Question 1

Transfer payments are subtracted from national income to get to personal income.

Accepted Answer

The answer of Transfer payments are subtracted from national income...

Question 2

GNP minus depreciation is
A) GDP.
B) NNP.
C) retained earnings.
D) national income.

Accepted Answer

GNP minus depreciation is NNP (Net National Product). NNP represents the total income earned by the nationals of a country after deducting the depreciation cost of the fixed assets.

Question 3

Related to the Economics in Practice on p. 432: The National Income and Product Accounts (NIPAs) were originally developed for the Commerce Department
A) during the Reconstruction era following the Civil War.
B) during the era of the Great Depression in the 1930s.
C) at the onset of the Cold War in the 1950s.
D) during the 1970s following the public distrust of the government from the Watergate scandal.

Accepted Answer

The National Income and Product Accounts (NIPAs) were originally developed for the Commerce Department during the era of the Great Depression in the 1930s. The accounts were created in order to better understand and address the economic challenges of the time, and have since become an essential tool for measuring and analyzing the overall health of the US economy.

Question 4

If national income is $400 billion, personal income is $350 billion, personal taxes are $100 billion, then disposable income equals
A) $450 billion.
B) $300 billion.
C) $250 billion.
D) -$50 billion.

Accepted Answer

Disposable income is defined as personal income minus personal taxes. Therefore, disposable income = $350 billion - $100 billion = $250 billion.

Question 5

Related to the Economics in Practice on p. 427: If a Harley Davidson dealer in Chicago sells a newly manufactured Harley motorcycle on eBay to a customer in Tokyo, Japan, the value of the motorcycle is
A) counted in U.S. GDP.
B) counted in Japanese GDP.
C) counted in U.S. GDP and Japanese GNP.
D) not counted in U.S. GDP because it was sold to a foreign customer.

Accepted Answer

The motorcycle is produced in the U.S., so it is counted in U.S. GDP as an export.

Question 6

The percentage of disposable personal income that is saved is the
A) MPS.
B) personal investment rate.
C) MPC.
D) personal saving rate.

Accepted Answer

The personal saving rate is the percentage of disposable personal income that is saved. It reflects the portion of income that individuals are not spending on consumption and instead are saving for future expenses or investments. Therefore, choice D is the correct answer. MPS (marginal propensity to save) and MPC (marginal propensity to consume) are related to how individuals allocate their additional income between saving and spending, but do not directly measure the percentage of income being saved. Personal investment rate is not a common economic term and does not accurately reflect this concept.

Question 7

The total income of the country is
A) net national product.
B) personal income.
C) national income.
D) production income.

Accepted Answer

National income is the total income earned within a country's borders, including income earned by foreign-owned assets within the country. It includes all income earned by individuals, businesses, and the government.

Question 8

If personal saving is -$40 billion and disposable personal income is $430 billion, then personal consumption spending is
A) $40 billion.
B) $390 billion.
C) $410 billion.
D) $470 billion.

Accepted Answer

The answer of If personal saving is -$40 billion and...

Question 9

If investment is larger than depreciation, the capital stock decreases.

Accepted Answer

If investment is larger than depreciation, the capital stock increases.

Question 10

National income minus the amount of national income not going to households is
A) proprietor's income.
B) interest income.
C) personal income.
D) disposable income.

Accepted Answer

Personal income refers to the total amount of income going to the households or individuals before direct taxes. It includes all the income received by individuals from all sources, minus the earnings not received by them (such as retained earnings of corporations).

Question 11

If disposable personal income is $500 billion and personal saving is $15 billion, the personal saving rate is
A) 1.5%.
B) 3%.
C) 7.5%.
D) 15%.

Accepted Answer

Personal saving rate is calculated by dividing personal saving by disposable personal income and multiplying the result by 100.
Personal saving rate = (Personal Saving / Disposable Personal Income) x 100
= (15 / 500) x 100
= 3%

Question 12

Which of the following is added to personal income to get national income?
A) retained earnings
B) personal interest income
C) depreciation
D) personal taxes

Accepted Answer

Retained earnings are added back to personal income to calculate national income because they represent income that has been earned by corporations but not distributed to households. This adjustment ensures that all income generated within the economy is accounted for, regardless of its distribution.

Question 13

If the personal saving rate is 20% and personal saving is $20 billion, the value of personal disposable income is
A) $4 billion.
B) $20 billion.
C) $100 billion.
D) $400 billion.

Accepted Answer

The formula for personal saving rate is (personal saving/personal disposable income) * 100. If we rearrange the formula, we get personal disposable income = personal saving / (personal saving rate/100). Substituting the given values, we get personal disposable income = $20 billion / (20/100) = $100 billion. Therefore, the correct choice is C.

