National Income

What is GDP?

• the monetary value of all goods and services (final, intermediate, and non market) produced in a given year

• Total resource income less taxes, saving, and spending on exports.

• the economic value of all economic resources used in the production of a year's output.

• the market value of all final goods and services produced within a nation in a specific year

Which of the following is a final good or service?

• Diesel fuel bought for a delivery truck

• Fertilizer purchased by a farm supplier

• A haircut

• Chevrolet windows purchased by a General Motors assembly plant

Tom Atoe grows tomatoes for home consumption. This activity is

• excluded from GDP in order to avoid double counting

• excluded from GDP because an intermediate good is involved

• productive but is excluded from GDP because no market transaction occurs

• included in GDP because it reflects production

Answer the question on the basis of the following data. All figures are in billions of dollars:

Government purchases $15

Consumption 90

Gross investment 20

Consumption of fixed capital 5

Exports 8

Imports 12

Refer to the above data. GDP is:

• $116

• $121

• $125

• $150

Assume an economy producing only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the next question(s) on the basis of these data.

Refer to the data. The nominal GDP for year 4 is

• $49

• $55

• $40

• $35

Assume an economy producing only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the next question(s) on the basis of these data.

Refer to the data, . If year 3 is chosen as the base year, Real GDP for year 5 is

• $160

• $49

• $40

• $64

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because

• of changes in trade deficits and surpluses

• the length of the workweek has declined historically

• the price level may change over time

• depreciation may be greater or smaller than gross investment

The GDP tends to

• overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives

• understate economic welfare because it includes expenditures undertaken to offset or correct pollution

• understate economic welfare because it does not take into account increases in leisure

• overstate economic welfare because it does not reflect improvements in product quality

When the consumer price index falls, the typical family

• has to spend more dollars to maintain the same standard of living

• can spend fewer dollars to maintain the same standard of living

• finds that its standard of living is not affected

• can save less because they do not need to offset the effects of rising prices

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

• 5%

• 6%

• 7,2%

• 105%