chapter 5 part 2 answers

Chapter 5: Measuring GDP
1) Which of the following is NOT part of GDP?
A) General Motors’ purchases of new capital equipment
B) Expenditures by the federal government for national defense
C) Social security payments made to the elderly
D) The purchase of new homes by consumers
Answer: C
2) Net exports of goods and services equal the
A) exports of goods and services divided by the imports of goods and services.
B) exports of goods and services plus the imports of goods and services.
C) exports of goods and services minus the imports of goods and services.
D) imports of goods and services minus the exports
of goods and services.
Answer: C
3) In the calculation of GDP by the expenditure approach, exports from the United
States must be
A) subtracted because they are included in the consumption of a foreign country.
B) ignored because they are not bought by U.S. citizens.
C) subtracted if they are bought by foreign firms
for investment purposes.
D) added.
Answer: D
Government purchases of goods and services $240
Depreciation 240
Gross private domestic investment 400
Personal income taxes 140
Net taxes 120
Net exports of goods and services 80
Personal consumption expenditures 640
Net interest 100
4) From the data in the above table, GDP equals
A) $1,120.
B) $1,280.
C) $1,290.
D) $1,360.
Answer: D
5) Using the data in the above table, net domestic product equals
A) $1,120.
B) $1,280.
C) $1,290.
D) $1,360.
Answer: A
6) Which of the following is a component of the incomes approach to GDP?
A) Consumption expenditure.
B) Wages and salaries.
C) Investment.
D) Government purchases of goods and services.
Answer: B
7) Gross domestic product minus net domestic product equals
A) exports minus imports.
B) imports minus exports.
C) net taxes.
D) depreciation.
Answer: D
8) The above table gives data for a hypothetical nation. Gross domestic product is
A) $4,049 billion.
B) $4,079 billion.
C) $4,054 billion.
D) $4,339 billion.
Answer: B
9) The above table gives data for a hypothetical nation. Net domestic product is
A) $4,039 billion.
B) $4,044 billion.
C) $4,054 billion.
D) $4,314 billion.
Answer: C
10) GDP equals
A) aggregate expenditure.
B) aggregate income.
C) the value of the aggregate production in a country during a given time period.
D) all of the above.
Answer: D
11) Which of the following is NOT a component of the incomes approach to GDP?
A) Net exports
B) Wages and salaries
C) Corporate profits
D) Proprietors’ income
Answer: A
12) Depreciation equals ____.
A) capital minus gross investment
B) capital minus net investment
C) net investment minus gross investment
D) gross investment minus net investment
Answer: D
13) Gross Domestic Product is equal to the sum of consumption expenditure,

investment, net exports, and ____.
A) government purchases
B) saving
C) profits
D) net taxes
Answer: A
14) Intermediate goods and services ____.
A) are double counted in GDP
B) are used to produce final goods and services
C) include used goods
D) are included in GDP
Answer: B
15) Using the information in the table above, calculate the value of GDP.
A) $185 million
B) $145 million
C) $195 million
D) $140 million
Answer: D
16)A nation's gross domestic product (GDP):
A) is the dollar value of the total output produced within the borders of the nation.
B) is the dollar value of the total output produced by its citizens, regardless of where they
are living.
C) can be found by summing C + I + S + Xn.
D) is always some amount less than its C + I + G + Xn.
Answer: A
17) The GDP is the:
A) monetary value of all final goods and services produced within a nation in a particular
year.
B) national income minus all non income charges against output.
C) monetary value of all economic resources used in producing a year's output.
D) monetary value of all goods and services, final and intermediate, produced in a specific
year.
Answer: A
18) GDP includes:
A) neither intermediate nor final goods. C) intermediate, but not final, goods.
B) both intermediate and final goods. D) final, but not intermediate, goods.
Answer: D
19) Suppose the total market value of all final goods and services produced in a
particular country in 2004 is $500 billion and the total market value of final goods and
services sold is $450 billion. We can conclude that:
A) GDP in 2004 is $450 billion. C) GDP in 2004 is $500 billion.
B) NDP in 2004 is $450 billion. D) inventories in 2004 fell by $50 billion.
Answer: C
20) GDP is:
A) the monetary value of all goods and services (final, intermediate, and non-market)
produced in a given year.
B) total resource income less taxes, saving, and spending on exports.
C) the economic value of all economic resources used in the production of a year's output.
D) the market value of all final goods and services produced within a nation in a specific
year.
Answer: D
21)Which of the following is a final good or service?
A) diesel fuel bought for a delivery truck
B) fertilizer purchased by a farm supplier
C) a haircut
D) Chevrolet windows purchased by a General Motors assembly plant
Answer: C
State why each of the following statements is true or false:
1- GDP is the value of all goods and services produced.

