Question 1

Which of the following would increase GNP in the United States?

Accepted Answer

GNP (Gross National Product) measures the value of goods and services produced by a country's residents, regardless of where they are located. An increase in the production of U.S.-owned General Motors cars made in Mexico would increase the U.S. GNP because it involves production by U.S. residents (General Motors) abroad.

Question 2

A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

Accepted Answer

If a significant fraction of domestic production takes place in foreign-owned factories and facilities, it means that the profits generated by those facilities will go to the foreign owners, rather than staying within the country. Therefore, Gross Domestic Product (GDP), which measures the total value of goods and services produced within a country's borders, will be larger than Gross National Product (GNP), which measures the total value of goods and services produced by a country's residents, including those who are located abroad. Thus, the country is likely to have a situation where GDP is much larger than GNP.

Question 3

If a German firm produces cars in the United States,that production should count towards

Accepted Answer

GDP measures the economic value of all goods and services produced within a country's borders. Since the German firm is producing cars in the United States, that production is contributing to the U.S. economy, and therefore should be counted towards U.S. GDP. It is not counted towards German GDP because the production is occurring outside of Germany's borders. GNP, on the other hand, measures the economic value of goods and services produced by a country's residents, regardless of where the production occurs. Since the German firm is not a resident of the United States, their production would not count towards U.S. GNP.

Question 4

Which of the following is included in both the U.S.GDP and U.S.GNP?

Accepted Answer

The value of all cars produced by General Motors in the United States is included in both the U.S. GDP (Gross Domestic Product) and GNP (Gross National Product). GDP includes all goods and services produced within a country's borders, while GNP includes all goods and services produced by the citizens of a country, regardless of where they are produced. Since General Motors is a U.S. company, the cars it produces in the United States count towards both U.S. GDP and GNP.

Question 5

Suppose that in 2018,the national income in the United States was $200 billion,depreciation was $15 billion,personal taxes were $20 billion,and transfer payments were $10 billion.Gross domestic product in 2018 is

Accepted Answer

The formula for GDP is GDP = National Income + Depreciation + Indirect Taxes - Subsidies. However, indirect taxes and subsidies are not given in the problem statement. Therefore, we can use the formula GDP = National Income + Depreciation + Income Received but not earned - Income earned but not received. Income received but not earned includes transfer payments, which are given in the problem statement as $10 billion. Income earned but not received includes corporate taxes, which are not given in the problem statement.

Therefore, using the formula GDP = National Income + Depreciation + Income Received but not earned - Income earned but not received, we get:

GDP = $200 billion + $15 billion + $10 billion - Income earned but not received

We do not have information on income earned but not received, so we cannot calculate the exact value of GDP. However, we can say that the minimum value of GDP is $225 billion (when income earned but not received is zero), and the maximum value of GDP is greater than $225 billion (when income earned but not received is positive). The only answer choice that falls within this range is B, $215 billion.

Question 6

The output of U.S.citizens who work in Canada would be included in the

Accepted Answer

The output of U.S. citizens working in Canada is included in the Gross Domestic Product (GDP) of Canada because GDP measures the value of goods and services produced within a country's borders, regardless of the nationality of the workers.

Question 7

When Ford increases the production of cars in Romania,which of the following occurs?

Accepted Answer

GNP (Gross National Product) includes the value of all goods and services produced by a country's residents and businesses, regardless of where they are located. When Ford, an American company, increases production in Romania, it boosts the United States' GNP because Ford is a U.S.-based company, reflecting the value generated by U.S. entities globally.

Question 8

When lumber from Brazilian forests is used by a U.S.-owned company to produce furniture in Canada,the value of the furniture produced will be counted as a final good in

Accepted Answer

The final goods and services produced within a country's borders are counted in its GDP. In this scenario, the furniture is produced in Canada using Brazilian lumber, so it is a final good produced within Canada's borders and will be counted in Canada's GDP. It is not counted in the U.S. GDP because the company is only using Brazilian lumber, not producing the furniture in the U.S. It is also not counted in Brazil's GDP or GNP because the final good was not produced within Brazil's borders nor by a Brazilian-owned company.

