TEXT BANK QUIZ 2

1) national income accounting a set of rules and definitions for measuring the
economic activity of a country
TRUE.
2) Gross domestic product (GDP) is the total market value of all final goods and
services produced within a country in a given of period
TRUE.
3) GDP calculation included intermediate goods and services
FALSE.
4) The market value of a good or service is determined by multiplying the
quantity produced by the price at which it is sold
TRUE.
5) GDP calculation included the total market value of all goods and services
produced in the previous years.
FALSE
6) Purchases of used goods included in GDP calculation
FALSE
7) GDP calculation includes sales of financial assets, such as stocks and bonds,
intermediate goods
FALSE
8) GDP calculation includes final output produced abroad by domestic firms
FALSE
9) GPD is a stock variable
FALSE (flow)
10) GDP calculation includes goods and services that are bought for resale or
further processing
FALSE
11) GDP calculation includes government transfer payments, such as social
pensions or unemployment benefits
FALSE
12) GDP calculation includes the value of household work or volunteer work
FALSE
13) GDP calculation includes imports, illegal activities such as drug
trafficking
FALSE
14) GDP calculation spending on defense and national security
TRUE
15) GDP is a measure of final output in both the private and public sectors
TRUE
16) GDP includes the value of exports, the value of non-material goods, such
as education or healthcare
TRUE
17) GDP calculation includes the value of used goods that are sold in the
market
FALSE
18) GDP has three alternative approaches to measuring GDP all of them will
produce the same value of GDP (the value-added approach, the spending
approach, and the income approach)
TRUE
19) The value-added approach defines GDP as the sum of the value-added at
all stages of production
TRUE
20) In the national income accounts, Personal consumption spending is the
largest component of GDP
TRUE
21) Net exports of goods and services are positive if exports are greater than
imports
TRUE
22) The fundamental identity of national income accounting is total
production = total income = total spending
TRUE
23) Government transfer payments are included in the calculation of GDP
FALSE
24) In the value-added approach, GDP can be calculated by adding up the
value-added at each stage of production and it is based on the idea that the
value of a product is equal to the sum of the value-added.
TRUE
25) Personal consumption spending includes purchases of new houses by
domestic household
FALSE
26) Capital consumption allowance (CCA) is also known as depreciation
TRUE
27) Social Security benefits and unemployment insurance are included in the
calculation of GDP.
FALSE
28) The value-added approach includes the value of all intermediate goods
used in the production process in the calculation of GDP
FALSE
29) The spending approach to measuring GDP includes spending on services,
but not spending on goods
FALSE
30) In the spending approach, the government purchases the goods and
services that are included in the government spending, but government
transfer payments are not
TRUE
 31) The word final in the definition of GDP refers to not counting in
intermediate goods and services
TRUE
32) Intermediate goods and services are excluded from GDP because their
inclusion would involve double counting
TRUE
33) Government transfer payments do not enter the gross domestic accounts,
but government spending does
TRUE
34) GDP capture changes in both quantity and prices
TRUE
35) GDP is the value of all goods and services produced in the economy
FALSE

36) GDP is a flow because it measures production over a period of time

37) Gross investment equals net investment plus depreciation
38) Depreciation is defined as the decrease in the capital stock because of wear
and tear
39) Gross investment equals net investment + replacement investment
40) The production approach to calculating GDP by adding up the total value
of all goods and services produced within a country
41) The expenditure approach to measuring GDP by adding up the total
amount of money spent on final goods and services within a country
42) Which of the following categories is excluded from personal consumption
spending is purchases of exports
43) Which of the following categories is included in personal consumption
spending is purchases of durable goods
 44) Which is the following categories is included in gross private domestic
investment spending is purchases of new houses
45) Which of the following categories is not included in personal consumption
spending is purchases of intermediate goods
46) What is the fundamental identity of national income accounting Total
production = total income = total spending
47) The difference between gross private domestic investment spending and
personal consumption spending is gross investment includes purchases of new
capital goods while personal spending does not
48) Which of the following is a component of government spending investment
in highways and bridges
49) What is not included in government spending government transfer
payment
50) Gross investment includes depreciation while net investment does not it is
the difference between them
51) The category that included in gross investment purchases of new houses
and new capital goods
52) The spending approach to measuring GDP defines GDP as the total
spending on final goods and services newly produced within a domestic
economy during a certain time period
53) GDP = C + I + G + NX this equation represents the spending approach to
measuring GDP
54) Used final goods, durable goods, non-durable goods are category is
included from personal consumption spending
55) The purpose of national income accounting to measure the economic
activity of a country
56) The meaning of “flow variable “ in the definition of GDP Expressed per
unit of time
57) Final goods are products that are bought by their ultimate or final users,
while intermediate goods are products that are used in the production of final
goods.
58) Intermediate goods and services not counted in GDP to avoid double
counting
59) the meaning of “total market value “is the quantity of final goods and
services multiplied by their respective market prices
60)Total value added for the domestic economy in a year equals nominal GDP
61) The total market value of final output of goods and services computed at
existing prices is called nominal GDP
62) Using the spending approach, gross domestic product equals the sum of
personal consumption spending, private investment spending, government
spending, and net exports of goods and services
63) Gross private investment minus capital consumption allowance equals net
private investment
64) Two approaches of measuring GDP are the income approach and the
spending approach.