CHAPTER 5: MEASURING A NATION'S INCOME ...
CHAPTER 5: MEASURING A NATION’S INCOME Multiple Choice Identify the choice that best completes the statement or answers the question. 1. When GDP falls, a. income and expenditure must both fall. b. income and expenditure can both rise. c. income must fall, but expenditure may rise or fall. d. expenditure must fall, but income may rise or fall. 2. Income equals expenditure because a. firms always pay out all their revenue as income to someone. b. each time a sale is made, there is a buyer and a seller. c. households own the factors of production used to generate incomes. d. All of the above are correct. 3. If a province makes the production and sale of illicit drugs legal, then GDP a. must increase. b. must decrease. c. wouldn't change. d. may increase or decrease. 4. When a government provides subsidies to encourage growth of small businesses, the subsidies would a. be included in GDP because they are invested by businesses. b. be included in GDP because they are a form of government spending. c. not be included in GDP because they are transfer payments. d. may or may not be included in GDP, depending on how the funds are used. 5. Diesel fuel is a. always considered a final good. b. counted as an intermediate good if a company uses it to provide transportation services. c. counted as a final good if a farmer uses it to run a tractor to grow crops. d. Both b and c are correct. 6. Gross domestic product a. is the market value of all final goods and services produced within a country in a given period (usually a year) b. is the income in the hands of individuals after deducting income taxes; income available to households to spend and save c. is the value of goods and services purchased by all levels of government— federal, provincial, and local—in a given period d. is the market value of all final goods and services produced by permanent residents of a nation in a given time period 7. Macroeconomics is that branch of economics that studies a. the conditions of individual markets b. the influence of governments on individual markets c. economywide phenomena d. only the private sector of the economy 8. Suppose that nominal GDP is $6,000 billion and real GDP is $3,000. What is the GDP price deflator? a. 125 b. 150
c. d.
200 250
9. The purchase of final goods and services by households is called a. investment b. public sector expenditure c. consumption d. net exports 10. Investment is the purchase of capital equipment, inventories, and a. structures b. nondurable goods c. depreciation d. import investment 11. Transfer payments a. are included in GDP because they are forms of income b. are included in GDP because goods and services have been produced in the transfer c. are NOT included in the GDP because goods and services have not been produced in the transfer d. are included in GDP because they represent the production of transfers of goods and services to foreign countries 12. Which of the following would be considered consumption expenditure? a. The Smiths buy a home built in 1990. b. The federal government pays the salary of a captain in the Armed Forces. c. The Hostlers buy a new car that was manufactured in Germany. d. The government buys food for its armed forces. 13. The method that measures GDP in relationship to the size of the population is called a. GNP b. worker GDP c. GDP per person d. capital GDP 14. The components of GDP are a. C + I + G b. NX + G + C c. C + G + NX d. C + I + G + NX 15. Suppose nominal GDP is $7700 and the GDP deflator is 110. Real GDP is a. $7700 b. $7000 c. $847,000 d. $8470
1. A 2. B 3. A 4. C 5. B 6. A 7. C
8. C 9. C 10. A 11. C 12. C 13. C 14. D 15. B
c. d.
200 250
9. The purchase of final goods and services by households is called a. investment b. public sector expenditure c. consumption d. net exports 10. Investment is the purchase of capital equipment, inventories, and a. structures b. nondurable goods c. depreciation d. import investment 11. Transfer payments a. are included in GDP because they are forms of income b. are included in GDP because goods and services have been produced in the transfer c. are NOT included in the GDP because goods and services have not been produced in the transfer d. are included in GDP because they represent the production of transfers of goods and services to foreign countries 12. Which of the following would be considered consumption expenditure? a. The Smiths buy a home built in 1990. b. The federal government pays the salary of a captain in the Armed Forces. c. The Hostlers buy a new car that was manufactured in Germany. d. The government buys food for its armed forces. 13. The method that measures GDP in relationship to the size of the population is called a. GNP b. worker GDP c. GDP per person d. capital GDP 14. The components of GDP are a. C + I + G b. NX + G + C c. C + G + NX d. C + I + G + NX 15. Suppose nominal GDP is $7700 and the GDP deflator is 110. Real GDP is a. $7700 b. $7000 c. $847,000 d. $8470
1. A 2. B 3. A 4. C 5. B 6. A 7. C
8. C 9. C 10. A 11. C 12. C 13. C 14. D 15. B
