Question 1

In Canada in 2008, what percentage of GDP was consumption?

Accepted Answer

A)  45 percent
B)  56 percent
C)  65 percent
D)  75 percentE) All of the above
F) A) and C)

Question 2

How do nominal GDP and real GDP compare as gauges of economic well-being?

Accepted Answer

A)  Nominal GDP is a better gauge of economic well-being than is real GDP.
B)  Real GDP is a better gauge of economic well-being than is nominal GDP.
C)  Real GDP and nominal GDP are equally good measures of economic well-being.
D)  Whether real GDP or nominal GDP is a better measure of economic well-being depends on what sort of goods are produced.E) B) and D)
F) C) and D)

Question 3

Which of the following headlines would be most closely related to what macroeconomists study?

Accepted Answer

A)  Unemployment rate rises from 5 percent to 5.5 percent.
B)  The price of gold grows by 3.1 percent in the third quarter.
C)  The number of tourists visiting Canadian national parks has declined.
D)  The price of oranges rises after an early frost.E) B) and C)
F) All of the above

Question 4

Which of the following best describes real GDP?

Accepted Answer

A)  Real GDP evaluates current production at current prices.
B)  Real GDP evaluates current production at the prices that prevailed in some specific year in the past.
C)  Real GDP is not a valid measure of the economy's performance, since prices change from year to year.
D)  Real GDP is a measure of the value of goods only; hence, it excludes the value of services.E) None of the above
F) All of the above

Question 5

Table 5-2
 
-Refer to Table 5-2. What is the disposable personal income for this economy?

Accepted Answer

A)  $353
B)  $343
C)  $278
D)  $273E) A) and B)
F) A) and C)

Question 6

How is Canadian GNP calculated from Canadian GDP?

Accepted Answer

A)  by including income earned by foreigners in Canada and excluding income earned by Canadian citizens abroad
B)  by including income earned by Canadian citizens abroad and excluding income earned by foreigners in Canada
C)  by including income earned by foreigners in Canada
D)  by excluding income earned by Canadian citizens abroadE) A) and D)
F) A) and C)

Question 7

How is the value of housing service provided by the economy's stock of houses included in GDP?

Accepted Answer

A)  It is not included in GDP since it is not sold on the market.
B)  It is counted and is valued as the mortgage payment made on the house.
C)  It is counted and uses only the purchase price of the house in the year it is sold.
D)  It is counted and is based on an estimate of its rental value.E) None of the above
F) B) and C)

Question 8

George buys and lives in a newly constructed home he paid $200 000 for in 2010. He sells the house in 2011 for $225 000. How is GDP impacted?

Accepted Answer

A)  The 2011 sale increases 2011 GDP by $225 000 and does nothing to 2010 GDP.
B)  The 2011 sale increases 2011 GDP by $25 000 and does nothing to 2010 GDP.
C)  The 2011 sale does not increase 2011 GDP and does nothing to 2010 GDP.
D)  The 2011 sale increases 2011 GDP by $225 000, and 2010 GDP is revised upward by $25 000.E) A) and B)
F) None of the above

Question 9

In an economy consisting of only households and firms, how can GDP be computed?

Accepted Answer

A)  by adding up the total expenditures of households and subtracting savings
B)  by adding up the income paid by firms only in exchange for labour
C)  by adding up either total income paid by firms, or total expenditures of households, but not both
D)  by adding up both the total expenditures of households and total income paid by firmsE) B) and D)
F) None of the above

Question 10

Stephanie buys a designer dress produced by a Canadian-owned fashion shop in France. As a result, Canadian consumption increases. What happens as a result?

Accepted Answer

A)  Canadian net exports decrease, Canadian GNP increases, and French GDP is unaffected.
B)  Canadian net exports decrease, Canadian GDP increases, and Canadian GNP is unaffected.
C)  Canadian net exports decrease, Canadian GDP is unaffected, and Canadian GNP increases.
D)  Canadian net exports are unaffected, Canadian GDP is unaffected, and French GDP increases.E) A) and B)
F) All of the above

Question 11

How is gasoline treated in GDP terms?

Accepted Answer

A)  It is counted as an intermediate good.
B)  It is counted as a final good if a company uses it to provide transportation services.
C)  It is counted as a final good if a consumer uses it to mow her yard.
D)  It is counted as an intermediate good if a consumer uses it to mow a friend's yard without pay.E) A) and D)
F) None of the above

Question 12

Sally prepared her own meals during the first quarter of 2010, and then ate at restaurants every day in the second quarter of 2010. What is the impact on GDP of Sally's change of habit?

Accepted Answer

A)  It necessarily raises GDP.
B)  It necessarily reduces GDP.
C)  It raises GDP because the restaurant meals are more expensive.
D)  It has no impact on GDP.E) A) and D)
F) B) and C)

Question 13

Table 5-2
 
-Refer to Table 5-2. What is the NNP for this economy?

