Question 1

The value of U.S.imports is:

Accepted Answer

Imports are subtracted from GDP calculation because they do not constitute production in the United States. GDP is a measure of all final goods and services produced within a country's borders, and imports are already accounted for in the final prices of goods and services. Therefore, including them in GDP would result in double counting.

Question 2

The ZZZ Corporation issued $25 million in new common stock in 2013.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result,investment:

Accepted Answer

The issuance of new common stock is a financing activity and does not result in an investment. Therefore, the only investment that has occurred is the $18 million used to replace obsolete equipment in the factory.

Question 3

The smallest component of aggregate spending in the United States is:

Accepted Answer

Net exports (exports minus imports) typically make up a relatively small portion of aggregate spending in the United States compared to other components like consumption, investment, and government purchases.

Question 4

Suppose that inventories were $80 billion in 2012 and $70 billion in 2013.In 2013,national income accountants would:

Accepted Answer

The decrease in inventories from $80 billion in 2012 to $70 billion in 2013 indicates a reduction in inventory investment of $10 billion. To calculate total investment, this amount must be subtracted from other elements of investment, such as fixed investment, residential investment, and government investment. Therefore, the correct choice is to subtract $10 billion from other elements of investment in calculating total investment, which is represented by choice letter B.

Question 5

In calculating the GDP,national income accountants:

Accepted Answer

National income accountants add increases in inventories or subtract decreases in inventories to calculate GDP. This is because changes in inventories represent goods produced but not yet sold, and therefore are a part of the final goods and services produced during the year.

Question 6

Transfer payments are:

Accepted Answer

Transfer payments are payments made by the government to individuals or other entities without receiving any good or service in return. Therefore, they do not reflect current production and are not included in the calculation of GDP.

Question 7

In calculating GDP,governmental transfer payments,such as Social Security or unemployment compensation,are:

Accepted Answer

Governmental transfer payments, such as Social Security or unemployment compensation, are not counted in GDP calculations because they do not represent payment for the production of goods or services.

Question 8

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array}{llcc}
  \text {Personal Taxes  } &\$40  \
 \text {  Social Security Contributions} &15\
 \text {Taxes on Production and Imports  } &20\
 \text {Corporate Income Taxes  } &40\
 \text { Transfer Payments } &22\
 \text { U.S. Exports } &24\
  \text {Undistributed Corporate Profits  } &35  \
 \text {Government Purchases  } &90\
 \text { Gross Private Domestic Investment } &75\
 \text { U.S. Imports  } &22\
 \text {Personal Consumption Expenditures  } &250\
 \text {Consumption of Fixed Capital  } &25\
 \text { Net Foreign Factor Income } &10\
 \text {Statistical Discrepancy  } &0\
\end{array}$
 Refer to the data.NDP is:

Accepted Answer

NDP (Net Domestic Product) is calculated by subtracting Depreciation from the Gross Domestic Product (GDP). In the given data, the GDP is $463 and the Depreciation is $71. Therefore, NDP= $463 - $71 = $392. Hence, the correct choice is C.

Question 9

Government purchases include government spending on:

Accepted Answer

Government purchases include government spending on both government consumption goods (such as office equipment, supplies, and salaries for government employees) and public capital goods (such as roads, bridges, and public buildings). Transfer payments, such as social security and welfare, are not considered government purchases as they are meant to redistribute income rather than to directly purchase goods or services.

Question 10

In the treatment of U.S.exports and imports,national income accountants:

Accepted Answer

In calculating GDP, national income accountants add the value of exported goods and services, since they are produced within the country and contribute to the domestic economy. On the other hand, imports represent goods and services produced outside the country and therefore don't contribute to the domestic economy. Thus, imports are subtracted from GDP while exports are added, which is done to arrive at the net exports figure. Therefore, the best choice is D - add exports, but subtract imports, in calculating GDP.

Question 11

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion.GDP in year 2 is:

Accepted Answer

GDP in year 2 would be the sum of all expenditures, which includes consumption (assumed to be unchanged), investment (which includes business inventories), government spending, and net exports. Since all other components of expenditure remained the same in year 2 except for the increase in business inventories by $10 billion, GDP in year 2 would be $200 billion (year 1 GDP) + $10 billion (increase in business inventories) = $210 billion.

Question 12

Suppose that inventories were $40 billion in 2012 and $50 billion in 2013.In 2013,national income accountants would:

Accepted Answer

The increase in inventories represents an increase in investment, specifically in the category of "change in private inventories". Therefore, national income accountants would add the $10 billion increase in inventories to other elements of investment in calculating total investment.

Question 13

If the economy adds to its inventory of goods during some year:

Accepted Answer

The amount of inventory increase should be included in calculating that year's GDP as it represents the production of goods that have been produced but not yet sold. This counts as a part of the final output of the economy and is therefore included in GDP.