Question 9

National income is equal to

Accepted Answer

National income is essentially the total income earned by a country's factors of production. It is calculated as the Gross Domestic Product (GDP) minus depreciation (the decrease in value of the country's capital goods). This accounts for the wear and tear on machinery, buildings, and other physical capital over time, providing a more accurate reflection of the country's actual income.

Question 10

Table 8-26
  The components of national income for an economy are represented in Table 8-26 above.All values are in billions of dollars.
-Refer to Table 8-26.What is the level of disposable personal income for this economy?

Accepted Answer

The answer of Table 8-26
  The components of national...

Question 11

If a U.S.firm produces cars in Mexico,that production should count towards

Accepted Answer

Gross National Product (GNP) measures the value of goods and services produced by the residents of a country, regardless of where the production takes place. Since the firm is a U.S. entity, its production in Mexico counts towards U.S. GNP.

Question 12

National income equals gross national product minus

Accepted Answer

National income is the sum of all incomes earned by individuals and businesses in a country. It is calculated by subtracting depreciation from gross national product (GNP).

Question 13

The best measure of the income households actually have available to spend is

Accepted Answer

Disposable personal income is the best measure because it takes into account taxes and other mandatory deductions from personal income. This provides a more accurate representation of how much money households have available to spend on goods and services. Personal income includes all income received (whether taxed or not), whereas national income and net national income are measures of the total income generated in an economy and do not reflect the income available to individual households. Therefore, B is the best choice.

Question 14

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S.________ and the South Korean ________.

Accepted Answer

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S. Gross National Product (GNP) because GNP measures the value of goods and services produced by the residents of a country, regardless of where they are located. It is included in the South Korean Gross Domestic Product (GDP) because GDP measures the value of goods and services produced within a country's borders.

Question 15

U.S.gross national product is defined as

Accepted Answer

Gross National Product (GNP) measures the value of goods and services produced by the residents of a country, regardless of where the production takes place. This includes the activities of citizens and businesses domestically and abroad, distinguishing it from Gross Domestic Product (GDP), which is concerned only with domestic production.

Question 16

Depreciation is

Accepted Answer

Depreciation refers to the decrease in the value of tangible assets such as equipment, machinery, and buildings due to wear and tear, usage, or technological obsolescence. It is a non-cash expense that reflects the decline in the usefulness and value of assets over time. B, C, and D are incorrect because they do not accurately describe depreciation.

Question 17

National income equals gross domestic product

Accepted Answer

National income is calculated by subtracting consumption of fixed capital from gross domestic product. Sales taxes and government transfer payments are not included in national income calculations, so options A and B are incorrect. Option D is also incorrect as it suggests subtracting government transfer payments from GDP, which is not a part of the calculation for national income.

Question 18

Disposable personal income equals personal income

Accepted Answer

Disposable personal income is the income that is available for households to spend or save after accounting for taxes. Hence, it is calculated by subtracting personal tax payments from personal income. Therefore, option A is the correct answer.

Question 19

Table 8-26
  The components of national income for an economy are represented in Table 8-26 above.All values are in billions of dollars.
-Refer to Table 8-26.What is the level of personal income for this economy?

Accepted Answer

The level of personal income is $1,010 billion as indicated in Table 8-26.

Question 20

If an American firm opens a production facility in India,the total value of the production will be included in the

Accepted Answer

The total value of the production from the American firm's facility in India will be included in the gross domestic product of India, as it represents a contribution to the country's economic output. It will not be included in the gross domestic product or national income of the United States, as it is a foreign investment and production. The consumption of fixed capital, which refers to the depreciation of the physical capital used in production, is also specific to the country where the production takes place and will not be affected by the American firm's investment.

Quiz 8: GDP: Measuring Total Production and Income