Answer: False because GDP is the value of final goods and services produced
2- The intermediate goods and services are included in GDP.
Answer: False because GDP excluding counting intermediate goods and services to
avoids counting the same value more than once.
3- Gross investment is one of the expenditures included in the expenditure approach
to measuring GDP.
Answer: True because Gross investment is the total amount spent on purchases of
new capital and on replacing depreciated capital.
4- Real GDP per person tells us the value of goods and services that the average
person can enjoy.
Answer: True Because Real GDP per person is real GDP divided by the population.
And can reflect the welfare of nation.
5- If the value of output by citizens outside the country is greater than the value of
output by foreigners inside the country, GNP will be less than GDP.
Answer: False because : GNP= GDP+ National product outside the country - Foreign
product inside the country .
Then GNP< GDP if foreign product inside the country is greater than national output.
6- GNP may equal GDP.
Answer: True, If net transfer to foreigners is zero
7- In calculating GDP from the expenditure side, economists add imports to other
aggregate expenditure components.
Answer: False , because GDP= C+I+G+(X-M), where imports are payments foe
purchasing goods and services from abroad.
Answer the following:
1- Compare between GDP and GNP and GNI.
2- Mention the three methods of calculating GDP.

1- Income method:
▪ Income of labor (wages, salaries)
▪ Profit of private sector business.
▪ Rent income from ownership of land.
2-Expenditure method:
▪ Consumption expenditure.
▪ Investment expenditure.
▪ Government expenditure.
▪ Net exports.
3-output method:
value added from each the following sector:
▪ Agricultural.
▪ Manufacturing.
▪ Service.
3- Explain the meaning of depreciation.
Answer: Depreciation is the decrease in the value of a firm’s capital that
results from wear and tear and obsolescence.
4- Compare between Nominal GDP and real GDP
Answer: Real GDP per person is real GDP divided by the population.
Real GDP per person tells us the value of goods and services that the
average person can enjoy.
-Nominal GDP is measured in actual market prices.
-Real GDP is calculated in constant or invariant prices.

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Chapter 5: Measuring GDP

1) Which of the following is NOT part of GDP?

A) General Motors’ purchases of new capital equipment

B) Expenditures by the federal government for national defense

C) Social security payments made to the elderly

D) The purchase of new homes by consumers

2) Net exports of goods and services equal the

D) imports of goods and services minus the exports

of goods and services.

A) subtracted because they are included in the consumption of a foreign country.

B) ignored because they are not bought by U.S. citizens.

C) subtracted if they are bought by foreign firms

for investment purposes.

6) Which of the following is a component of the incomes approach to GDP?

B) Wages and salaries.

D) Government purchases of goods and services.

A) exports minus imports.

B) imports minus exports.

D) all of the above.

B) Wages and salaries

12) Depreciation equals ____.

A) capital minus gross investment

B) capital minus net investment

C) net investment minus gross investment

D) gross investment minus net investment

13) Gross Domestic Product is equal to the sum of consumption expenditure,

A) are double counted in GDP

B) are used to produce final goods and services

C) include used goods

D) are included in GDP

16)A nation's gross domestic product (GDP):

C) can be found by summing C + I + S + Xn.

D) is always some amount less than its C + I + G + Xn.

B) national income minus all non income charges against output.

C) monetary value of all economic resources used in producing a year's output.

18) GDP includes:

A) GDP in 2004 is $450 billion. C) GDP in 2004 is $500 billion.

B) NDP in 2004 is $450 billion. D) inventories in 2004 fell by $50 billion.

20) GDP is:

B) total resource income less taxes, saving, and spending on exports.

A) diesel fuel bought for a delivery truck

B) fertilizer purchased by a farm supplier

D) Chevrolet windows purchased by a General Motors assembly plant

State why each of the following statements is true or false:

1- GDP is the value of all goods and services produced.

2- Mention the three methods of calculating GDP.

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