Question 14

Answer the question on the basis of the following data.All figures are in billions of dollars: $\begin{array}{llcc}
  \text {Government Purchases  } &\$15  \
 \text {Consumption  } &90\
 \text { Gross Investment } &20\
 \text {  Consumption of Fixed Capital} &5\
 \text {  Exports} &8\
 \text { Imports } &12\
\end{array}$
  Refer to the data.NDP (net domestic product)is:

Accepted Answer

NDP is calculated as GDP minus the consumption of fixed capital (depreciation). GDP = Government Purchases + Consumption + Gross Investment + (Exports - Imports) = 15 + 90 + 20 + (8 - 12) = 121. NDP = GDP - Consumption of Fixed Capital = 121 - 5 = 116.

Question 15

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion.GDP in year 2 is:

Accepted Answer

The formula for calculating GDP is GDP = C + I + G + NX, where C represents consumption, I represents investment, G represents government spending, and NX represents net exports. In this scenario, all components except for investment (business inventories) remained the same. Therefore, GDP in year 2 would be $190 billion ($200 billion in year 1 minus $10 billion decrease in business inventories).

Question 16

In national income accounting,government purchases include:

Accepted Answer

Government purchases in national income accounting include purchases made by all levels of government: federal, state, and local. This includes purchases of goods and services for consumption and public capital goods. Government transfer payments are not included in government purchases.

Question 17

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array}{llcc}
  \text {Personal Taxes  } &\$40  \
 \text {  Social Security Contributions} &15\
 \text {Taxes on Production and Imports  } &20\
 \text {Corporate Income Taxes  } &40\
 \text { Transfer Payments } &22\
 \text { U.S. Exports } &24\
  \text {Undistributed Corporate Profits  } &35  \
 \text {Government Purchases  } &90\
 \text { Gross Private Domestic Investment } &75\
 \text { U.S. Imports  } &22\
 \text {Personal Consumption Expenditures  } &250\
 \text {Consumption of Fixed Capital  } &25\
 \text { Net Foreign Factor Income } &10\
 \text {Statistical Discrepancy  } &0\
\end{array}$
 Refer to the data.NI is:

Accepted Answer

The answer of Answer the question on the basis of...

Question 18

Answer the question on the basis of the following data.All figures are in billions of dollars. $\begin{array}{llcc}
  \text {Personal Taxes  } &\$40  \
 \text {  Social Security Contributions} &15\
 \text {Taxes on Production and Imports  } &20\
 \text {Corporate Income Taxes  } &40\
 \text { Transfer Payments } &22\
 \text { U.S. Exports } &24\
  \text {Undistributed Corporate Profits  } &35  \
 \text {Government Purchases  } &90\
 \text { Gross Private Domestic Investment } &75\
 \text { U.S. Imports  } &22\
 \text {Personal Consumption Expenditures  } &250\
 \text {Consumption of Fixed Capital  } &25\
 \text { Net Foreign Factor Income } &10\
 \text {Statistical Discrepancy  } &0\
\end{array}$
 Refer to the data.GDP is:

Accepted Answer

The answer of Answer the question on the basis of...

Question 19

Answer the question on the basis of the following data.All figures are in billions of dollars: $\begin{array}{llcc}
  \text {Government Purchases  } &\$15  \
 \text {Consumption  } &90\
 \text { Gross Investment } &20\
 \text {  Consumption of Fixed Capital} &5\
 \text {  Exports} &8\
 \text { Imports } &12\
\end{array}$
 Refer to the data.GDP is:

Accepted Answer

GDP is calculated as: Government Purchases + Consumption + Gross Investment + (Exports - Imports) = 15 + 90 + 20 + (8 - 12) = 121 billion dollars.

Question 20

The largest component of total expenditures in the United States is:

Accepted Answer

Consumption is the largest component of total expenditures in the United States, accounting for approximately 70% of GDP. Net exports, government purchases, and gross investment make up the remaining 30%.

Quiz 26: Measuring Domestic Output and National Income

The value of U.S.imports is:

The ZZZ Corporation issued $25 million in new common stock in 2013.It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans.As a result,investment:

The smallest component of aggregate spending in the United States is:

Suppose that inventories were $80 billion in 2012 and $70 billion in 2013.In 2013,national income accountants would:

In calculating the GDP,national income accountants:

Transfer payments are:

In calculating GDP,governmental transfer payments,such as Social Security or unemployment compensation,are:

Government purchases include government spending on:

In the treatment of U.S.exports and imports,national income accountants:

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion.GDP in year 2 is:

Suppose that inventories were $40 billion in 2012 and $50 billion in 2013.In 2013,national income accountants would:

If the economy adds to its inventory of goods during some year:

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion.GDP in year 2 is:

In national income accounting,government purchases include:

The largest component of total expenditures in the United States is: