Chapter 20

Question 1

In national-income accounting, the value of intermediate products

a) should always be counted as part of GDP in the expenditure approach
b) should be added to the value of other inputs in determining a frim’s contribution to GDP
d) must equal the value added by the firm
e) is counted as factor income in the calculation of GDP from the income side

Answer 1

b) should be subtracted from the value of final goods in determining a firm’s total value added

Question 2

In shoetown, a rancher takes $0 worth of inputs and produces animal skins which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200 worth of shoes. The value added from these transactions

a) $800
b) $1000
c) $1200
d) $2300
e) $2500

Answer 2

c) $1200

Question 3

Which of the following statements about national-income accounting is correct?

a) the total value added in the economy is equal to the sum of all components in the circular flow of expenditure and income
b) the value of the expenditure side is calculated by adding up all the income claims generated by the act of production
c) GDP on the expenditure side is calculated by adding up all the income claims generated by the act of production
d) GDP on the income side is calculated by adding up total expenditure for each of the main components of final output
e) GDP from the expenditure side and GDP from the income side differ by the amount of investment in the economy

Answer 3

b) the value of the expenditure on a nation’s output is equal to the total income claims generated by producing that output

Question 4

Consider the circular flow of expenditure and income in the canadian economy. which of the following is an injection into the circular flow?

a) loblaws imports cheese from switzerland
b) you pay GST on your purchases
c) you contribute to your compnay pension plan
d) a toyota plant in canada imports car parts from japan
e) the government of canada purchases new coast guard ships made in Halifax

Answer 4

e) the government of canada purchases new coast guard ships made in halifax

Question 5

GDP from the expenditure side is equal to the sum of

a) C + I + G + (IM - X)
b) C + I + G - net exports
c) C + I + G + (X - IM)
d) C + I + G
e) C + I + net exports

Answer 5

c) C + I + G + (X - IM)

Question 6

when calculating GDP from the expenditure side, Ga comprises

a) only expenditures made by the federal government
b) government purchases of goods and services, excluding transfer payments
c) only purchases of goods and not services
d) only purchases of goods and not services
d) only expenditures made by provincial and local governments
e) government expenditures on goods and services, including transfer payments

Answer 6

b) government purchases of goods and services, excluding transfer payments

Question 7

suppose a government collects $12 billion in various tax revenues, and pays $2.5 billion in debt interest, $9 billion in social security benefits, and $0.5 billion in government employee wages. What is the direct contribution to GDP coming from this government’s fiscal actions?

a) $0.5 billion
b) $2.5 billion
c) $3.0 billion
d) $11.5 billion
e) $12.0 billion

Answer 7

a) $0.5 billion

Question 8

8) with regard to national-income accounting, which of the following statements regarding investment (Ia) is correct?
a) the capital shock includes investment in stocks and bonds
b) the accumulation of inventories does not count as current investment
c) rental payments are included as investment expenditures
d) depreciation refers to funds used to increase the existing stock of capital
e) housing construction is classified as investment expenditure rather than consumption expenditures

Answer 8

e) housing construction is classified as investment expenditure rather than consumption expenditure