CHAPTER 13: NATIONAL INCOME ACCOUNTING AND THE BALANCE OF PAYMENTS

A country's current account A. balance equals the change in its net foreign wealth. B. balance equals the change in its foreign wealth. C. surplus equals the change in its foreign wealth. D. deficit equals the change in its foreign wealth. E. None of the above.

A

A country's gross national product (GNP) is A. the value of all final goods and services produced by its factors of production and sold on the market in a given time period. B. the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period. C. the value of all final goods produced by its factors of production and sold on the market in a given time period. D. the value of all final goods and services produced by its factors of production and sold on the market. E. the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period.

A

For most macroeconomists, A. gross national income and gross national product are the same. B. gross national income exceeds gross national product. C. gross national product exceeds gross national product. D. it is hard to tell whether gross national income equals gross national product. E. None of the above.

A

For most macroeconomists, A. national income accounts and national output accounts are equal to each other. B. national income accounts exceed national output accounts. C. national output accounts exceed national income accounts. D. it is impossible to tell whether national income accounts are equal to national output accounts. E. None of the above.

A

GDP is supposed to measure A. the volume of production within a country's borders. B. the volume of services generated within a country's borders. C. the volume of production of a country's output. D. GNP plus depreciation. E. None of the above.

A

Government savings, Sg, is equal to A. T-G. B. T+G. C. T=G. D. T+G-I. E. None of the above.

A

Investment is usually A. more variable than consumption. B. less variable than consumption. C. as variable as consumption. D. It is hard to tell from the data whether investment is more or less variable than consumption. E. None of the above.

A

Which one of the following expressions is the most accurate? A. CA=EX-IM. B. CA=IM-EX. C. CA=EX=IM. D. CA=EX+IM. E. None of the above.

A

A closed economy A. can save either by building up its capital stock or by acquiring foreign wealth. B. can save only by building up its capital stock. C. can save only by acquiring foreign wealth. D. cannot save either by building up its capital stock or by acquiring foreign wealth. E. None of the above.

B

Every international transaction automatically enters the balance of payments A. once either as a credit or as a debit. B. twice, once as a credit and once as a debit. C. once as a credit. D. twice, both times as debit. E. None of the above.

B

For open economies, A. S= I. B. S= I +CA. C. S= I - CA. D. S> I + CA. E. S< I + CA.

B

Government transfer payments such as social security and unemployment benefits are A. included in government purchases. B. not included in government purchases. C. not included in government purchases, but they are included in the consumption component of GNP. D. not included in government purchases, but they are part of the investment component of GNP. E. None of the above.

B

In a closed economy, national saving A. sometimes equals investment. B. always equals investment. C. is always less than investment. D. is always more than investment. E. None of the above.

B

In a closed economy, private saving, Sp, is equal to A. I-(G-T). B. I+(G-T). C. I+(G+T). D. I-(G+T). E. I+(G-T)+C.

B

Movements in GDP A. and GNP usually do not differ greatly. B. and GNP usually do not differ greatly, as a practical matter. C. and GNP usually do differ greatly. D. are usually smaller than those of GNP movements, in practice. E. None of the above.

B

Purchases of inventories by A. firms are not counted in investment spending. B. firms are also counted in investment spending. C. households are also counted in investment spending. D. households and firms are also counted in investment spending. E. None of the above.

B

Which one of the following statements is the most accurate? A. GNP plus depreciation is called net national product (NNP). B. GNP less depreciation is called net national product (NNP). C. GNP less depreciation is called net factor product (NFP). D. Answers A and C are both correct. E. None of the above.

B

Which one of the following statements is the most accurate? A. It is not hard to measure accurately a country's net foreign wealth. B. It is surprisingly hard to measure accurately a country's net foreign wealth. C. It is surprisingly hard to measure a country's foreign wealth. D. It is surprisingly hard to measure accurately a country's foreign transactions. E. None of the above.

B

Which one of the following statements is the most accurate? A. The sale of a used textbook does generate income for factors of production. B. The sale of a used textbook does not generate income for any factor of production. C. The sale of a used textbook sometimes does and sometimes does not generate income for factors of production. D. It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production. E. None of the above.

B

In an open economy, private saving, Sp, is equal to A. I-CA+(G-T). B. I+CA-(G-T). C. I+CA+(G-T). D. I-CA-(G-T). E. I+CA+(G+T).

C

In open economies, A. saving and investment are necessarily equal. B. as in a closed economy, saving and investment are not necessarily equal. C. saving and investment are not necessarily equal as they are in a closed economy. D. saving and investment are necessarily equal contrary to the case of a closed economy. E. None of the above.

C

Ricardian equivalence argues that when the government cuts taxes and raises its deficit, A. consumers anticipate that they will face lower taxes later to pay for the resulting government debt. B. consumers anticipate that they will receive better services from the government. C. consumers anticipate that they will face higher taxes later to pay for the resulting government debt. D. consumers anticipate it will affect their future taxes, in general in the direction of lowing future taxes. E. None of the above.

C

The CA is equal to A. Y - (C-I+G). B. Y + (C+I+G). C. Y - (C+I+G). D. Y - (C+I-G). E. Y - (C+I+G) = -CA, (i.e., minus the CA).

C

The sale of A. a used textbook does enter GNP. B. a used textbook does not enter GNP, but the sale of a used house does. C. both a used textbook and a used house do not enter GNP. D. a used house does not enter GNP, but the sale of a used book does. E. None of the above.

C

An open economy A. can save only by building up its capital stock. B. can save only by acquiring foreign wealth. C. cannot save either by building up its capital stock or by acquiring foreign wealth. D. can save either by building up its capital stock or by acquiring foreign wealth. E. None of the above.

D

Any goods A. purchased by federal, state, or local governments are classified as government purchases. B. and services purchased only by federal government are classified as government purchases. C. and services purchased only by federal or state governments are classified as government purchases. D. and services purchased by federal, state, or local governments are classified as government purchases. E. None of the above.

D

GNP equals GDP A. minus net receipts of factor income from the rest of the world. B. plus receipts of factor income from the rest of the world. C. minus receipts of factor income from the rest of the world. D. plus net receipts of factor income from the rest of the world. E. None of the above.

D

The highest component of GNP is A. the current account. B. investment. C. government purchases. D. consumption. E. None of the above.

D

Disposable income is National income A. less taxes collected from households and firms by the government. B. plus net taxes collected from households and firms by the government. C. less net taxes collected from households and firms by the government D. less net taxes collected from households by the government. E. less net taxes collected from households and firms by the government.

E

In order to move from units expressed in trillion to units expressed in billions, you need to multiple the number in billions by A. 100. B. 10,000. C. 100,000. D. 1,000,000. E. 1,000.

E

National income equals GNP A. less depreciation, less net unilateral transfers, less indirect business taxes. B. less depreciation, plus net unilateral transfers, plus indirect business taxes. C. less depreciation, less net unilateral transfers, plus indirect business taxes. D. plus depreciation, plus net unilateral transfers, less indirect business taxes. E. less depreciation, plus net unilateral transfers, less indirect business

E

Ricardian equivalence argues that when the government A. increases taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. B. cuts taxes and decreases its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. C. cuts taxes and raises its surplus, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. D. cuts taxes and raises its deficit, consumers anticipate that they will face lower taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. E. cuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.

E