GDP PDF

Measuring Domestic Output and National Income 584! &x5 CBA %5 ,51 25 35.. -...

Measuring Domestic Output and National Income 584! &x5 CBA %5 ,51 25 35.. - -dis'd1 1. national income accounting measure the economy’s overall performance. The primary measure of economic performance and output is a GDP (AGGREGATE OUTPUT). -11 &if I & re 2. GDP is the total market (monetary) value of all final goods and services & 1 /s -519 - E in produced within the country at certain period time. - - cod * - 3. To measure GDP only the final goods are included but we must ignore the Si (015Si S1v) - : intermediate goods. This process called avoiding multiple measures (double counting). S. m 4. Final goods are those which purchased by final (ultimate) users, but & os ! I'l final Intermediate goods are goods that are used to produce final goods. = 5. Another way to avoid multiple measures we can take only the value added at each transaction of intermediate or final goods in the GDP - %% s &I 6. Value added equal the firm output minus the purchased input from outside the firm. * 7. The GDP exclude nonproduction transaction that don’t create products or * services. For more contact 66943036 economic and finance instructor 1  %S. 11 /19 Measuring Domestic Output and National Income CBA ED 8. O Two types of nonproduction transactions. FDP /11 &↑ Saves 1. Financial transaction public transfer payment like unemployment &164 lis - (5) compensation …. And private transfer payment likes cash gifts. And stock & j- - market transactions (selling the stocks and bond) & 5 eyei GDP & · 15/ 5400elsos 2. Secondhand sales. such as used cars. &. I S , 2 4619. , sid , - 1. A nation's gross domestic product (GDP) S, 11 , > = O A. is the dollar value (monetary value) of all final output produced within the borders - of the nation during a specific period of time. can be found by summing C + Ig + G + Xn. Market B. is the dollar - - value of all final output produced by its citizens, regardless of where they are living. X- ⑮ C. can be found by summing C + In + S + Xn. D. is always some amount less than C + Ig + G + Xn. wh 2. Suppose the total monetary value of all final goods and services produced in a - particular country in 2015 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude. produced A. GDP in 2015 is $450 billion. B. NDP in 2015 is $450 billion. GDP = Tos C. GDP in 2015 is $500 billion. & D. inventories in 2015 fell by $50 billion. · siis 3. National income accountants can avoid multiple counting by - A. including transfer payments in their calculations. OB. only counting final goods. or - value C. counting both intermediate and final goods. added D. only counting intermediate goods. - 4. By summing the dollar value of all market transactions in the economy, we would A. determine the market value of all resources used in the production process. GDP - -S B. obtain a sum substantially larger & - than the GDP. FDP 11 % C. determine value added for the economy. I D. measure GDP. &, 5.eds Final 5. Final goods and services refer to A. goods and services that are unsold and therefore added to inventories. B. goods and services whose value has been adjusted for changes in the price level. C. goods and services purchased by ultimate users, rather than for resale or further O processing. D. the excess of U.S. exports over U.S. imports. - 50 For more contact 66943036 economic and finance instructor w , 2  & Te Final Measuring Domestic Output and National Income 9. EDP -I CBA 6. If intermediate goods and services were included in GDP, - &I A. the GDP would be overstated. - O - B. the GDP would then have to be deflated for changes in the price level. C. nominal GDP would exceed real GDP. D. the GDP would be understated. 7. Which of the following is a final good or service? * O - A. a haircut purchased by a father for his 12-year-old son · sid B. fertilizer purchased by a farm supplier C. diesel fuel bought for a delivery truck D. Chevrolet windows purchased by a General Motors assembly plant - = 8. Assume that a manufacturer of stereo speakers - => 80 purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is intermediat A. $110.* final- B. $30. & output-input C. $40. -40 = 30 D. $70. Fo S ! 