Question 1

Net exports of goods and services are equal to the value of
A)domestic consumption minus the value of exports.
B)domestic consumption minus the value of imports.
C)exports plus the value of imports.
D)imports minus the value of exports.
E)exports minus the value of imports.

Accepted Answer

Net exports of goods and services represent the difference between the value of a country's exports and its imports. Therefore, the correct formula is exports minus imports, which corresponds to choice E.

Question 2

Which of the following is included as investment in GDP?
i.Cars produced during the year but unsold at the end of the year.
Ii New capital equipment produced and purchased during the year.
iii.Purchases of a company's shares and bonds.
A)i and ii
B)i,ii and iii
C)iii only
D)i only
E)ii only

Accepted Answer

Investment in GDP includes both i and ii but not iii. Unsold cars produced during the year are considered as inventory investment and new capital equipment produced and purchased during the year is considered as fixed investment. Purchases of a company's shares and bonds are not considered as investment in GDP as they do not involve the production of new goods or services.

Question 3

Government expenditures on goods and services include i.the local Library's purchase of new books.
Ii)ACT's road maintenance.
Iii)the State of Victoria's payment of wages to correctional service officers.
A)i and iii
B)i only
C)i,ii and iii
D)i and ii
E)ii and iii

Accepted Answer

All three options represent government expenditures on goods and services. The local library's purchase of new books represents a purchase of goods, while ACT's road maintenance and the State of Victoria's payment of wages to correctional service officers represent purchases of services. Therefore, all three options fall under government expenditures on goods and services.

Question 4

In measuring GDP,which of the following is included?
A)The value of shares and bonds bought and sold.
B)The value of preparing meals at home.
C)The value of increases in business inventories.
D)The value of used goods when they are sold.
E)The value of durable consumption goods but not the value of nondurable consumption goods.

Accepted Answer

Increases in business inventories are included in GDP because it represents a production activity.

Answer: D 
 The value of used goods when they are sold is included in GDP because it represents a transaction that adds to the economy's output.

A, B, and E are not included in GDP because they do not represent new production activities. The value of shares and bonds bought and sold (A) are financial transactions and not part of the production of goods and services. The value of preparing meals at home (B) is not included in GDP because it is not a market transaction and does not involve the production of goods and services for sale. The value of durable consumption goods but not the value of nondurable consumption goods (E) is incorrect because both durable and nondurable consumption goods are included in GDP.

Question 5

The purchase of iron ore by China is classified in Australian GDP accounts as
A)import expenditure.
B)investment expenditure.
C)export expenditure.
D)consumption expenditure.
E)government expenditure.

Accepted Answer

The purchase of iron ore by China from Australia is considered export expenditure in Australian GDP accounts, as it involves the sale of goods to a foreign country.

Question 6

Gross domestic product equals
A)Y = C + I + G - NX.
B)Y = C + I + G + NX.
C)Y = C - I + G + NX.
D)Y = C - I - G - NX.
E)Y = C + I - G + NX.

Accepted Answer

GDP is the sum of consumption, investment, government spending, and net exports, so the correct formula is Y = C + I + G + NX.

Question 7

If a firm does not sell all of the goods it produces in a given time period,then the goods
A)do not count in GDP for that time period but always count next period.
B)count in GDP in the period they are sold to the final user.
C)count positively in GDP as inventory investment.
D)count negatively in GDP as inventory investment.
E)do not count in GDP ever.

Accepted Answer

Unsold goods are counted as inventory investment in GDP for the period they are produced, contributing positively to GDP.

Question 8

If last year net exports of goods and services was negative.This means that
A)there was an error made when calculating net exports of goods and services.
B)consumption expenditure plus investment was less than the value of exports plus the value of imports.
C)consumption expenditure plus investment plus government expenditures on goods and services was less than the value of exports plus the value of imports.
D)the value of exports was less than the value of imports.
E)the value of exports was greater than the value of imports.