Accepted Answer

A)  $380
B)  $388
C)  $404
D)  $405E) None of the above
F) All of the above

Question 14

Which of the following is included in GDP?

Accepted Answer

A)  the sale of stocks and bonds
B)  the estimated rental value of owner-occupied housing
C)  unpaid production of goods and services at home
D)  the sale of an old piece of jewelleryE) A) and D)
F) All of the above

Question 15

In 2008, what were Canadian net exports?

Accepted Answer

A)  negative and about 10 percent the size of GDP
B)  negative and about 3 percent the size of GDP
C)  positive and about 1 percent the size of GDP
D)  positive and about 10 percent the size of GDPE) None of the above
F) A) and B)

Question 16

What is the relationship between a country's wealth and other measures of well-being such as life expectancy and literacy?

Accepted Answer

A)  In rich countries, people typically live into their late seventies, while in poor countries people typically live only until their fifties or early sixties.
B)  In rich countries, as well as in poor countries, most people can read.
C)  Poor countries tend to have higher infant mortality rates than do rich countries; therefore, population in poor countries increases at a lower rate.
D)  In rich countries income inequality is less than in poor countries.E) A) and B)
F) B) and C)

Question 17

What does the simple circular-flow diagram illustrate?

Accepted Answer

A)  that expenditure generates income so that income and the value of production are equal
B)  that the economy's income exceeds its expenditure
C)  that the expenditure of an economy exceeds its income
D)  that money "flows" from households to firms and not the other way aroundE) None of the above
F) A) and B)

Question 18

How is NNP calculated?

Accepted Answer

A)  by subtracting saving from the total income of citizens of a nation
B)  by subtracting business expenses and taxes from the total profits earned by citizens of a nation
C)  by subtracting depreciation from the total income of citizens of a nation
D)  by subtracting depreciation from the total profits earned by citizens of a nationE) A) and D)
F) None of the above

Question 19

Greg, a Canadian citizen, works only in the United States. How does the value added to production from his employment impact GDP and GNP?

Accepted Answer

A)  It is included in both Canadian GDP and Canadian GNP.
B)  It is included only in Canadian GDP.
C)  It is included only in Canadian GNP.
D)  It is not included in either Canadian GDP or Canadian GNP.E) A) and B)
F) A) and C)

Question 20

A wind farm in Manitoba buys a large turbine generator from a Swedish-owned factory located in Ontario that uses local workers. What happens as a result?

Accepted Answer

A)  Canadian investment, GDP, and GNP all increase by the same amount.
B)  Canadian investment increases, but GDP and GNP are unaffected by the purchase.
C)  Canadian investment and GDP increase by the same amount, but Canadian GNP increases by a smaller amount.
D)  Canadian investment and GNP increase by the same amount, but Canadian GDP increases by a smaller amount.E) A) and C)
F) B) and D)

Exam 5: Measuring a Nations Income

How is gasoline treated in GDP terms?

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Which of the following headlines would be most closely related to what macroeconomists study?

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Which of the following is included in GDP?

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Table 5-2 -Refer to Table 5-2. What is the NNP for this economy?

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Table 5-2 -Refer to Table 5-2. What is the disposable personal income for this economy?

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George buys and lives in a newly constructed home he paid $200 000 for in 2010. He sells the house in 2011 for $225 000. How is GDP impacted?

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How is Canadian GNP calculated from Canadian GDP?

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Greg, a Canadian citizen, works only in the United States. How does the value added to production from his employment impact GDP and GNP?

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How is the value of housing service provided by the economy's stock of houses included in GDP?

Correct AnswerverifiedShow Answer

A wind farm in Manitoba buys a large turbine generator from a Swedish-owned factory located in Ontario that uses local workers. What happens as a result?

Correct AnswerverifiedShow Answer

How do nominal GDP and real GDP compare as gauges of economic well-being?

Correct AnswerverifiedShow Answer

In an economy consisting of only households and firms, how can GDP be computed?

Correct AnswerverifiedShow Answer

In 2008, what were Canadian net exports?

Correct AnswerverifiedShow Answer

Stephanie buys a designer dress produced by a Canadian-owned fashion shop in France. As a result, Canadian consumption increases. What happens as a result?

Correct AnswerverifiedShow Answer

What is the relationship between a country's wealth and other measures of well-being such as life expectancy and literacy?

Correct AnswerverifiedShow Answer

In Canada in 2008, what percentage of GDP was consumption?

Correct AnswerverifiedShow Answer

How is NNP calculated?

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Sally prepared her own meals during the first quarter of 2010, and then ate at restaurants every day in the second quarter of 2010. What is the impact on GDP of Sally's change of habit?

Correct AnswerverifiedShow Answer

What does the simple circular-flow diagram illustrate?

Correct AnswerverifiedShow Answer

Which of the following best describes real GDP?

Correct AnswerverifiedShow Answer

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