2, 9. Tom grows fruits and vegetables for home consumption. This activity is - - A. excluded from GDP in order to avoid double counting. B. excluded from GDP because an intermediate good is involved. O C. productive but is excluded - e from GDP because no market transaction occurs. D. included in GDP because it reflects production. - 10. Arthur sells $100 - worth of cotton to Bob. o -O Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that - - she sells to Donita for $700. Donita sells the dresses for $1,200 - to kids attending the prom. The total contribution to GDP of this series of transactions is balneadded final · 100 & A. $1,200. B. $500. C. $2,300. D. $1,100. ① - > Tou - 200 700 500 - = O D- 1200 - 11. Which of the following transactions would be included in GDP? 1200 L A. Mary buys a used book for $5 at a garage sale. E B. Nick buys $5,000 worth of stock in Microsoft. - C. Olivia receives a tax refund of $500. D. & Peter buys a newly constructed house. is E goo For more contact 66943036 economic and finance instructor 3 Measuring Domestic Output and National Income CBA i/ output-input 12. Value added can be determined by A. summing the profits of all enterprises in the economy. O B. subtracting the purchase of intermediate products from the value of the sales of final products. => - C. calculating the year-to-year changes in real GDP. D. deflating nominal GDP. : Ts Two methods or approaches to measure the GDP -41 1. Expenditure approach (output approach) I519 2. Income approach or allocations, earning approach. S = · 1. expenditure approach. ↑ 3 = & Wan A. Consumption (personal consumption) (C) is all spending in consuming goods (durable or non-durable) and services I os -- i B. Gross private domestic Investment. (Ig) inflow of capital 28 -F - i u - 1) Investment equal residential and nonresidential construction + purchase of -Xi je machinery, equipment and tools +change in inventory. j41Id DeP 2) Net investment equal gross investment minus consumption of capital - (Depreciation or outflow of capital). 19-Depyo-19-In % -10 ⑳ In = Ig Dep In + Ind = 197 Dep 3) When gross investment exceed depreciation. Economy experienced positive · 24 - & net investment and growth. production capacity expanding - 19 < Dep Ind 4) When gross investment less than depreciation. Economy experienced negative net investment and shrinking, production capacity decrease, disinvestment. E & g! Inf T For more contact 66943036 economic and finance instructor 4  Measuring Domestic Output and National Income CBA #sep Inre 5) When an economy has gross investment equal depreciation it said to be -i stationary production capacity. ⑲ 6) The investment used in GDP is gross private domestic investment. Ig. -98 -9 - C. Government purchase or government spending (G) all government > expenditures on goods or services consumption goods or public goods. * export FDP - - /19 D. Net export (Xn) = exports (X) minus imports (M) import FDP J 21, 39 1 X ↑ · The GDP = C +Ig + G +Xn Consumption Investment Government Net export - purchase C Ig G Xn joo , y signed Spending by spending by the Spending by Spending by the households firms government foreigners In = 19-Dep 13. The concept of net domestic investment refers to Dep A. the amount of machinery and equipment used up in producing the GDP in a specific year. - * B. the difference between the market value and book value of outstanding capital > stock. 19-Dep C. gross domestic investment less net exports. D. total investment less the amount of investment goods used up in producing the O year's output. b = espe For more contact 66943036 economic and finance instructor 5  Measuring Domestic Output and National Income Dep > #9 CBA -G In 19-Dep = 14. If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that A. nominal GDP is rising but real GDP is declining. -821 O B. net investment is negative. economy's stock of capital is shrinking. & C. the economy is importing more than it exports. D. the economy's production capacity is expanding. & 15. When an economy's production capacity is expanding, enlarging A. nominal GDP, but not necessarily real GDP, is rising. B. net exports is always a positive amount. - C. DI exceeds PI. IND-19) Dep D. gross domestic investment exceeds depreciation. & - In = 65 IG 16. If in some year gross investment was $120 billion and net investment was $65 In - = billion, then in that year the country's capital stock A. may have either increased or decreased. - 4 F B. increased by $65 billion. - & Int C. increased by $55 billion. O D. decreased by $55 billion. expanding &+ 17. In national income accounting, the consumption category of expenditures includes purchases of A. both new and used consumer goods. B. consumer durable - - goods, consumer nondurable goods, and services. Like - # automobiles for personal use but not houses. X C. consumer durable - and nondurable - goods but not services. - D. consumer nondurable goods and services but not consumer durable goods. 