:

A)gross investment exceeded depreciation by $5.8 billion
B)the economy's capital stock was expanding that year
C)the production of 1933's GDP used up more capital goods than were produced in that year
D)the economy produced no capital goods at all in 1933
E)the economy produced a negative amount of capital goods in 1933

Question 19

If depreciation exceeds gross investment,it can be concluded that:

A)GDP is rising, but GNI is declining
B)net investment is negative
C)the economy is importing more than it is exporting
D)the economy's capital stock is expanding
E)GNI is declining, but GDP is rising

Question 20

GDP can be calculated by adding:

A)consumption, gross investment, government purchases, exports, and imports
B)gross investment, government purchases, consumption, and net exports
C)consumption, net investment, wages, and rents
D)consumption, gross investment, government purchases, and imports
E)consumption, gross investment, government purchases, and exports

Question 21

In the treatment of Canadian exports and imports,national income accountants:

A)subtract exports, but add imports, in calculating GDP
B)subtract both exports and imports in calculating GDP
C)add both exports and imports in calculating GDP
D)add exports and ignore imports in calculating GDP
E)add exports, but subtract imports, in calculating GDP

Question 22

GDP tends to:

A)overstate economic well-being, because it does not include certain nonmarket activities such as the productive work of homemakers
B)understate economic well-being, because it includes expenditures to reduce or eliminate pollution
C)understate economic well-being, because it does not take into account increases in leisure
D)overstate economic well-being, because it does not reflect improvements in product quality
E)fairly reflect economic well-being at all times

Question 23

Gross investment refers to:

A)depreciation minus net investment
B)net investment minus depreciation
C)net investment after it has been adjusted for investment income paid to foreigners
D)net investment plus net exports
E)net investment plus depreciation

Question 24

Professor Shields grows tomatoes in her garden for her family and friends.This activity is:

A)excluded from GDP because it is not a productive activity
B)excluded from GDP to avoid double counting
C)excluded from GDP because an intermediate product is involved
D)included in GDP because it reflects production
E)excluded from GDP because no money changes hands

Question 25

The amount of after-tax income received by households is measured by:

A)GDP
B)personal consumption expenditures
C)GNI
D)GDP plus transfer payments
E)DI

Question 26

In 2010,the two countries with the top rankings using the Human Development Index were:

A)Saudi Arabia and Denmark
B)the United States and Japan
C)Norway and Australia
D)Sweden and Finland
E)Canada and Iceland

Question 27

The growth of GDP may understate economic well-being if the:

A)distribution of income becomes increasingly unequal
B)quality of products and services improves
C)environment deteriorates because of air pollution
D)population increases
E)amount of leisure decreases

Question 28

If,in a given year,gross investment was $120 billion and net investment was $65 billion,then the country's capital stock in that year:

A)may have either increased or decreased
B)increased by $65 billion
C)increased by $55 billion
D)decreased by $55 billion
E)decreased by $65 billion

Question 29

The value of Canadian imports is:

A)added to exports when calculating GDP, because imports indicate spending by Canadians
B)subtracted from exports when calculating GDP, because imports do not require spending by Canadians
C)subtracted from exports when calculating GDP, because imports do not involve production in Canada
D)added to exports when calculating GDP, because imports do not involve production in Canada
E)ignored when calculating GDP, since imports do not represent spending by Canadians

Question 30

In calculating GDP,national income accountants:

A)treat inventory changes as an adjustment to personal consumption expenditures
B)ignore inventories because they do not represent final products
C)subtract increases in inventories or add decreases in inventories
D)add increases in inventories or subtract decreases in inventories
E)subtract increases in inventories but ignore decreases in inventories

Question 31

In year 1,Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November of that year.The bicycle was sold to E.Z.Ryder in March of year 2.This bicycle is counted as:

A) consumption in year 1 and as negative investment in year 2
B) negative investment in year 1 and as investment in year 2
C) consumption in year 1 and as investment in year 2
D) investment in year 1 and as negative investment in year 2
E) investment in both year 1 and year 2

Question 32

An economy is enlarging its stock of capital goods:

A)when net investment exceeds gross investment
B)only when gross investment exceeds net investment
C)whenever gross investment is positive
D)when depreciation exceeds gross investment
E)when gross investment exceeds depreciation

Question 33

Which of the following best defines disposable income?

A)income received by households after payment of income taxes
B)the before-tax income received by households
C)all income earned by resource suppliers for their current contributions to production
D)the market value of the annual output of all final goods and services
E)the total income acquired by Canadians both within Canada and elsewhere

Question 34

If the size of the underground economy increases over time:

A)real GDP will rise more rapidly than per capita real GDP
B)GDP will increasingly tend to understate the level of output through time
C)GDP will increasingly tend to overstate the level of output through time
D)the accuracy of GDP will be unaffected through time
E)per capita real GDP will rise more rapidly than real GDP

Question 35

Real GDP measures:

A)current output in current dollars
B)current output in constant dollars from a given year
C)GDP per person in current dollars
D)GDP per person in constant dollars from a given year
E)current output adjusted to take account of price differences between countries

Question 36

Depreciation can be determined indirectly by:

A)adding income taxes to DI
B)subtracting net investment from gross investment
C)subtracting net investment from GDP
D)adding net investment to gross investment
E)subtracting net investment income to the rest of the world from GDP

Question 37

The Human Development Index does not incorporate which of the following statistics?

A)life expectancy at birth
B)average of years of schooling of the country's adult citizens
C)the expected years of schooling for children of school-going age
D)per capita GDP adjusted for purchasing power parity
E)the percentage of a country's population living in poverty

Question 38

Net exports may be defined as:

A)the portion of domestic products sent to other countries
B)exports plus imports
C)exports minus imports
D)imports minus exports
E)exports minus net investment income to the rest of the world

Question 39

The main difference between GDP and GNI is that GNI excludes:

A)net international income to the rest of the world
B)depreciation of fixed capital
C)transfer payments
D)government purchases
E)net exports