National Income Accounting: Master the Concepts and Methods

Question 1

Which of the following is not directly included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Value of imports

Answer

Consumption expenditure by households

Answer

Government expenditure on public services

Answer

Investment in new factories

Question 2

Gross Domestic Product (GDP) measures the total monetary value of:

Accepted Answer

All goods and services produced within a country's borders in a year

Answer

All income earned by citizens of a country in a year

Answer

All wealth accumulated by a country in a year

Answer

All taxes collected by a government in a year

Question 3

Net National Income (NNI) is calculated by:

Accepted Answer

Subtracting depreciation from Gross National Income (GNI)

Answer

Adding net factor income from abroad to GNI

Answer

Multiplying GNI by the population

Answer

Dividing GNI by the price level

Question 4

Economic growth refers to the:

Accepted Answer

Sustained increase in real GDP over time

Answer

Increase in the number of people employed

Answer

Reduction in the rate of inflation

Answer

Improvement in the balance of payments

Question 5

Value added by a firm is determined by:

Accepted Answer

Subtracting the cost of intermediate inputs from sales revenue

Answer

Adding labor costs to profits

Answer

Multiplying total revenue by the profit margin

Answer

Dividing total costs by the number of employees

Question 6

Which of the following is a method used to adjust GDP for inflation?

Accepted Answer

Real GDP

Answer

Deflation

Answer

Nominal GDP

Answer

Purchasing Power Parity

Question 7

Which economic indicator measures the average change in prices for a basket of goods and services over time?

Accepted Answer

Inflation rate

Answer

Unemployment rate

Answer

GDP growth rate

Answer

Interest rate

Question 8

The value of goods and services produced in an economy minus depreciation is known as:

Accepted Answer

Net National Product (NNP)

Answer

National Income (NI)

Answer

Personal Income (PI)

Answer

Disposable Income (DI)

Question 9

Which component is excluded from Gross Domestic Product (GDP)?

Accepted Answer

Intermediate goods and services

Answer

Household consumption expenditure

Answer

Government expenditure

Answer

Gross investment

Question 10

The expenditure approach to calculating GDP includes:

Accepted Answer

Consumption + Investment + Government spending + (Exports - Imports)

Answer

Consumption + Investment + Government spending + Exports

Answer

Consumption + Investment + Government spending - Imports

Answer

Consumption + Government spending + (Exports + Imports)

Question 11

Real GDP adjusts for:

Accepted Answer

Inflation

Answer

Population growth

Answer

Technological advancements

Answer

Changes in exchange rates

Question 12

Keynesian economics emphasizes that:

Accepted Answer

Demand influences economic output

Answer

Supply is the primary determinant of economic outcomes

Answer

Government intervention is generally unnecessary

Answer

Free markets always lead to optimal economic outcomes

Question 13

Which fiscal policy measure aims to stimulate economic growth?

Accepted Answer

Cutting taxes

Answer

Increasing taxes

Answer

Reducing government spending

Answer

Raising interest rates

Question 14

The Consumer Price Index (CPI) measures:

Accepted Answer

The change in prices of a representative basket of goods and services commonly purchased by households

Answer

The change in prices of all goods and services produced in an economy

Answer

The change in import prices

Answer

The change in stock market prices

Question 15

Which of the following is NOT included in Gross Domestic Product (GDP)?

Accepted Answer

Imports

Answer

Household consumption

Answer

Business investment

Answer

Government expenditures

Question 16

How is GDP related to inflation?

Accepted Answer

The relationship between GDP and inflation can vary depending on economic circumstances.

Answer

GDP and inflation are always positively correlated.

Answer

GDP and inflation are always negatively correlated.

Answer

There is no relationship between GDP and inflation.

Question 17

How does disposable income differ from personal income?

Accepted Answer

Disposable income is personal income after taxes and other deductions.

Answer

Personal income is disposable income after taxes and other deductions.

Answer

Disposable income includes taxes and other deductions, while personal income does not.

Answer

Personal income includes taxes and other deductions, while disposable income does not.

Question 18

Which of the following is excluded from the direct calculation of GDP?

Accepted Answer

Personal saving

Answer

Consumption

Answer

Investment

Answer

Government spending

Question 19

The distinction between nominal GDP and real GDP lies in:

Accepted Answer

The adjustment for inflation

Answer

The selection of a base year for comparison

Answer

The inclusion of different goods and services

Answer

The overall size of the economy

Question 20

In comparison to GDP, Gross National Income (GNI) incorporates:

Accepted Answer

Income earned by domestic residents abroad

Answer

Income generated by foreign residents domestically

Answer

Government transfer payments

Answer

Depreciation expenses

Question 21

The measure that compares actual GDP to potential GDP is known as:

Accepted Answer

Output Gap

Answer

Inflation Rate

Answer

Unemployment Rate

Answer

Consumer Price Index

Question 22

Which of the following is **excluded** from the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Goods and services produced outside the domestic economy