18. Net exports are Xn = - export-import A. that portion of consumption and investment goods sent to other countries. B. exports plus imports. i m > X O C. exports less imports. are negative when a nation's imports exceed its exports D. imports less exports. JORDXX - M 19. Which of the following is not - economic investment? A. the purchase of a new* drill press by the Ajax Manufacturing Company OB. the purchase of 100 shares of AT&T by a retired business executive - C. construction of a suburban housing project - D. the piling up of inventories on a grocer's shelf j-na--G) => 4)-- = --- For more contact 66943036 economic and finance instructor 6  Measuring Domestic Output and National Income CBA 20. Which of the following do national income accountants consider to be - investment? Gnsumption A. the purchase of an automobile for private, nonbusiness use -4 - S B. the purchase of a new house. Any increase in business inventories. C. the purchase of corporate bonds Orstock - - D. the purchase of gold coins By FDP = 200 -I v = 19. - Decrease 21. 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 O - - increased by $10 billion. GDP in year 2 is A. $180 billion. 10 = 210 B. $190 billion EDP = 200 + C. $200 billion. O D. $210 billion. * %y-1 22. In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are A. & not counted. B. counted as investment spending. C. counted as government spending. D. counted as consumption spending. O 23. The largest component of total expenditures in the United States is A. net exports. B. government purchases. &C. consumption. The smallest is XN D. gross investment. , -5221- 24. Government purchases include government spending on 5& i Is ⑨ A. government consumption F goods and public capital goods. purchases by federal, state, and local governments. B. government consumption goods only. =T j C. public capital goods only. D. government consumption goods, public capital goods, and transfer payments. Ev 25. The ZZZ Corporation issued - $25 million in new common stock in 2016. 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 - A. of $7 million occurred. B. of $25 million occurred. C. of $18 million occurred. O -25 D. has not occurred. - · %1Dopment repay lon S For more contact 66943036 economic and finance instructor 7 Measuring Domestic Output and National Income CBA i & 1. GDP = C+ Ig+ G + Xn. NDP + Dep GDP = 2. NDP = GDP – DEP. - > - Dep = FDP-NDP ggissia >Do CISD-IFFE 3. NI =NDP - S. D+ NFFI. - = - - · S S.. 4. PI = NI – indirect business tax (Tax on production) – social security’s C I T = - P contribution – corporate income tax – undistributed profit + &transfer -Je 59. 75 [ payment.. S S & 5. DI = PI – PIT…. DI=C+S GDP: gross domestic product NDP: net domestic product 5 -12 DEP: depreciation (consumption of fixed NI: national income capital. 851541 S.D: statistical discrepancy NFFI: net foreign factor income - Is idl & ⑤ se Mis PI: personal income (income received earned or DI: disposable income unearned) %z ima PT: personal tax NFFI =income received – income ↑ payment Ex For more contact 66943036 economic and finance instructor 8 Measuring Domestic Output and National Income CBA 2. Income approach national income equal 1. Compensation of employees (wages). The largest 2. Rent. To landlords or landowners. 3. Profit. To entrepreneur it includes proprietors' income + corporate profit. ❖ Corporate profit equal dividends +corporate income tax + undistributed profit. 4. Interest. To capital goods and loaned money 5. Tax on production and imports (indirect business tax). national income is the total income of the domestic resources. Plus tax on production and import. national income is income earned. For more contact 66943036 economic and finance instructor 9 Measuring Domestic Output and National Income CBA Nominal GDP versus real GDP 1. Nominal GDP equal current output multiply by current prices. (P×Q) 2. Real GDP equal current output multiply by the base year prices. It is a nominal GDP Adjusted for the change in the price level. (Q× base P) 3. If nominal GDP exceed real GDP there is inflation. 4. Nominal GDP over real GDP equal GDP price index or GDP deflator. (NOM/REAL) ×100 5. Nominal GDP may be increases as increase in price level and real GDP may not increase. 6. Inflation can be calculated as: INF2 = (GDP PI 2 – GDP PI1) / GDPPI1 Year Q P Nominal Real GDP GDP price index Inflation GDP 1 50 10 2 50 12 3 60 14 4 70 16 Finally, Shortcoming of GDP 1. GDP exclude nonmarket transaction such as foods that produced and consumed at home. 2. GDP exclude the wellbeing arising from the leisure time such as vacations. 3. GDP don’t account the improved of product quality. 4. GDP don’t account the underground economic. 5. GDP overstate overall economy because it doesn’t include the impact of pollution For more contact 66943036 economic and finance instructor 10 Measuring Domestic Output and National Income CBA Government Purchases $15 Consumption 90 Gross Investment 20 Consumption of Fixed Capital 5 Exports 8 Imports 12 26. Refer to the accompanying data (all figures in billions of dollars). GDP is A. $116. B. $121. C. $125. D. $150. 27. Refer to the accompanying data (all figures in billions of dollars). NDP (net domestic product) is A. $116. B. $121. C. $125. D. $150 Personal Taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 U.S. Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 U.S. Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor Income 10 Statistical Discrepancy 0 28. Refer to the accompanying data (all figures in billions of dollars). GDP is A. $390. B. $417. C. $422. D. $492. 29. Refer to the accompanying data (all figures in billions of dollars). NDP is A. $370. B. $402. C. $392. D. $467. For more contact 66943036 economic and finance instructor 11 Measuring Domestic Output and National Income CBA 30. Refer to the accompanying data (all figures in billions of dollars). NI is A. $362. B. $382. C. $447. D. $402. 31. Refer to the accompanying data (all figures in billions of dollars). PI is $314. B. $346. C. $408. D. $437. 32. Refer to the accompanying data (all figures in billions of dollars). DI is A. $284. B. $329. C. $274. D. $402. 33. Transfer payments are A. excluded when calculating GDP because they only reflect inflation. B. excluded when calculating GDP because they do not reflect current production. C. included when calculating GDP because they are a category of investment spending. D. included when calculating GDP because they increase the spending of recipients. Gross Investment $18 National Income 100 Net Exports 2 Personal Income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 34. Refer to the accompanying data (all figures in billions of dollars). The gross domestic product for this economy is A. $100. B. $95. C. $110. D. $107. 35. Refer to the accompanying data (all figures in billions of dollars). Consumption of fixed capital is A. $5. B. $10. C. $20. D. $30. For more contact 66943036 economic and finance instructor 12 Measuring Domestic Output and National Income CBA 36. Refer to the accompanying data (all figures in billions of dollars). Disposable income is A. $83. B. $73. C. $75. D. $77. 37. Refer to the accompanying data (all figures in billions of dollars). From this information we can conclude that the net foreign factor income is A. negative $5 billion. B. zero. C. positive $5 billion. D. positive $15 billion. 38. Corporate profits are found by A. summing corporate income taxes, dividends, and undistributed corporate profits. B. adding corporate income taxes and dividends and subtracting undistributed corporate profits. C. subtracting corporate income taxes from the sum of dividends and undistributed corporate profits. D. summing dividends, undistributed corporate profits, and proprietors' income. Personal Consumption Expenditures $400 Government Purchases 128 Gross Private Domestic Investment 88 Net Exports 7 Net Foreign Factor Income 0 Consumption of Fixed Capital 43 Taxes on Production and Imports 50 Compensation of Employees 369 Rents 12 Interest 15 Proprietors' Income 52 Corporate Income Taxes 36 Dividends 24 Undistributed Corporate Profits 22 Statistical Discrepancy 0 39. Refer to the accompanying national income data for the economy. All figures are in billions of dollars. The gross domestic product for this economy is A.$584. B. $592. C. $609. D. $623. For more contact 66943036 economic and finance instructor 13 Measuring Domestic Output and National Income CBA 40. Refer to the accompanying national income data for the economy. All figures are in billions of dollars. Net domestic product is A. $520. B. $580. C. $623. D. $573. 41. Refer to the accompanying national income data for the economy. All figures are in billions of dollars. The national income is A. $561. B. $573. C. $580. D. $530. 42. Refer to the accompanying national income data for the economy. All figures are in billions of dollars. Disposable income A. cannot be determined from the data given. B. is $484. C. is $416. D. is $502. 43. Which of the following best defines national income? A. income received by households less personal taxes B. the before-tax income received by households C. incomes earned by U.S. resource suppliers plus taxes on production and imports D. the market value of the annual output net of consumption of fixed capital Gross Private Domestic Investment $46 Exports of the U.S. 9 Disposable Income 190 Personal Saving 10 Government Purchases 84 Net Foreign Factor Income 10 Consumption of Fixed Capital 52 Dividends 13 Imports of the U.S. 12 Taxes on Production and Imports 22 Personal Taxes 38 Social Security Contributions 23 Statistical Discrepancy 0 44. Refer to the accompanying data. All figures are in billions of dollars. The gross domestic product is A. $326. B. $282. C. $307. D. $300. For more contact 66943036 economic and finance instructor 14 Measuring Domestic Output and National Income CBA 45. Refer to the accompanying data. All figures are in billions of dollars. The net domestic product is A. $233. B. $255. C. $230. D. $348. 46. Refer to the accompanying data. All figures are in billions of dollars. The national income is A. $265. B. $223. C. $208. D. $346. 