Question 1

Real GDP measures:

Accepted Answer

A)   current output at current prices.
B)   current output at base year prices.
C)   base year output at current prices.
D)   base year output at current exchange rates.E) None of the above
F) All of the above

Question 2

GDP tends to underestimate the productive activity in the economy because it excludes:

Accepted Answer

A)   spending by the government on military goods.
B)   spending by businesses to reduce the level of pollution.
C)   the work done by construction companies to remodel homes.
D)   the personal labour time homeowners spend on home repairs.E) B) and C)
F) C) and D)

Question 3

In an economy, the total expenditures for a market basket of goods in year 1 (the base year)  was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?

Accepted Answer

A)   100
B)   110
C)   115
D)   120E) A) and B)
F) None of the above B

Question 4

Net investment refers to:

Accepted Answer

A)   the amount of machinery and equipment used up in producing GDP in a specific year.
B)   the difference between the market value and book value of outstanding capital stock.
C)   gross domestic investment less net exports.
D)   gross investment less consumption of fixed capital.E) A) and D)
F) A) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

A) True 
 B)False  True

Question 7

(GDP figures are in billions of dollars.) 
 
-Refer to the above table. What is the GDP price index in Year 1?

Accepted Answer

A)   105.2
B)   108.3
C)   109.6
D)   111.5E) B) and D)
F) B) and C)

Question 8

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:

Accepted Answer

A)   may have either increased or decreased.
B)   increased by $65 billion.
C)   increased by $55 billion.
D)   decreased by $55 billion.E) B) and C)
F) A) and B)

Question 9

-Refer to the above diagram. The base year used in determining the price indices for this economy:

Accepted Answer

A)   cannot be determined from the information given.
B)   is some year before 1992.
C)   is more recent than 1992.
D)   is 1992.E) B) and D)
F) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Refer to the information below. The capital consumption allowance: All figures are in billions of dollars.

Accepted Answer

A)   cannot be calculated.
B)   is $23.
C)   is $14.
D)   is $32.E) A) and B)
F) A) and C)

Question 12

-Refer to the above information. Negative net investment is occurring in:

Accepted Answer

A)   economy A only.
B)   economy B only.
C)   economy C only.
D)   economies A and B only.E) B) and C)
F) A) and D)

Question 13

Refer to the information below. The gross domestic product is: All figures are in billions of dollars.

Accepted Answer

A)   $326.
B)   $282.
C)   $309.
D)   $300.E) B) and C)
F) A) and D)

Question 14

By summing the values added at each stage in the production of some good we obtain:

Accepted Answer

A)   the price of that good.
B)   the total income generated by that good's production.
C)   the total cost (including profits)  of that product.
D)   all of the above.E) B) and C)
F) C) and D)

Question 15

Nominal GDP is:

Accepted Answer

A)   the sum of all monetary transactions which occur in the economy in a year.
B)   the sum of all monetary transactions involving final goods and services which occur in the economy in a year.
C)   the amount of production which occurs when the economy is operating at full employment.
D)   money GDP adjusted for inflation.E) A) and B)
F) None of the above B

Question 16

The ZZZ Corporation issued $25 million in new common stock in 2012. 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

A)   of $7 million has occurred.
B)   of $25 million has occurred.
C)   of $18 million has occurred.
D)   has not occurred.E) None of the above
F) All of the above

Question 17

Suppose nominal GDP was $360 billion in 2002 and $450 billion in 2012. The appropriate price index was 100 in 2002 and 120 in 2012. It can be concluded that between 2002 and 2012 real GDP:

Accepted Answer

A)   increased by about $15 billion.
B)   decreased by about $32 billion.
C)   increased by about $90 billion.
D)   increased by about $117 billion.E) A) and B)
F) B) and C)

Question 18

GDP excludes expenditures by:

Accepted Answer

A)   businesses on pollution control equipment.
B)   business for travel and entertainment.
C)   government on military hardware.
D)   consumers on used automobiles.E) A) and C)
F) B) and C)

Question 19

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

Accepted Answer

A)   $200,000.
B)   $100,000.
C)   $300,000.
D)   zero dollars.E) A) and B)
F) All of the above

Question 20

The smallest component of aggregate spending in Canada is:

Accepted Answer

A)   net exports.
B)   government purchases.
C)   investment.
D)   consumption.E) C) and D)
F) B) and C)

Exam 5: Measuring the Economys Output

Real GDP measures:

Correct AnswerverifiedShow Answer

GDP tends to underestimate the productive activity in the economy because it excludes:

Correct AnswerverifiedShow Answer

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?

Correct AnswerverifiedB

Net investment refers to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedTrue

(GDP figures are in billions of dollars.) -Refer to the above table. What is the GDP price index in Year 1?

Correct AnswerverifiedShow Answer

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:

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-Refer to the above diagram. The base year used in determining the price indices for this economy:

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

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Refer to the information below. The capital consumption allowance: All figures are in billions of dollars.

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-Refer to the above information. Negative net investment is occurring in:

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Refer to the information below. The gross domestic product is: All figures are in billions of dollars.

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By summing the values added at each stage in the production of some good we obtain:

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Nominal GDP is:

Correct AnswerverifiedB

The ZZZ Corporation issued $25 million in new common stock in 2012. 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:

Correct AnswerverifiedShow Answer

Suppose nominal GDP was $360 billion in 2002 and $450 billion in 2012. The appropriate price index was 100 in 2002 and 120 in 2012. It can be concluded that between 2002 and 2012 real GDP:

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GDP excludes expenditures by:

Correct AnswerverifiedShow Answer

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

Correct AnswerverifiedShow Answer

The smallest component of aggregate spending in Canada is:

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B

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True

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B

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