Question 14

If depreciation equals zero and retained earnings equal $25 billion, then
A) GNP is less than net national product by $25 billion.
B) GNP equals net national product.
C) net national product is less than GNP by $25 billion.
D) GNP is greater than GDP by $25 billion.

Accepted Answer

When depreciation equals zero, there is no difference between Gross National Product (GNP) and Net National Product (NNP), as depreciation is the adjustment needed to go from GNP to NNP. Retained earnings do not affect this relationship.

Question 15

Saving rates tend to rise during ________ and fall during ________.
A) boom times; expansions
B) recessions; expansions
C) boom times; recessions
D) recessions; contractions

Accepted Answer

During recessions, individuals and businesses are more likely to save as a precaution against economic uncertainty, whereas during expansions, confidence is higher, leading to increased spending and lower saving rates.

Question 16

If personal income is $700 billion and personal income taxes are $140 billion, the value of disposable personal income is
A) $560 billion.
B) $630 billion.
C) $640 billion.
D) $840 billion.

Accepted Answer

Disposable personal income is calculated by subtracting personal income taxes from personal income. Therefore, $700 billion - $140 billion = $560 billion.

Question 17

If GNP is $625 billion and depreciation is $125 billion, then net national product is
A) $5 billion.
B) $500 billion.
C) $700 billion.
D) $750 billion.

Accepted Answer

Net national product (NNP) = Gross national product (GNP) - Depreciation
NNP = $625 billion - $125 billion
NNP = $500 billion

Question 18

Related to the Economics in Practice on p. 432: The economist most closely associated with the development of the National Income and Product Accounts (NIPAs) is
A) John Maynard Keynes.
B) David Ricardo.
C) Simon Kuznets.
D) Alan Greenspan.

Accepted Answer

Simon Kuznets is widely credited with creating the framework for the NIPAs, which is used to measure the output and income of a country's economy. John Maynard Keynes and David Ricardo were both influential economists, but they did not directly contribute to the development of the NIPAs. Alan Greenspan was a prominent economist and former Chairman of the Federal Reserve, but he also did not play a direct role in the creation of the NIPAs.

Question 19

National income
A) is always less than personal income.
B) is always greater than personal income.
C) may be greater than or less than personal income.
D) will always equal personal income.

Accepted Answer

National income and personal income are different measures of income. National income includes all income earned by households, businesses, and the government in a country over a given period, while personal income only includes the income received by individuals. Therefore, national income may be greater than or less than personal income depending on the specific economic conditions and distribution of income within a country.

Question 20

Related to the Economics in Practice on p. 427: The value of the fees charged by eBay to sellers who use eBay is
A) counted in U.S. GDP.
B) only counted in U.S. GDP if the seller is in the U.S.
C) only counted in U.S. GDP if the product being sold is new.
D) never counted in U.S. GDP

Accepted Answer

The fees charged by eBay to sellers are considered a part of the value added by eBay to the economy and are included in U.S. GDP. This is because eBay is providing a service (the platform for sellers to sell their products) for which they charge a fee, and this fee contributes to the overall economic activity of the country. The location of the seller or the nature of the product being sold does not affect whether or not the fees are counted in U.S. GDP.

Quiz 21: Measuring National Output and National Income

Transfer payments are subtracted from national income to get to personal income.

GNP minus depreciation is

Related to the Economics in Practice on p. 432: The National Income and Product Accounts (NIPAs) were originally developed for the Commerce Department

If national income is $400 billion, personal income is $350 billion, personal taxes are $100 billion, then disposable income equals

Related to the Economics in Practice on p. 427: If a Harley Davidson dealer in Chicago sells a newly manufactured Harley motorcycle on eBay to a customer in Tokyo, Japan, the value of the motorcycle is

The percentage of disposable personal income that is saved is the

The total income of the country is

If personal saving is -$40 billion and disposable personal income is $430 billion, then personal consumption spending is

If investment is larger than depreciation, the capital stock decreases.

National income minus the amount of national income not going to households is

If disposable personal income is $500 billion and personal saving is $15 billion, the personal saving rate is

Which of the following is added to personal income to get national income?

If the personal saving rate is 20% and personal saving is $20 billion, the value of personal disposable income is

If depreciation equals zero and retained earnings equal $25 billion, then

Saving rates tend to rise during and fall during .

If personal income is $700 billion and personal income taxes are $140 billion, the value of disposable personal income is

If GNP is $625 billion and depreciation is $125 billion, then net national product is

Related to the Economics in Practice on p. 432: The economist most closely associated with the development of the National Income and Product Accounts (NIPAs) is

National income

Related to the Economics in Practice on p. 427: The value of the fees charged by eBay to sellers who use eBay is