CHAPTER 4- Monitoring The Value Of Production: GDP
The components and robots for the Toyota auto assembly lines in Canada are built in Japan. Toyota assembles cars for the Canadian market in Ontario Choose the correct statement
The assembly line components and robots appear as imports in Canada's GDP
Which if the following increases Canadian GDP
The ice cream I buy from my grocery store
The largest component of GDP using the expenditure approach is
consumption expenditure
In the circular flow diagram, aggregate expenditure includes
consumption expenditure, investment, government expenditure and net exports
Real GDP
fluctuates around potential GDP
Which one of the following flows from firms to households?
goods and services
Which of the following is not correct?
Gross investment is the amount by which the value of capital increases.
Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income
I equals II equals III.
The components and robots for the Toyota auto assembly lines in Canada are built in Japan. Toyota assembles cars for the Canadian market in Ontario Choose the incorrect statement
If any parts for the cars come from Japan, they are recored as a negative entry in calculation Japan's GDP
The underground economy is any economic activity that
Is hidden to avoid taxes and regulations because it is illegal
Net domestic income at market prices equals
all incomes plus indirect taxes minus subsidies.
Suppose the economy's capital increases over the year. It must be true that
net investment was positive.
The maximum level of real GDP that can be produced while avoiding shortages of labour, capital, land, and entrepreneurial ability that would bring rising inflation is
nominal GDP.
Which of the following statements by politicians is talking about the business cycle?
"Canadian unemployment is falling due to the upturn in the economy."
Refer to Fact 20.1.1. Peter's net investment in 2012 is
$1,500.
Refer to Figure, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is net exports?
$10
Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. What is aggregate income?
$100
Refer to Figure 4.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is GDP?
$100
Refer to Figure 4.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is aggregate expenditure?
$100
Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP for this year is
$20,300.
At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500. At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000. Peter's depreciation in 2017 is
$2300
A south sea island produces only coconuts. In 2005, the price of a coconut is $2.00 and the quantity produced is 400. In 2012, the price of a coconut is $1.50 and the quantity produced is 350. 2005 is the reference base year. Real GDP in 2012 in terms of base-year prices is
$700.
Refer to Fact 20.1.1. Peter's capital at the beginning of 2017 is
$8,100
Refer to Fact 20.1.1. Peter's gross investment in 2017 is
$3,800.
Refer to Fact 20.1.1. Peter's capital at the end of 2017 is
$9,600
Which of the following relationships is correct?
Gross Investment = Net Investment + Depreciation
To measure GDP, Statistics Canada uses
-the expenditure approach. - the income approach.
Which of the following items would be included in a current measure of GDP?
A professional gardener who regularly cuts your lawn.
Given that pollution is a by-product of some production processes,
GDP tends to overstate economic well-being.
30) Suppose in current dollar terms, GDP increased by approximately 7 percent between one period and the next, but real GDP fell by 2 percent. Which one of the following explanations is most likely? A) Prices fell by 9 percent. B) Prices fell by 2 percent. C) Output rose by 2 percent. D) Prices increased by 7 percent. E) Prices increased by 9 percent.
E
3) Which of the following statements is true?
Final goods and services produced in Canada by foreigners are part of Canada's GDP.
An art collector recently sold a piece of pottery for $300. He had purchased it for $200 two years earlier. How will the most recent sale affect GDP?
GDP is unaffected
Why is the Human Development Index thought to be a better measure of economic well-being than real GDP per person?
It includes health and education measures, as well as real GDP per person.
Choose the correct statement.
Nominal GDP is just a more precise name for GDP.
In a given year, nominal GDP increases by approximately 7 percent, but real DGP falls by 2 percent. Which one of the following is most likely?
Price increased by 9 percent
Which one of the following would not be counted as part of this year's GDP?
The government bond you buy for your newborn niece
Which of the following adds to Canadian GDP?
The ice cream I buy from my grocery store.
Which of the following would be an example of a consumption expenditure?
The purchase of a new car by the Singh household.
Of the following items, which one would be considered as investment in the National Income and Expenditure Accounts?
The purchase of a new van by a potter who packs it with
The expenditure approach measures GDP by adding together
The total expenditures of consumers, firms, net exporters, and by governments at all levels.
Which one of the following is false?
Y = C + I + G + M - X
Which one of the following is true?
Y = C + I + G + X - M
Stock and bond sales are not included in GDP because they
are not goods and services.
Which one of the following is not an example of investment in the expenditure approach to measuring GDP? General Motors
buys shares in another company.
In calculating GDP, economists use the value of final goods and services because
by using final goods and services, they avoid double counting.
One of the reasons why real GDP grows is that
capital grows as a result of investment.
Suppose Mail Boxes Etc. buys a new copier for its store for $1,000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, ________ has occurred.
depreciation
SaskWidget produces plastic parts. At the beginning of the year, they held $24 million worth of capital. At the end of the year, they held $20 million worth of capital. One can conclude that
depreciation exceeded gross investment by $4 million.
Net domestic income at market prices can be derived by which one of the following? GDP (income approach) minus
depreciation.
Which of the following is not a reason for GDP incorrectly measuring the value of total output?
environmental quality
Which approach to measuring GDP is being used when Statistics Canada sums spending on goods and services for consumer goods, government, business investments and exports, net of imports?
expenditure
Consumption expenditure includes only
expenditure by Canadian households on goods and services produced in Canada and in the rest of the world
For the aggregate economy, income equals
expenditure equals GDP.
8) Complete the following sentence. Net exports equals
exports minus imports.
In the National Income and Expenditure Accounts, government expenditure refers to spending on goods and services by
federal, provincial, and local governments.
In the circular flow model,
firms are sellers of goods and services in goods markets.
The change in capital from year to year is equal to
gross investment minus depreciation.
The purchasers in the goods markets are
households, firms, government, and those who import our goods.
The circular flow diagram illustrates the expenditures made by
households, firms, governments, and the rest of the world.
Nominal GDP will increase
if either the average level of prices rises or the quantity of goods and services produced increases.
What we produce during our working time is ________ as part of GDP and the enjoyment we gain from our leisure time is ________ as part of GDP.
included; not included
Government expenditure on goods and services
includes expenditure by all levels of government on goods and services
Wages, salaries, and supplementary labour income are components of which approach to measuring GDP?
income approach
Which approach to measuring GDP is being used when Statistics Canada sums wages, salaries and supplementary labour income, and other factor incomes?
income approach
In the Canadian economy, market prices and factor costs would be the same except for
indirect taxes and subsidies.
The purchase of a new home is categorized as
investment
The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper ________ part of GDP because the paper is ________ good.
is not; an intermediate
The existence of which one of the following is not a reason for the fact that GDP gives an incorrect estimate of the value of total output in the economy?
leisure time
A common definition of recession is a period with .
negative growth rate in real GDP that lasts at least two quarters.
17) The sum of wages, salaries and supplementary labour income, and other factor incomes is
net domestic income at factor cost.
A bakery uses flour to produce bread. When calculating GDP, we include ________, because when we add the value of the flour to the value of the loaf of bread to calculate GDP, the result is ________.
only the value of the bread sold in a store; double counting
Which one of the following is an income flow from firms to households?
payments for factor services
Which one of the following is an expenditure flow from households to firms?
payments for goods and services
The business cycle is defined as the
periodic but irregular up-and-down movement of total production and other measures of economic activity.
21) Capital in year 2018 equals capital in year 2017
plus net investment.
If nominal GDP increased by 11 percent during a year while real GDP increased by only 5 percent, then the
price level increased by 6 percent.
Intermediate goods are
produced by one firm, bought by another firm, and used as a component of a final good or service.
Real GDP will increase only if the
quantity of goods and services produced increases.
If you want to investigate the claim that more goods and services were produced in the economy during 2017 than 2018, what should you look at?
real GDP
The four parts of the business cycle occur in the following order
recession, trough, expansion, peak.
To derive net domestic income at market prices from GDP,
subtract depreciation from GDP.
To obtain the factor cost of a good from its market price
subtract indirect taxes and add subsidies.
Which one of the following would be included in the calculation of GDP by the expenditure approach?
the cost of a new kitchen cupboards when you renovate your house
In recent history, real GDP has risen less rapidly than nominal GDP. This is because
the general price level rose.
Gross domestic product is
the market value of all the final goods and services produced in a country during a given time period.
Potential GDP is
the maximum amount of GDP that can be produced while avoiding shortages of labour, capital, land, and entrepreneurship that would bring rising inflation
From the following list, choose the item that would be included in a current measure of GDP.
the purchase of 10 litres of gasoline for your car
In calculating GDP, all of the following are excluded except
the value of all homes built in the year but not sold
Real GDP equals
the value of final goods and services produced in a given year when valued at the prices of a reference base year.
The value of intermediate goods is not counted in GDP
to avoid counting their value twice and overstating the value of GDP.
2) A hypothetical economy produced four final goods during the year: plates, TVs, bicycles, and computers. Forty plates were produced and sold for $10 each. Five TVs were produced and sold for $300 each. Fifty bicycles were produced and sold for $100 each. Three computers were produced and sold for $750 each. With this information, one could determine
total income
Since non-market exchanges are excluded from measures of GDP, the GDP measure tends to
underestimate the total production of an economy.
The existence of which one of the following is a reason for the fact that GDP gives an underestimated value of total output in the economy?
underground economy
Business cycles are
unpredictable, but always have two phases and two turning points.