Accepted Answer

A negative net exports value means that the value of exports is less than the value of imports, indicating a trade deficit. This could be due to various reasons such as a strong domestic demand for foreign goods or a weak foreign demand for domestic goods.

Question 9

Australia's net exports include
A)the sale of BHP-Billiton shares on the ASX.
B)sales of iron ore to China.
C)Honda automobiles produced and sold in Japan.
D)the sale of state government securities to Australian citizens.
E)the production of Koala Bear teddies in China that are sold in China.

Accepted Answer

Net exports refer to the value of a country's exports minus the value of its imports. Therefore, only option B, which involves the sale of iron ore to China, constitutes a net export. The other options involve either the sale of shares (which does not involve physical goods), the sale of goods produced abroad, or the sale of domestic securities.

Question 10

In calculating GDP,we must
A)add the value of the goods produced outside of Australia by local firms.
B)add the market value of imports and subtract the market value of exports.
C)add the market value of exports and subtract the market value of imports.
D)exclude net exports of goods and services (NX).
E)subtract the market value of imports,because these goods are produced in a country other than Australia,and subtract the market value of exports,because these goods are consumed in a country other than Australia.

Accepted Answer

GDP measures the total value of all goods and services produced within a country's borders. Adding the market value of exports accounts for domestically produced goods sold abroad, while subtracting the market value of imports adjusts for goods produced outside the country but consumed domestically, ensuring only the value of domestic production is included in GDP.

Question 11

Last year in Candamica,consumption expenditure was $20 billion,interest,rent and profit were $2.5 billion,government expenditure on goods and services was $7 billion,net exports of goods and services was $5 billion,and investment was $2 billion.Hence total expenditure was
A)$34 billion.
B)$36.5 billion.
C)$34.5 billion.
D)$24.5 billion.
E)Unable to be determine without information about imports.

Accepted Answer

Total expenditure is calculated by summing consumption expenditure, government expenditure, net exports, and investment: $20 billion + $7 billion + $5 billion + $2 billion = $34 billion.

Question 12

Investment is the expenditure done by
A)the rest of the world.
B)firms.
C)governments.
D)savers.
E)Both answers A and B are correct.

Accepted Answer

The answer of Investment is the expenditure done by
A)the rest...

Question 13

Economists define investment to include purchases of
A)capital goods,such as tools,instruments and buildings.
B)capital goods,equity stocks and bonds.
C)capital goods,equity stocks and inventories.
D)capital goods and inventories.
E)capital goods,household durable goods and inventories.

Accepted Answer

The answer of Economists define investment to include purchases of
A)capital...

Question 14

Investment is defined as the purchase of
A)financial assets and inventories only.
B)new capital goods but not additions to inventories.
C)any financial asset only.
D)additions to inventories only.
E)new capital goods and additions to inventories.

Accepted Answer

Investment refers to the purchase of new capital goods and additions to inventories. Financial assets alone are not considered investment unless they are being used to purchase new capital goods or add to inventories. Choice E covers both of these categories.

Question 15

Net exports of goods and services are defined as the
A)value of exports minus the income we receive from foreigners.
B)income we receive from selling goods to foreigners.
C)value of exports plus the income we receive from foreigners.
D)value of the goods we sell to foreigners.
E)value of exports minus the value of imports.

Accepted Answer

Net exports of goods and services are calculated by subtracting the value of imports from the value of exports. Therefore, option E is the correct choice as it represents the definition of net exports.

Question 16

Kelly's Surf Shop orders 5,000 new surfboards at the beginning of the year but only sells 4,500 by the end of the year.How are the 500 unsold surfboards accounted for in gross domestic product?
A)They will be included in the government spending category of GDP.
B)They will be included in the durable consumption category of GDP.
C)They will be included in the inventory investment category of GDP.
D)They will be included in the nondurable consumption category of GDP.
E)They will be included in the residential investment category of GDP.

