Chapter 5: National-Income Accounting

Multiple Choice Questions

MEASURES OF OUTPUT

1. The primary purpose of the national-income accounts is to assist: A) Market investors in making more profitable investments. B) Wage earners in maximizing their incomes. C) Economic historians to better understand the economic past. D) Government policy makers in formulating economic policies and evaluating performance.

Answer: D Type: Definition Page: 93

2. Prices are used in national accounting to: A) Add the values of output from different sectors of the economy. B) Compare the value of output of one period with that of another. C) Provide an index to measure the rate of inflation. D) All of the above.

Answer: D Type: Basic Understanding Page: 93

3. The GDP is: A) C + I + G + (X - IM). B) The sum of value added at every stage of the production process. C) The total market value of final goods and services. D) All of the above.

Answer: D Type: Definition Page: 93

4. The total market value of all final goods and services produced in an economy during a given time period is the definition of: A) Gross domestic product. B) Net domestic product. C) National income. D) Personal income.

Answer: A Type: Definition Page: 93

5. GDP can be calculated by: A) Adding up the spending on goods and services by business, government, households, and foreigners, and subtracting imports. B) Adding up the "value added" at every stage of production in the economy. C) Adding up all of the receipts of households, government, and business. D) All of the above.

Answer: D Type: Definition Page: 94

6. The GDP can be calculated as: A) The sum of value added and intermediate goods. B) The sum of final