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Exam 5: National Income Accounting

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Question 1

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Which of the following can be a valid reason for Canada's GDP exceeding its GNP in 2001?

A) Net factor income from abroad in Canada was negative.
B) Canada's GNP measurements were flawed.
C) Canada's indirect business taxes were exceptionally high.
D) The World Bank underestimated Canada's net exports.
E) Canada's residents received more foreign aid than they could spend.

F) B) and C)
G) A) and D)

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Question 2

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The table given below reports the value of different economic variables of a country during a year. Table 5.4 $\begin{array}{c}\text { GNP Data }\\\text { (Adjusted for net factor ícome from abroad) }\\\begin{array}{|l|l|}\hline \text { Net Investment } & \$ 400 \\\hline \text { Capital Consumption Allowance } & \$ 800 \\\hline \text { Indirect Business Taxes } & \$ 600 \\\hline \text { U.S. Exports } & \$ 200 \\\hline \text { U.S. Imports } & \$ 300 \\\hline \text { Government Purchases } & \$ 150 \\\hline \text { Consumption Spending } & \$ 2,030 \\\hline\end{array}\end{array}$ -Refer to Table 5.4. Calculate the national income of this country.

A) $1,880
B) $2,480
C) $3,280
D) $3,880
E) $4,280

F) A) and B)
G) A) and C)

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Question 3

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The table given below reports the value of the different economic variables of a nation during a year. Table 5.5 $\begin{array}{c}\text { GNP Data }\\\text { (Adjusted for net factor ícome from abroad) }\\\begin{array}{|l|l|}\hline \text { Consumption Spending } & \$ 1,150 \\\hline \text { Gross Investment } & \$ 320 \\\hline \text { Exports } & \$ 420 \\\hline \text { Capital Consumption Allowance } & \$ 60 \\\hline \text { Govermment Purchases } & \$ 200 \\\hline \text { Social Security Benefits } & \$ 365 \\\hline \text { Imports } & \$ 540 \\\hline \text { Personal Income Tax } & \$ 225 \\\hline\end{array}\end{array}$ -Refer to Table 5.5. For the economy described in the table above, disposable personal income is:

The income that is available to individuals for consumption or investment is called disposable income.

The table given below lists the price per unit and output of computers and calculators (the only two goods produced by a nation) for the years 1995 and 2003. Table 5.6 $\begin{array}{c}\quad\quad\quad\quad\text { Production Data }\\\quad\quad\quad\quad\quad\text { Prices per Unit } \quad\quad \text { Quantity }\\\begin{array}{|c|l|l|c|c|}\hline \text { Production } & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} & \mathbf{1 9 9 5} & \mathbf{2 0 0 3} \\\hline \text { Computers } & \$ 2,000 & \$ 1,600 & 100 & 100 \\\text { Calculators } & \$ 60 & \$ 70 & 900 & 900 \\\hline\end{array}\end{array}$ -Refer to Table 5.6. What is the constant-dollar real GDP growth from 1995 to 2003 using 2003 as the base year?

Which of the following would not be included as part of personal income?

Since there are smaller fluctuations in the equilibrium prices of final goods than in the prices of intermediate goods, the producer price index is more volatile than the consumer price index.

Depreciation must be subtracted from the calculation of gross domestic product.

A price index is a measure of the average level of prices in an economy.

If the value of intermediate goods and services are included in GDP, then:

The table given below reports the value of different economic variables of a country during a year. Table 5.4 $\begin{array}{c}\text { GNP Data }\\\text { (Adjusted for net factor ícome from abroad) }\\\begin{array}{|l|l|}\hline \text { Net Investment } & \$ 400 \\\hline \text { Capital Consumption Allowance } & \$ 800 \\\hline \text { Indirect Business Taxes } & \$ 600 \\\hline \text { U.S. Exports } & \$ 200 \\\hline \text { U.S. Imports } & \$ 300 \\\hline \text { Government Purchases } & \$ 150 \\\hline \text { Consumption Spending } & \$ 2,030 \\\hline\end{array}\end{array}$ -Refer to Table 5.4. Compute the GNP of the country.

National income is the sum of:

Personal income is equal to:

The table given below reports the sales value at each stage of production of the soft drink Pepsi. Table 5.3 $\begin{array}{|l|c|}\hline {\text { Production Stage }} & \text { Sales Value } \\\hline \text { Sugar cane } & \$ 0.05 \\\hline \text { Processed sugar } & \$ 0.10 \\\hline \text { Wholesale Pepsi } & \$ 0.40 \\\hline \text { Pepsi in a vending machine } & \$ 0.60 \\\hline\end{array}$ -Refer to Table 5.3. Compute GDP according to the income approach if Pepsi is assumed to be the only good produced in the economy.

GDP according to the income method is the sum of:

Consider a small country producing only two commodities (coffee beans and corn) . Following are the price and output of these two commodities in the year 2008: $\begin{array}{|l|l|}\hline \text { Price } & \text { Quantity } \\\hline \$ 12 & 500 \mathrm{lbs} \text {. of coffee beans } \\\hline \$ 6 & 600 \text { bushels of corn } \\\hline\end{array}$ Assuming that the output of these two commodities remains constant, while the price of each rises by 10 percent in 2009, compute the value of real GDP in 2009.

Bill Gates' recent purchase of a new Rolls-Royce automobile produced in Great Britain will:

Which of the following represents the amount of income that is actually available to people for consumption and saving?

Personal income is equal to:

The table given below reports the value of the different economic variables of a nation during a year. Table 5.5 $\begin{array}{c}\text { GNP Data }\\\text { (Adjusted for net factor ícome from abroad) }\\\begin{array}{|l|l|}\hline \text { Consumption Spending } & \$ 1,150 \\\hline \text { Gross Investment } & \$ 320 \\\hline \text { Exports } & \$ 420 \\\hline \text { Capital Consumption Allowance } & \$ 60 \\\hline \text { Govermment Purchases } & \$ 200 \\\hline \text { Social Security Benefits } & \$ 365 \\\hline \text { Imports } & \$ 540 \\\hline \text { Personal Income Tax } & \$ 225 \\\hline\end{array}\end{array}$ -Refer to Table 5.5. For the economy described in the table above, personal income is: