2.What is national income? List its components.
3. Define GDP and its characteristics.
4. What is the definition of GDP? How would the value of output produced at an American-owned
factory in the U.S. and a foreign-owned factory in the U.S. be treated in GDP accounting?
7. Why do economists worry about “multiple counting” and calculate only the “value added” in the
production process?
12. Which of the following are included and which are excluded in calculating this year’s GDP?
Explain in each instance.
(a) Social Security checks received by a retired person
(b) An increase in business inventories
(c) The income of a tax accountant working for a business
(d) Income received from interest on a corporate bond
(e) The cashing in of a U.S. savings bond
21. Define net exports.
22. What are the components of national income? What is the relative share going to wages and
salaries and to corporate profits?
30. How is a price index computed?
106. Nominal GDP is:
A) the sum of all monetary transactions that occur in the economy in a year.
B) the sum of all monetary transactions involving final goods and services that occur in the economy
in a year.
C) the amount of production that occurs when the economy is operating at full employment.
D) money GDP adjusted for inflation.
107. Real GDP refers to:
A) the value of the domestic output after adjustments have been made for environmental pollution and
changes in the distribution of income.
B) GDP data that embody changes in the price level, but not changes in physical output.
C) GDP data that reflect changes in both physical output and the price level.
D) GDP data that have been adjusted for changes in the price level.
108. Real GDP measures:
A) current output at current prices. C) current output at base year prices.
B) base year output at current prices. D) base year output at current exchange rates.
109. Nominal GDP is adjusted for price changes through the use of:
A) the Consumer Price Index (CPI). C) the Producer Price Index (PPI).
B) the GDP price index. D) exchange rates.
