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Exam 7: Measuring the Economys Output

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Question 1

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Which of the following are included and which are excluded in calculating this year's GDP? Explain in each instance. (a)A monthly scholarship cheque received by an economics student. (b)The purchase of a new corncrib by a farmer. (c)The purchase of a used tractor by a farmer. (d)The cashing in of a savings bond. (e)The services of a mechanic in fixing the radiator in his own car. (f)Canada Pension Plan cheques received by a retired person. (g)An increase in business inventories. (h)Government purchase of missiles. (i)A barber's income. (j)Income received from interest on a corporate bond. (k)Cash received from selling a corporate bond.

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(a)Scholarships are viewed as transfer p...

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Question 2

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What adjustments need to be made to go from net domestic income at factor cost to GDP?

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When we add up wages,salaries and supple...

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The following is a list of figures for a given year in billions of dollars.Using this data,compute: (a)GDP by the Expenditure Method; (b)GDP by the Income Method; (c)Net exports;and (d)Net Investment.

What are the components of net domestic income at factor cost? What is the relative share of GDP in 2011 going to: Wages,salaries and supplementary labour income;and to Profits of corporations and government enterprises before taxes?

If Canada doubled its real GDP,it would be a much less liveable society than it is today.Explain this view.

Define GDP and its characteristics.

Differentiate between nominal and real GDP.

Explain the difference between final and intermediate goods,and give an example of each.

The expanding "underground" economy creates problems for economic policy makers.Explain.

The next four questions refer to the following price and output data over a five-year period for an economy that produces only one good.Assume that year 2 is the base year.

Why do economists worry about "multiple counting" and calculate only the "value added" in the production process?

Firms A-E are involved in the production of some good.What is the total value added by all the firms in the production of this good? What did each firm add separately in value and what does it total?

Identify at least four transactions and other variables,which are not included in the GDP.

Give the three categories,which comprise gross investment;and explain the difference between them.

The following table shows the price of a specific stereo receiver for a five-year period.Using Year 3 as the base year,calculate the price index for each year.

The following data show nominal GDP and the appropriate price index for several years.Compute real GDP for each year and indicate whether you have "inflated" or "deflated" nominal GDP in finding real GDP.All GDP are in billions.

What are the two basic ways of deriving real GDP from nominal GDP?

Discuss the pros and cons of GDP as a measure of the economy's output performance and as a measure of its standard of living.

Of what use is national income accounting to economists and to policy makers?

Net investment can be positive,negative,or zero,but gross investment can never be less than zero.Explain.