Multiple Choice Answers

Question 1
The GDP is the value of all final goods and services produced:
A. within the nations boundaries.
B. by domestically owned companies.
C. by citizens of the country.
D. by domestically controlled companies.

Question 2
Net domestic product is usually preferred to GDP by economists because net national product:
A. includes depreciation.
B. excludes depreciation.
C. includes indirect business taxes.
D. excludes indirect business taxes.

Question 3
The largest item amount among those listed here is:
A. national income.
B. net interest.
C. net domestic product.
D. corporate profits.

Question 4
Which is NOT counted in GDP?
A. A Social Security check sent to a retiree
B. Government spending on highway building
C. Money spent on an airline ticket
D. Money spent by a company to build a new office park

Question 5
The smallest component of national income is:
A. rent.
B. interest.
C. profits.
D. salaries and wages.

Question 6
Our GDP includes all the output produced by Americans:
A. and foreigners within our borders.
B. within our borders.
C. within our borders and abroad.
D. within our borders and by American-owned, multinational companies with offices and factories abroad.

Question 7
Which of the following is the best example of an intermediate product?
A. A road
B. Steel
C. Bread
D. A TV set

Question 8
Which of the following would increase GDP?
A. More imports
B. Additional leisure time
C. Government removing more litter
D. People engaging in more “do-it-yourself” projects

Question 9
National income accountants can avoid multiple accounting by:
A. including transfers in their calculations.
B. counting both intermediate and final goods.
C. only counting final goods.
D. only counting intermediate goods.

Question 10
The concept of “net domestic investment” refers to:
A. the amount of machinery and equipment used up in producing the GDP in a given year.
B. the difference between the market value and book value of outstanding capital stock.
C. gross domestic investment less net exports.
D. total investment less the amount of investment goods used up in accomplishing the year’s production.

Question 11
GDP can increase at a faster rate than real GDP only if:
A. there is inflation.
B. the unemployment rate is increasing.
C. the value of the dollar is stable.
D. the population is growing.

Question 12
Which statement is true?
A. GDP is a virtually perfect measure of national output.
B. GDP takes into account pollution, crime, and even personal satisfaction.
C. GDP is a single number that seeks to measure our national output.
D. There is no relationship between our GDP and our national output.

Question 13
Which of the following is an intermediate good or service?
A. A paint gun purchased by Handy Andy
B. A dozen boxes of Girl Scout cookies purchased by your instructor
C. A computer purchased by a farmer in Smallville, Kansas
D. Glue purchased by McGraw-Hill to bind your textbook

Question 14
__________ is the market value of a firm’s output less the value of the inputs the firm has bought from the previous seller.
A. Value added
B. Net Domestic Product
C. Real GDP
D. Genuine Progress Index

Question 15
Which is the smallest?
A. Net domestic product
B. National income
C. Government expenditures
D. Net exports

Question 16
GDP is a less than perfect measure of economic well-being. It may be faulted for each of these practices EXCEPT that it:
A. does not take leisure time into account.
B. involves multiple counting.
C. does not take psychic costs into account.
D. does not take psychic income into account.

Question 17
Net domestic product is equal to:
A. gross national product.
B. the inflation rate.
C. national income (NI) plus corporate profits taxes.
D. NI plus indirect business taxes.

Question 18
We do NOT count __________ as part of GOP
A. price increases
B. transfer payments
C. final goods
D. depreciation

Question 19
About seven out of ten dollars of our GDP is spent on:
A. government purchases.
B. net exports.
C. investment spending.
D. consumer goods.

Question 20
The value actually earned by members of households who supply the inputs necessary to produce GDP is called:
A. net investment.
B. national income
C. personal income.
D. disposable income.