Chapter 8.4 Practice

When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:

GDP will be much larger than GNP.

All of the following are correct except

Gross domestic income does not include health insurance benefits received by the employees.

Indicate whether the following statement is correct or incorrect. "Corporate profits are much too high: Most corporations make profits equal to 50 percent of the products the sell."

Incorrect: The largest component of gross domestic income is wages, which are about three times as large as profit.

Suppose the amount the federal government collects in personal income taxes increases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income? National income will ___. Personal income will ___. Disposable personal income will ___.

remain the same remain the same decrease

In the United States, the difference between GNP and GDP is __ that of many other countries.

smaller than

Which component of gross domestic income is the largest?

wages

In 2012, the largest component of gross domestic income was

wages.

U.S. Gross National Product (GNP) differs from U.S. Gross Domestic Product (GDP) in which of the following ways?

GNP considers production that occurs outside the U.S. GNP is the value of final goods and services produced by residents of the U.S.

8.4-02: National income (NI) equals $__billion.

National income (NI) = Net national product (NNP) - Indirect business taxes. NNP = Gross national product (GNP) - Consumption of fixed capital (depreciation) Personal income (PI) = National income (NI) - Corporate earnings + Government transfer payments Disposable personal income = Personal income (PI) - Personal taxes

Disposable personal income is equal to

personal income minus personal tax payments.

In the U.S., gross domestic product (GDP) and gross national product (GNP) are close in value. Under what circumstances would GNP be much larger than GDP?

All of the above would push GNP above GDP. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S.

Which of the following do we subtract from GDP to obtain national income?

depreciation

If you were attempting to forecast the level of consumer spending by households, which measure of total production or total income might be most helpful in making your forecast?

Disposable personal income.

To calculate personal income from national income, which of the following must the BEA do?

add government transfer payments