47. Refer to the accompanying data. All figures are in billions of dollars. Personal income is A. $184. B. $221. C. $149. D. $228. 48. What is the difference between national income and personal income? A. personal taxes B. National income includes income earned both in the United States and abroad, while personal income only includes that income earned within the borders of the United States. C. National income represents before-tax income, while personal income measures how much is available for spending after all taxes have been subtracted. D. National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned. For more contact 66943036 economic and finance instructor 15 Measuring Domestic Output and National Income CBA Proprietors' Income $20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interest 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 49. Refer to the accompanying data. All figures are in billions of dollars. National income is A. $395. B. $380. C. $375. D. $360. 50. Refer to the accompanying data. All figures are in billions of dollars. Gross domestic product is A. $395. B. $380. C. $375. D. $360. 51. Refer to the accompanying data. All figures are in billions of dollars. Net domestic product is A. $395. B. $380. C. $375. D. $360. For more contact 66943036 economic and finance instructor 16 Measuring Domestic Output and National Income CBA Personal Taxes $23 Net Private Domestic Investment 33 Net Exports 6 National Income 278 U.S. Exports 20 Gross Private Domestic Investment 56 Disposable Income 220 Taxes on Production and Imports 32 Undistributed Corporate Profits 15 Proprietors' Income 45 Net Foreign Factor Income 0 Statistical Discrepancy 0 52. Refer to the accompanying national income data. All figures are in billions of dollars. Consumption of fixed capital (private sector) is A. $23. B. $14. C. $32. D. $26. 53. Refer to the accompanying national income data. All figures are in billions of dollars. U.S. imports are A. $26. B. $16. C. $24. D. $14. 54. Refer to the accompanying national income data. All figures are in billions of dollars. The gross domestic product is A. $328. B. $301. C. $382. D. $333. 55. Refer to the accompanying national income data. All figures are in billions of dollars. Personal income is A. $229. B. $253. C. $274. D. $243. 56. The amount of after-tax income received by households is measured by A. discretionary income. B. national income. C. disposable income. D. personal income. For more contact 66943036 economic and finance instructor 17 Measuring Domestic Output and National Income CBA 57. Real GDP refers to A. the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income. B. GDP data that embody changes in the price level but not changes in physical output. C. GDP data that do not reflect changes in both physical output and the price level. D. GDP data that have been adjusted for changes in the price level. 58. A price index is A. a comparison of the current price of a market basket to a fixed point of reference. B. a comparison of real GDP in one period relative to another. C. the cost of a market basket of goods and services in a base period divided by the cost of the same market basket in another period. D. a ratio of real GDP to nominal GDP. Year Units of Output Price of Bagel Per Unit Price Index (Year 1 = 100) 1 10 $10 100 2 12 20 200 3 15 30 300 4 20 40 400 59. The table contains data for a hypothetical single-product economy. Nominal GDP in year 3 is A. $100. B. B. $450. C. C. $225. D. D. $150. 60. The table contains data for a hypothetical single-product economy. Real GDP in year 3 is A. $100. B. $450. C. $225. D. $150. 61. Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000, real GDP A. increased by $60 billion. B. decreased by $32 billion. C. increased by $100 billion. D. increased by $117 billion. For more contact 66943036 economic and finance instructor 18 Measuring Domestic Output and National Income CBA Year Units of Output Price Per Unit 1 3 $3 2 4 4 3 6 5 4 7 7 5 8 8 62. Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are shown in the table. The price index for year 1 is A. 140. B. 40. C. 167. D. 60. 63. If nominal GDP rises, A. real GDP may either rise or fall. B. we can be certain that the price level has risen. C. real GDP must fall. D. real GDP must also rise. Year Nominal GDP Price Index 1 $550 $140 2 560 135 3 576 120 4 586 117 5 604 108 64. In the economy described in the table, real GDP for year 3 is A. $512. B. $428. C. $480. D. $691. 65. Refer to the diagram. The base year used in determining the price indices for this economy A. cannot be determined from the information given. B. is some year be fore 2000. C. is more recent than 2000. D. is 2000. For more contact 66943036 economic and finance instructor 19