Problem Set 2

Chapter 2: Measuring a Nation’s Income

1. Calculate GDP:
Consumption (C) 310 Exports (X) 305 Imports (M) 245
Investment (I) 115 Government purchases (G) 60
2. Norway’s real GDP for 2010 is $900 billion. If the economic growth rate from 2010 to
2011 is 5%, what is the real GDP for 2011?
3. Using the table below which shows the total output for the US economy over 2 years,
calculate (a) nominal GDP for 2007 (b) real GDP for 2007 using 2006 as the base year
(c) economic growth from 2006 to 2007.
Year Item Price Quantity
Ice cream $4 400 units
2006 Waffle $2 200 units
Cherries $0.75 100 units
Ice cream $4.25 500 units
2007 Waffle $2.5 300 units
Cherries $1 50 units
4. Canada’s nominal GDP increased 6% from 2001 to 2002. Canada’s real GDP decreased
2% from 2001 to 2002. Explain.
5. Classify the following transactions into one of the four components of GDP.
a. Honda Vietnam enterprise sells Wave car to a female student.
b. Honda Vietnam enterprise sells Dream car to a student in the Philippines.
c. Honda Vietnam enterprise sells Dream car to Hanoi Public Security Department.
d. Honda Vietnam enterprise sells a new Civic Car from factory to Petro Vietnam.
e. Honda Vietnam enterprise transferred the Dream produced on the afternoon of
December 31 to inventory.
f. On January 1, Honda Vietnam enterprise took the Dream produced last year to sell to
consumers.
6. A nation has the following information (billion USD)
Wage: 400 Rent: 100 interest: 50 Profit: 150
Indirect tax: 60 NIA: 60
Investment: 250 Net investment: 150

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 Government expenditure: 60 Undivided profit: 30
Consumption: 500 Export: 200 Import: 150
Government’s subsidy: 20 Personal tax: 25
a. Calculate GDP using expenditure method and distribution method
b. Calculate GNP.
c. Calculate NNP, NI, PI, DI.
7. Suppose a country produces only 3 products A, B, and C as information in the table:
a. Calculate nominal GDP.
b. Suppose Year 1 is the base year. Calculate real GDP.
c. Calculate inflation rate of Year 2 and Year 3 using GDP def.

Service A Good B Good C

Year
QA PA QB PB QC PC
1 50 20 100 10 10 30
2 50 21 110 15 15 30
3 55 22 120 15 20 32

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 MULTIPLE CHOICES
1. Are these activities part of GDP?
a. Miller picks flowers in her garden.
b. Fruits are sold on the market.
c. Patients, hurt in a car accident, are treated in a hospital.
d. Pensioners do community work for free.
2. At long-run macroeconomic equilibrium, ________.
a. an inflationary gap exists
b. real GDP equals potential GDP
c. a recessionary gap exists
d. real GDP is less than potential GDP but is as close as it is possible to be
3. Full-employment equilibrium occurs when
a. real GDP exceeds potential GDP.
b. real GDP equals potential GDP.
c. potential GDP exceeds real GDP.
d. a result of an increase in long-run aggregate supply.
4. GDP is the sum of:
a. Consumption, net investment, government spending and net exports
b. Wages, rent, profits, depreciation, indirect taxes
c. Total value added of enterprises
d. These statements are correct
5. Which of the following is an intermediary cost?
a. Workers' wages
b. Depreciation of warehouse
c. Freight rental
d. b and c are correct
6. Calculated by income, GDP is the total:
a. Wages, income tax, interest, rent, profit
b. Wages, benefits, depreciation, interest, rent
c. Wages, interest, rent, profits, depreciation and indirect taxes
d. Interest, rent, profit, depreciation, indirect tax
7. Which statement is wrong: Real GDP is an indicator to measure:
a. Economic development
b. The value of an economy's final goods
c. The value added of an economy's goods and services
d. The income of an economy
8. Which one is not direct tax?
a. Profit tax
b. Personal income tax
c. Value added tax
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 d. a, b and c
9. Which of the following is often used to measure economic growth:
a. Real GDP
b. Nominal GDP
c. GNP
d. NI
10. If Vietnam has a GDP greater than GNP then:
a. The production value that foreigners create in Vietnam is more than the production
value that Vietnamese people create abroad.
b. The production value that Vietnamese people create in foreign countries is more than
the production value that foreigners create in Vietnam.
c. Real GDP is bigger than nominal GDP
d. Real GNP is greater than the nominal GNP
e. The value of intermediate goods is greater than the value of final goods
11. When calculating GDP or GNP, which of the following two items is incorrect?
a. Government spending and wages
b. Profits of the company and interest received from lending money to the company
c. Investment spending and government spending
d. Household consumption and government spending
12. Which of the following items is included in GDP?
a. Housework
b. Revenue from the sale of illegal drugs
c. Revenue from the sale of intermediate products
d. Consulting service
13. If a shoemaker buys a piece of leather for 100,000 dong, a set of needles for 10,000 dong,
and uses them to sew shoes that sell to consumers for 500,000 dong, the value of his
contribution to GDP is:
a. 110,000 dong
b. 390,000 dong
c. 500,000 dong
d. 600,000 dong
14. A director lost his job because the company made a loss. He received a severance
allowance of 50 million dong instead of a salary of 100 million dong/year before. His
wife started working with a salary of 10 million dong/year. His daughter still works as
before, but increases the contribution to her parents by 5 million dong/year. This family's
share of gross national income for the year will be reduced:
a. 50 million dong
b. 65 million dong
c. 75 million dong
d. 85 million dong
e. 90 million dong
15. Which of the following is not included in GDP under the expenditure method?
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 a. Legal consulting services that a family hires
b. House cleaning services that a family hires
c. A new bridge was built with the city budget
d. Cotton yarn is purchased by a textile company
e. Macroeconomics textbook published by UEL
16. How will the $50,000 your family spend on a BMW made in Germany be included in
Vietnam's GDP according to the spending approach?
a. Investment increased by $50,000 and net exports decreased by $50,000
b. Consumption increased by $50,000 and net exports decreased by $50,000
c. Net exports fell by $50,000
d. Net exports increased by $50,000
e. No impact because this car is made abroad
Use the data on copper wire production below to answer questions 17 to 20.
Giá trị đầu vào mua từ DN
Stage Revenue
khác
I Mining copper ore 100 0
II Producing copper ingots 160 100
III Producing copper wire 210 160
IV Selling to the consumers 300 210
17. The total value of intermediate products is:
a. 210 b. 300 c. 470 d. 770
18. The whole process of producing copper wire and selling it to the final consumers
increases the national income:
a. 210 b. 300 c. 470 d. 770
19. The value added created in stage III is:
a. 50 b. 90 c. 160 d. 210
20. In the final product value, the value of copper ore was taken into account:
a. 1 times b. 2 times c. 3 times d. 4 times