Question 1

Adding wages, interest, rent, and profits yields

Accepted Answer

The answer of Adding wages, interest, rent, and profits yields
...

Question 2

To calculate GDP using the income approach, one of the adjustments made to net domestic product at factor cost is to

Accepted Answer

One of the adjustments made to net domestic product at factor cost when using the income approach is to add depreciation, which is also known as the consumption of fixed capital. This is necessary because depreciation represents the amount of capital that has been used up during the production process and needs to be replaced, so it is considered a form of income to the owners of capital.

Question 3

Which of the following is true regarding the measurement of GDP?

Accepted Answer

The income approach to GDP includes wages and profit income.

Question 4

The sum of all the income categories listed in the National Income and Product Accounts adds up to

Accepted Answer

The answer of The sum of all the income categories...

Question 5

Spending on financial assets ________ counted as part of GDP ________.

Accepted Answer

Spending on financial assets, such as stocks and bonds, is not considered as part of GDP because their purchase does not result in the production of goods or services. GDP only measures the final value of goods and services produced in a country during a given time period.

Question 6

When measuring GDP by the income approach, wage income includes i) health-care insurance paid for by the firm for its employees.
Ii) Social Security contributions made by the firm.
Iii) wages paid during a worker's vacation time.

Accepted Answer

Wage income in GDP by the income approach includes all forms of compensation to employees, such as health-care insurance, Social Security contributions, and wages paid during vacation time.

Question 7

To measure GDP by using the income approach, we must add all incomes and then ________ depreciation and ________ net taxes less subsidies.

Accepted Answer

The answer of To measure GDP by using the income...

Question 8

Recently, the government made adjustments to how GDP is calculated that included placing software purchases into the category of

Accepted Answer

The government made adjustments to how GDP is calculated by placing software purchases into the category of investment, which now directly counts software purchases as part of GDP.

Question 9

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

Accepted Answer

The answer of When Jamie purchases a classic 1968 Plymouth...

Question 10

According to the income approach to measuring GDP, the largest income category is

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The answer of According to the income approach to measuring...

Question 11

The income approach to measuring GDP is based on summing

Accepted Answer

The income approach to measuring GDP is based on adding up the total amounts earned through factors of production, including wages, interest, rent, and profits.

Question 12

In 2009 in the United States, net domestic product at factor cost was $11,091 billion. Additionally, rent was $2,000 billion, profits were $1,000 billion, and interest was $358 billion. Hence wages were

Accepted Answer

Net domestic product at factor cost = wages + rent + profits + interest
$11,091 billion = wages + $2,000 billion + $1,000 billion + $358 billion
Wages = $11,091 billion - $2,000 billion - $1,000 billion - $358 billion
Wages = $7,733 billion

Question 13

Which of the following are included in interest income?
i. payments made for the use of land
ii. income paid to households for loans they make
iii. payments made by households for their borrowing

Accepted Answer

Interest income refers to income earned from lending money, such as interest earned on loans or bonds. Therefore, payments made for the use of land (i) and payments made by households for their borrowing (iii) are not considered interest income. Income paid to households for loans they make (ii) is considered interest income and is included in this category.

Question 14

After calculating net domestic product at factor cost, to calculate GDP using the income approach, in part we must add

Accepted Answer

The answer of After calculating net domestic product at factor...

Question 15

The income approach measures GDP by summing

Accepted Answer

The income approach measures GDP by adding up the incomes earned by households in the production of goods and services. This includes wages and salaries, rents, interest, and profits. Therefore, answer D- the incomes paid to households for the resources they own is the correct choice.

Question 16

Once the categories of income are totaled, the sum is called

Accepted Answer

The answer of Once the categories of income are totaled,...

Question 17

If the statistical discrepancy is zero, in order to calculate GDP from the value of net domestic product at factor cost, we must add

Accepted Answer

To calculate GDP from the value of net domestic product at factor cost, we need to add indirect taxes, subtract subsidies, and add depreciation. This is because GDP includes the value of final goods and services produced within a country, while net domestic product at factor cost only includes the value of goods and services produced by domestic factors of production. Indirect taxes are taxes on production and consumption that are included in the price of goods and services, while subsidies are payments made by the government to support production. Depreciation is the decrease in the value of capital goods over time and needs to be added back to arrive at the gross value of goods and services produced.

Question 18

One reason the total sum of the income categories does not equal GDP is that

Accepted Answer

GDP values goods and services at market prices, while the income approach values them at factor cost. This means that the income approach does not include indirect taxes or subsidies, which are included in market prices. Additionally, the income approach includes depreciation, which is not part of GDP. Therefore, the total income categories will not equal GDP.

Question 19

The category of "rent" in the income approach to GDP

Accepted Answer

The category of "rent" in the income approach to GDP includes the money paid to use land and other rented inputs, which includes renting apartments, machinery, and any other rented inputs. It does not include the imputed rent for owner-occupied housing, which is accounted for separately in the income approach.

Question 20

The purchase of 500 shares of Honda stock by the California State Employees' Pension fund

Accepted Answer

The purchase of stocks is considered a financial transaction and does not involve the production of goods or services, so it is not counted as part of GDP.

Quiz 14: Gdp: a Measure of Total Production and Income