Accepted Answer

The unsold surfboards are considered part of the inventory investment category of GDP because they are goods produced but not yet sold, and are therefore counted as a part of the business's inventory.

Question 17

Consumption goods and services include
A)pensions provided by the government.
B)new homes and existing homes (as long as improvements have been made to the existing home).
C)new and used textbooks as long as they are sold via stores or online.
D)washing machines and tickets to NRL games.
E)None of the above.

Accepted Answer

Consumption goods are tangible items that are used up or bought for personal use. Washing machines and tickets to NRL games are tangible items that are bought for personal use and therefore are classified as consumption goods. Options A, B, and C are not consumption goods as they do not involve the purchase of tangible items for personal use. Pensions provided by the government are a form of income and not a tangible item. New homes and existing homes (as long as improvements have been made to the existing home) are considered investment goods as they are not used up in the short term. New and used textbooks may be classified as investment goods if they are purchased for education or career purposes. Therefore, the only option that fits the definition of consumption goods is D.

Question 18

When measuring GDP,
A)only the federal government's expenditure on goods and services is included.
B)the government sector is counted,and the value of the government sector in GDP is equal to its tax revenue.
C)the expenditure on goods and services by all levels of government are included.
D)the government sector is not included because it is the public sector not the private sector.
E)the government sector is not counted because it does not produce goods and services.

Accepted Answer

GDP includes the expenditure on goods and services by all levels of government, not just the federal government. This includes spending on public goods like infrastructure, healthcare, education, and defense. Tax revenue is not equivalent to the value of the government sector in GDP, as taxes may be used for transfer payments or debt servicing rather than direct expenditure on goods and services.

Question 19

Investment includes
A)Harvey Norman's purchase of camera surveillance in all stores.
B)student purchases of laptops.
C)your purchases of shares in BHP-Billiton.
D)wages paid to police officers.
E)the local Library's purchase of new books.

Accepted Answer

Investment in economic terms refers to the purchase of goods that will be used for future production. Harvey Norman's purchase of camera surveillance is an investment as it is a capital expenditure intended to improve store operations.

Question 20

Which of the following expenditure components of GDP can be negative or positive?
A)Investment
B)Government expenditure on goods and services
C)Consumption expenditure
D)Net exports of goods and services
E)None of the above because expenditure can never be negative.

Accepted Answer

Net exports of goods and services can be negative if a country imports more than it exports, resulting in a trade deficit.

Quiz 5: Gdp: a Measure of Total Production and Income

Net exports of goods and services are equal to the value of

Which of the following is included as investment in GDP? i.Cars produced during the year but unsold at the end of the year. Ii New capital equipment produced and purchased during the year. iii.Purchases of a company's shares and bonds.

Government expenditures on goods and services include i.the local Library's purchase of new books. Ii) ACT's road maintenance. Iii) the State of Victoria's payment of wages to correctional service officers.

In measuring GDP,which of the following is included?

The purchase of iron ore by China is classified in Australian GDP accounts as

Gross domestic product equals

If a firm does not sell all of the goods it produces in a given time period,then the goods

If last year net exports of goods and services was negative.This means that

Australia's net exports include

In calculating GDP,we must

Last year in Candamica,consumption expenditure was $20 billion,interest,rent and profit were $2.5 billion,government expenditure on goods and services was $7 billion,net exports of goods and services was $5 billion,and investment was $2 billion.Hence total expenditure was

Investment is the expenditure done by

Economists define investment to include purchases of

Investment is defined as the purchase of

Net exports of goods and services are defined as the

Kelly's Surf Shop orders 5,000 new surfboards at the beginning of the year but only sells 4,500 by the end of the year.How are the 500 unsold surfboards accounted for in gross domestic product?

Consumption goods and services include

When measuring GDP,

Investment includes

Which of the following expenditure components of GDP can be negative or positive?