Question 1

To calculate the real GDP, Statistics Canada has started to consider both the quantities and prices in the base year and the following year and then average the two.

Accepted Answer

Statistics Canada uses the chain Fisher volume index method, which averages the quantities and prices of the base year and the following year to calculate real GDP.

Question 2

The current GDP price index used by Statistics Canada is referred to as the chain-weighted index, because by using both the previous year prices and current prices it links each year to the prior year.

Accepted Answer

The statement correctly describes the chain-weighted index used by Statistics Canada.

Question 3

In an economy, the value of inventories fell by $50 billion from Year 1 to Year 2.In calculating total investment for Year 2, national income accountants would increase it by $50 billion.

Accepted Answer

The decrease in inventories is a component of investment, but it represents a reduction in investment rather than an increase. Therefore, national income accountants would subtract $50 billion from investment for Year 2 rather than adding it.

Question 4

The before-tax income received by resource suppliers is measured by disposable income.

Accepted Answer

The before-tax income received by resource suppliers is measured by national income, not disposable income. Disposable income is the income that individuals or households have available after paying taxes and transfers.

Question 5

A nation's gross domestic product (GDP):

Accepted Answer

GDP is the dollar value of the total output produced within the borders of the nation.

Question 6

A price index is 100 times the ratio of real GDP to nominal GDP.

Accepted Answer

A price index is 100 times the ratio of nominal GDP to real GDP, not the other way around.

Question 7

The purchase of Wal-Mart stock is a part of gross, but not of net, private domestic investment.

Accepted Answer

The purchase of Wal-Mart stock is a financial transaction and does not count as either gross or net private domestic investment, which involves spending on physical capital.

Question 8

If nominal GDP is 150 and the GDP price index is 200, real GDP is 75.

Accepted Answer

Real GDP is calculated by dividing nominal GDP by the GDP price index and then multiplying by 100. In this case, (150/200) x 100 = 75. Therefore, real GDP is 75.

Question 9

Exports are subtracted from imports in calculating Canadian GDP because exports are not available for domestic consumption.

Accepted Answer

Exports are actually added to GDP as they represent goods and services produced within a country that are sold to other countries. Imports are subtracted from GDP as they represent goods and services produced in other countries that are consumed within the country.

Question 10

Gross private domestic investment exceeds depreciation in an economy experiencing expanding production capacity.

Accepted Answer

When gross private domestic investment exceeds depreciation, it means that there is an increase in the capital stock of an economy. This indicates that the economy is able to produce more goods and services, indicating an expanding production capacity. Therefore, the statement is true.

Question 11

Government purchases include expenditures for social capital such as schools and highways that have long lifetimes.

Accepted Answer

Government purchases do include expenditures for social capital such as schools and highways that have long lifetimes.

Question 12

If real GDP is 50 and nominal GDP is 100, the GDP price index is 200.

Accepted Answer

The GDP price index is calculated by dividing the nominal GDP by the real GDP and then multiplying by 100. So, (100 / 50) * 100 = 200.

Question 13

Suppose the total market value of all final goods and services produced in a particular country is $600 billion and the total market value of final goods and services sold is $525 billion in 2020.We can conclude that:

Accepted Answer

GDP measures the total market value of all final goods and services produced within a country in a given period, regardless of whether they are sold or not. Therefore, GDP is $600 billion.

Question 14

Durable goods are products with expected lives of less than three years.

Accepted Answer

Durable goods are products with expected lives of more than three years. Examples of durable goods include appliances, furniture, and electronics.

Question 15

In an economy, the value of inventories rose from $275 billion in 2020 to $300 billion in 2021.In calculating the total investment for 2021, national income accountants would increase it by $25 billion.

Accepted Answer

The value of inventories is included in the investment component of national income accounting. Therefore, the increase in inventory value by $25 billion in 2021 would be considered an increase in investment and would be added to the total investment for the year.

Question 16

All expenditures on new construction are included as investment in calculating GDP.

Accepted Answer

All expenditures on new construction, such as building new homes, office buildings, and factories, are included in the calculation of investment and therefore included in the calculation of GDP.

Question 17

Interest on the public debt is included as a part of government purchases in determining GDP by the expenditures method.

Accepted Answer

Interest on the public debt is not a part of government purchases, but rather a transfer payment, and is not included in the calculation of GDP by the expenditures method.

Question 18

The GDP is the:

Accepted Answer

The GDP (Gross Domestic Product) is defined as the monetary value of all final goods and services produced within a nation's borders in a particular year. This excludes intermediate goods used in production and only includes final goods consumed by households, businesses, and government.

Question 19

Gross domestic product (GDP) measures and reports output:

Accepted Answer

GDP measures and reports output in dollar amounts.

Question 20

Welfare payments to families with dependent children are included in GDP.

Accepted Answer

Welfare payments are considered transfer payments and are not included in GDP because they do not reflect the production of goods or services.

Quiz 7: B: Measuring the Economys Output