Answer

Spending by households on goods and services

Answer

Spending by businesses on new capital goods

Answer

Spending by the government on goods and services

Question 23

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Government transfer payments

Answer

Final consumption expenditure

Answer

Gross investment

Answer

Net exports

Question 24

The total market value of all final goods and services produced within a country's borders during a specific period is known as:

Accepted Answer

Gross Domestic Product (GDP)

Answer

Gross National Income (GNI)

Answer

Net National Income (NNI)

Answer

National Income (NI)

Question 25

Double counting in GDP accounting refers to:

Accepted Answer

Counting the value of intermediate goods multiple times

Answer

Excluding final goods from GDP

Answer

Including depreciation in GDP

Answer

Measuring only services in GDP

Question 26

Which economic indicator is most closely associated with measuring the overall performance of an economy?

Accepted Answer

GDP growth rate

Answer

Inflation rate

Answer

Unemployment rate

Answer

Exchange rate

Question 27

Using GDP per capita as a measure of economic well-being:

Accepted Answer

Can provide insights into average living standards

Answer

Is always an accurate representation of well-being

Answer

Should be avoided as it is a misleading indicator

Answer

Only reflects the income of the wealthiest individuals

Question 28

Economic indicators play a vital role in macroeconomic analysis. What key economic factors do they provide insights into?

Accepted Answer

Economic growth

Accepted Answer

Inflation

Accepted Answer

Unemployment

Answer

Fiscal policy

Question 29

What is the formula for calculating GDP using the expenditure approach?

Accepted Answer

GDP = Consumption + Investment + Government Spending + Net Exports

Answer

GDP = Consumption - Investment + Government Spending + Net Exports

Answer

GDP = Consumption + Investment - Government Spending + Net Exports

Answer

GDP = Consumption + Investment + Government Spending - Net Exports

Question 30

What is the general relationship between GDP and unemployment?

Accepted Answer

The relationship can vary depending on economic circumstances

Answer

GDP is positively correlated with unemployment

Answer

GDP is negatively correlated with unemployment

Answer

There is no direct relationship between GDP and unemployment

Question 31

Which expenditure component is included in the Gross Domestic Product (GDP) calculation?

Accepted Answer

Consumption expenditure

Answer

Government transfer payments

Answer

Foreign aid received

Answer

Net capital inflow

Question 32

The difference between Gross Domestic Product (GDP) and Net National Income (NNI) primarily arises from excluding:

Accepted Answer

Net factor income from abroad

Answer

Indirect taxes

Answer

Subsidies

Answer

Depreciation

Question 33

A notable advantage of using GDP as an indicator of economic well-being is that it:

Accepted Answer

Provides a comprehensive measure of production

Answer

Remains unaffected by inflation

Answer

Is straightforward to calculate

Answer

Considers income distribution disparities

Question 34

Which economic policy is typically employed to stimulate aggregate demand?

Accepted Answer

Expansionary fiscal policy

Answer

Currency devaluation

Answer

Contractionary monetary policy

Question 35

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Financial asset holdings

Answer

Government spending on goods and services

Answer

Business investment

Answer

Consumer spending on goods and services

Question 36

How is real GDP calculated?

Accepted Answer

Nominal GDP divided by the GDP deflator, multiplied by 100

Answer

Nominal GDP plus the GDP deflator

Answer

Nominal GDP minus the GDP deflator

Answer

GDP deflator minus Nominal GDP

Question 37

What is the key difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP reflects the value of goods and services at current prices, while real GDP reflects their value at constant prices (adjusted for inflation).

Answer

Nominal GDP includes investment spending, while real GDP does not.

Answer

Real GDP is considered more accurate than nominal GDP.

Question 38

What is the primary purpose of the GDP deflator?

Accepted Answer

To adjust nominal GDP for the effects of inflation, providing a more accurate measure of real economic growth.

Answer

To calculate the total value of all goods and services produced in an economy.

Answer

To directly convert nominal GDP into real GDP.

Answer

To facilitate comparisons of GDP across different countries.

Question 39

Which of these is a macroeconomic indicator directly derived from GDP data?

Accepted Answer

Gross domestic product per capita

Answer

Stock market index

Answer

Consumer price index

Answer

Unemployment rate

Question 40

What is the difference between gross investment and net investment?

Accepted Answer

Gross investment includes the replacement of depreciated capital, while net investment only accounts for new additions to the capital stock.

Answer

Gross investment is used to calculate GDP, while net investment is not.

Answer

Net investment is always higher than gross investment.

Question 41

Which of the following is an example of an intermediate good?

Accepted Answer

Steel used in the production of cars

Answer

Food consumed by households

Answer

Cars purchased by consumers

Answer

Electricity used to power homes

Question 42

What is the key principle behind the Keynesian multiplier effect?

Accepted Answer

An initial increase in spending, such as government investment, leads to a larger overall increase in GDP due to subsequent rounds of spending and income generation.

Answer

A decrease in spending triggers a larger decrease in GDP.

Answer

An increase in investment leads to a decrease in consumption spending.