GDP - Gross Domestic Product National Income Accounting Questions and Answers

Question 1

An economist is calculating a country's Net Domestic Product (NDP). Which of the following formulas should be used?

Accepted Answer

GDP - Depreciation

Answer

Net Domestic Product (NDP) is an annual measure of the economic output of a nation that is adjusted to account for depreciation. It is calculated by subtracting the depreciation of capital goods from the Gross Domestic Product (GDP). This provides a measure of the net production of the economy.

Question 2

Which of the following is a primary component of the income approach to calculating GDP?

Accepted Answer

Compensation of Employees

Answer

The income approach to GDP measures the total income generated by production. A major component of this approach is the compensation of employees, which includes wages, salaries, and other benefits paid to workers. The other options are components of the expenditure approach.

Question 3

A steel manufacturer sells steel to an automobile factory for $5,000. The automobile factory uses the steel to produce a car, which it sells to a dealership for $20,000. The dealership then sells the car to a consumer for $25,000. Using the value-added approach, what is the total contribution to GDP from these transactions?

Accepted Answer

$25,000

Answer

The value-added approach sums the increase in market value at each stage of production. The steel manufacturer adds $5,000. The auto factory adds $15,000 ($20,000 - $5,000). The dealership adds $5,000 ($25,000 - $20,000). The total value added is $5,000 + $15,000 + $5,000 = $25,000, which is equal to the market value of the final good.

Question 4

If an economy's Gross Domestic Product (GDP) is $10 trillion and the depreciation (or capital consumption allowance) is $1.5 trillion, what is the Net Domestic Product (NDP)?

Accepted Answer

$8.5 trillion

Answer

Net Domestic Product (NDP) is calculated by subtracting depreciation from the Gross Domestic Product (GDP). Therefore, NDP = $10 trillion - $1.5 trillion = $8.5 trillion.

Question 5

Which of the following measures represents the total income that households and non-corporate businesses have left after paying taxes, which they can either spend or save?

Accepted Answer

Disposable Personal Income

Answer

Disposable Personal Income (DPI) is the amount of money that households have available for spending and saving after income taxes have been accounted for. It is calculated as Personal Income minus Personal Taxes.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product National Income Accounting Questions and Answers