True or False:

1. Gross Domestic Product (GDP) measures the value of all final goods and services produced

within a country's borders in a given period of time.

2. Net Domestic Product (NDP) is calculated by subtracting depreciation from GDP.

3. Personal Income is the total income earned by all factors of production in a given period of time.

4. Gross National Product (GNP) measures the value of all final goods and services produced by a

country's citizens, regardless of their location, in a given period of time.

5. In calculating GDP, only the market value of final goods and services is included, while

intermediate goods are excluded.

Match the following terms with their definitions:

Gross Domestic Product A. Total value of all final goods and services
produced within a country's borders
Net Domestic Product B. Total income earned by all factors of
production in a given period of time

Gross National Product C. GDP adjusted for depreciation

National Income D. Income received by households in a given
period of time after government transfers

Personal Income E. Total value of all final goods and services

produced by a country's citizens, regardless of
location

Multiple Choice:

10. Which of the following is not a component of GDP?

A) Consumption B) Government spending C) Investment D) Exports
11. Which of the following best describes Gross National Product (GNP)?
A) The total value of all goods and services produced within a country's borders.
B) The total value of all goods and services produced by a country's citizens, regardless of
location. C) The total value of all goods and services produced by a country's
businesses, regardless of location. D) The total value of all goods and services
produced by a country's government, regardless of location.
12. Which of the following is an example of a transfer payment?
A) A salary paid to a factory worker B) A pension paid to a retired person C) A payment for a
good or service D) A loan from a bank
13. Which of the following is an example of an intermediate good?
A) A car purchased by a consumer B) A tire purchased by an auto manufacturer C) A loaf of
bread purchased by a consumer D) A computer purchased by a business
14. Which of the following is not included in calculating National Income?
A) Rent B) Wages and salaries C) Interest and dividends D) Profits
15. Which of the following is an example of an income that is included in Gross National Product?
A) Income earned by a foreign worker in a country B) Income earned by a citizen of a country
while working abroad C) Income earned by a foreign company operating in a country D) Income
earned by a foreign investor from stocks in a country
16. Which of the following is not a method of calculating GDP?
A) Expenditure approach B) Income approach C) Value-added approach D) Asset approach
17. Which of the following is an example of a capital good?
A) A computer for personal use B) A hammer for a carpenter C) A TV for personal use D) A shirt
for personal use
18. In calculating GDP, which of the following is included?
A) Sales of used goods B) Financial transactions, such as buying stocks and bonds C) Government
transfer payments D) Illegal activities, such as drug trafficking
19. Which of the following is not a factor of production?
A) Land B) Labor C) Capital D) Money
20. Which of the following is an example of a factor that can affect a country's Gross National
Product?
A) The size of its population B) The amount of its government spending C) The amount of its
exports D) The level of its consumer debt
Workout question:

1.Calculate the GDP using the expenditure approach with the following information:
Consumption = 500, Investment = 200, Government spending = 300, Exports = 100, Imports =
50.

Answer

1. True
2. False
3. True
4. False
5. True
6. A
7. C
8. E
9. B
10. D (Exports are not a component of GDP, but they are a component of GNP)
11. B (The total value of all goods and services produced by a country's citizens, regardless of
location, is known as GNP.)
12. B (A pension paid to a retired person is an example of a transfer payment.)
13. B (A tire purchased by an auto manufacturer is an intermediate good.)
14. D (Profits are not included in calculating National Income.)
15. B (Income earned by a citizen of a country while working abroad is included in GNP.)
16. D (Asset approach is not a method of calculating GDP.)
17. B (A hammer for a carpenter is an example of a capital good.)
18. A (Sales of used goods are included in calculating GDP.)
19. D (Money is not a factor of production.)
20. C (The amount of a country's exports can affect its GNP.)
21. GDP = Consumption + Investment + Government Spending + (Exports - Imports)
Using the information given, we have:
GDP = 500 + 200 + 300 + (100 - 50) GDP = 500 + 200 + 300 + 50 GDP = 1,050
Therefore, the GDP using the expenditure approach is 1,050.