Chapter 11 Measuring a Nation’s Production and Income

| November 9, 2018

3)
Depreciation is subtracted from GNP to determine
A)
net income.
B)
net national product (NNP).
C)
net GDP.
D)
net imbalance on exports.

4)
Which of the following is a category of national income?
A)
net interest
B)
corporate profits
C)
rental income
D)
all of the above

5)
Which of the following is the largest component of national income?
A)
net interest
B)
corporate profits
C)
rental income
D)
compensation of employees by firms

6)
Which of the following is NOT a component of value added of a firm?
A)
expenditures on intermediate goods
B)
profits
C)
wages
D)
interest

7)
The amount of income that households keep after paying taxes is
A)
national income.
B)
personal income.
C)
personal disposable income.
D)
value added income.

8)
Personal income and personal disposable income refer to payments ultimately
flowing to
A)
firms.
B)
households.
C)
governments.
D)
foreigners.

9)
A firm’s value added can be measured as the value of its
A)
profits.
B)
purchases of inputs from other firms.
C)
total sales.
D)
total sales, less purchases from other firms.

10)
If Cassie’s Coffee House purchases 42 cents worth of ingredients and spends 28
cents on wages per cup of coffee to produce an 89 cent cup of coffee, then
Cassie’s Coffee House’s value added per cup of coffee is
A)
19 cents.
B)
28 cents.
C)
47 cents.
D)
61 cents.

11)
If Cassie’s Coffee House purchases 33 cents worth of ingredients and spends 36
cents on wages per cup of coffee to produce an 89 cent cup of coffee, then
Cassie’s Coffee House’s contribution to GDP is ________ per cup of coffee.
A)
20 cents
B)
33 cents
C)
36 cents
D)
56 cents

Recall
the Application about the size of Wal-Mart to answer the following question(s).
During 2008, Wal-Mart’s sales were approximately $374 billion, or roughly 2.6%
of U.S. GDP, and its cost of sales was $286 billion.

12)
Recall the application. In listing both the amount and cost of Wal-Mart’s 2008
sales, this Application is addressing the economic concept of
A)
real versus nominal GDP.
B)
GDP as a measure of welfare.
C)
chain-weighted indexes.
D)
value added.

13)
Recall the application. Why is the value of Wal-Mart’s 2008 sales NOT an
accurate measurement of its actual sales impact on the U.S. economy?
A)
The sales figure did not account for chain-weighted inflation measurements.
B)
The sales figure includes the value of purchases from other firms.
C)
The sales figure did not take into account the recession of 2008.
D)
The sales figure was in nominal, not real, dollars.

14)
Recall the application. By using a value-added approach to measure Wal-Mart’s
sales impact on the economy, we are
A)
using a chain-weighted index.
B)
avoiding double-counting.
C)
including GDP as a measure of welfare.
D)
excluding the net foreign sector.

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