CH 20 Flashcards
A company’s wages and salaries are part of its value added. Suppose, however, that the cleaning and machinery maintenance that its own employees used to do are now contracted out to specialist firms who come in to do the same work more cheaply. What happens to the company’s value added when it “contracts out” such work? The company’s value added will
A. increase, since the company is saving money by losing employees and spending that money on new clients.
B. not change, since now these services are included in value added of specialist firms.
C. not change, since the money that the company saves from firing employees is almost equal to what it pays to specialist firms.
D. decrease, since the cleaning and machinery maintenance now become intermediate services purchased from other firms.
E. decrease, since the company will receive bad reports from fired employees.
F. increase, since the company doesn’t have to pay salary to its own employees who used to do this job.
D
A company’s wages and salaries are part of its value added. Suppose, however, that the cleaning and machinery maintenance that its own employees used to do are now contracted out to specialist firms who come in to do the same work more cheaply. What happens to value added in the economy as a whole? Value added in the economy as a whole will
A. decrease, since specialist firms produce the same work more cheaply.
B. increase, since all the firms increase their values added.
C. increase, since more firms are now involved in production process.
D. not change, since the company will even out its value in the long term.
E. decrease, since there will be less work for the specialist firms to do.
F. not change, since these services are now included in value added of specialist firms.
F
In Shoetown, a rancher takes $60 worth of inputs and produces animal skins, which he sells to the tanner for $420. The tanner then sells leather to the shoemaker for $690, and the shoemaker then sells $1,100 worth of shoes. The value added from these transactions is
A. $2270.
B. $1100.
C. $2500.
D. $750.
E. $1040.
E
Jodie’s Bakery generates a yearly revenue of $6200. Throughout the year Jodie spends $1600 on flour, $1100 on fruit, $400 on sugar & spices, $1400 on butter, and employs an assistant whom she pays $1100. Calculate the value of the annual output produced by Jodie’s Bakery using the value added method.
A. $600
B. $1700
C. $3100
D. $3500
E. $6200
B
The expenditure approach to measuring GDP shows that Is this equation a causal relationship, suggesting that an increase in any one of the right-hand-side terms causes an increase in GDP?
A. No, this equation shows reverse causation (i.e. an increase in GDP causes an increase in any one of the right-hand-side terms).
B. This equation is an example of bi-directional causation.
C. Yes, all right-hand-side terms are positively related to one another.
D. No, this equation shows correlation between any one of the right-hand-side terms and GDP.
E. Yes, an increase in any one of the right-hand-side terms causes an increase in GDP.
B
The expenditure approach to measuring GDP shows that It is common to hear commentators suggest that an increase in imports reduces Canadian GDP. Is this true?
A. No, since an increase in imports rises consumption expenditure, therefore increases Canadian GDP.
B. No, because there is a bi-directional causation between GDP and imports exists.
C. Yes, since according to the equation, an increase in imports reduces net exports, and therefore reduces GDP.
D. Yes, because import expenditure contributes to foreign countries’ GDP, but not Canadian GDP.
B
Which of the following transactions would not be included in the calculation of GDP on the expenditure side?
A. The purchase of a new boat by a household.
B. The purchase of an airplanean by Air Canada.
C. The purchase of ground beef by McDonald’s.
D. The purchase of a plumber’s services by a household.
C
The table below includes data for a one-year period required to calculate GDP from the expenditure side. What is the value of GDP?
A.$2,267.46
B.$2,335.22
C.$2173.73
D.$2163.89
E.$3979.78
A
Suppose a government collects $12.8 billion in various tax revenues, and pays $2.8 billion in debt interest, $8.6 billion in social security benefits, and $1.4 billion in government employee wages. What is the direct contribution to GDP coming from this government’s fiscal actions?
A. $2.8 billion
B. $12.8 billion
C. $4.2 billion
D. $11.4 billion
E. $1.4 billion
E
In 2015, the United Nations ranked Norway first on thE Human Development—a ranking of the “quality of life” in many countries. Yet Norway was not ranked first in terms of real per capita GDP. Explain how the two rankings can be different.
A. The Human Development Index formula doesn’t take into account real per capita GDP factor.
B. The Human Development Index uses nominal GDP values, but not real GDP.
C. The Human Development Index formula includes not only per capita GDP, but also non-economic factors.
D. This could be explained by the different ways of calculation of national income–expenditure and income approaches.
C
The table below shows the total output and prices for an economy that produces only two goods, potatoes and oil. Data is provided for the years 2000 and 2010. What is the real GDP for 2010 if 2000 is the base year?
A. $22,500
B. $6,700
C. $5,250
D. $11,200
E. $6,450
E
The table below shows total output for an economy over 2 years. The implicit GDP deflator in 2010, when 2009 is used as the base year, was approximately
A. 99.
B. 177.
C. 197.
D. 256.
E. 138.
C
The table below shows total output for an economy over 3 years.
* millions of dollars
** real GDP measured in millions of 2002 dollars
The growth rate of real output from 2008 to 2009 is
A. 1.61 percent.
B. 2.68 percent.
C. 3.75 percent.
D. 5.35 percent.
E. 6.42 percent.
D
Consider the following data for a hypothetical economythat produces two goods, cider and cheese. Using year 1 as the base year, the 70.72% increase in nominal GDP may be explained by a ___ % increase in real GDP and a ___ % increase in prices.
31.87%, 29.46%
The table to the right gives some national income figures for the country of Econoland. All figures are in dollars
Using the income approach, the value of GDP for Econoland is $___
Max is a carpenter and his shop generates a yearly revenue of $7,500. Max’s expenditures on various items are shown in the table above. The value of the annual output produced by Max’s shop, using the value added method, is equal to $___
4500
