MEcons Tutorial 1

Topics: Gross domestic product, Measures of national income and output, Government spending Pages: 8 (2259 words) Published: April 13, 2015
Tutorial 1: Measuring National Income
Answer ALL Multiple-Choice Questions.
1. Which model is used to show the flows of money, factors of production, and goods and services in the economy? A. The Phillips curve model
B. The model of production possibilities
C. The circular-flow model
D. The AD-AS model
E. The rational expectations model

2. A household spends money on ___________________ and in exchange sells _______________ to firms. A. revenue; services
B. goods and services; factors of production
C. imports and exports; taxes and transfers
D. bonds; stocks
E. goods and services; revenue

3. GDP measures ________________________________.
I. production
II. income earned during the production process
III. spending by consumers, businesses, governments and foreigners A. I only
B. II only
C. III only
D. I and II only
E. I, II and III

4. In a specified period of time, a nation’s gross domestic product (GDP) is the ___________________________. A. total value of government spending, minus taxes collected B. total value of all final goods and services produced within the nation’s borders C. total value of all intermediate goods and services produced within the nation’s borders D. total disposable income earned by households in the nation E. total value of all final goods and services produced by a nation’s citizens, regardless their geographic location

5. GDP includes final goods and services, but not intermediate goods because A. intermediate goods are not part of investment spending
B. the value of the intermediate goods is already included in the value of the final goods C. the value of the intermediate goods is already included as inventory investment D. intermediate goods are only produced by government

E. intermediate goods are not current production

6. Which of the following would be an intermediate good?
A. Your vacation to the island of Yap
B. A visit to the doctor before a tropical vacation
C. A new skateboard your brother bought
D. Gasoline purchased for your car
E. Coal used in generating electricity

7. When computing the value of a nation’s domestic output of goods and services, we can add up all of the income earned by the factors of production in the economy. In this way, we are calculating national output with the ____________________________. A. expenditure approach

B. value-added approach
C. income approach
D. public sector approach
E. national savings approach

8. When computing the value of a nation’s domestic output of goods and services, we can add up all of the spending done by all sectors in the economy. In this way, we are calculating national output with the _______________________________. A. expenditure approach

B. value-added approach
C. income approach
D. public sector approach
E. national savings approach

9. A nation’s gross domestic product (GDP) can be determined with which simple formula? A. GDP = C + I + G
B. GDP = C + I + G + X
C. GDP = C + I + G + (X – M)
D. GDP = C – I + G + (M – X)
E. GDP = S + I

10. U.S imports are
A. not added to U.S GDP because they are produced abroad
B. added to U.S GDP because they are consumed domestically
C. added to U.S GDP because they represent an increase in inventories D. added to U.S GDP as government purchases because the government decides what goods may be imported E. not added to U.S GDP because they are intermediate goods

11. Transfer payments refer to payments made
A. as compensation to workers
B. without any exchange of goods and services
C. via online banking
D. to workers on transfer from one job to another
E. none of the above

12. Bob the farmer grows some vegetables for personal consumption. This activity is __________ from the GDP _________________. A. excluded; because it involves production
B. excluded; as no market transaction is involved
C. excluded; to avoid the double counting problem
D. excluded; as it involves a non-productive activity
E. excluded; because it...
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