GDP National Income Accounting 3

Question 1

Which of the following correctly describes the relationship between GDP and National Income (NI)?

Accepted Answer

NI = GDP - depreciation - indirect business taxes

Answer

Moving from GDP to National Income requires subtracting depreciation (CCA) and indirect business taxes (net of subsidies) to arrive at factor income earned.

Question 2

The 'value-added' method avoids double-counting in GDP by:

Accepted Answer

Summing the difference between each firm's sales and its intermediate input purchases

Answer

The value-added method sums the extra value each stage of production adds, so each input is counted only once across the entire production chain.

Question 3

Personal saving in national income accounting equals:

Accepted Answer

Disposable income minus personal consumption expenditures

Answer

Personal saving is the portion of disposable (after-tax) personal income that households do not spend on consumption.

Question 4

In the expenditure approach, gross private domestic investment (GPDI) includes all of the following EXCEPT:

Accepted Answer

Purchases of existing factory buildings

Answer

Purchasing an existing factory is a financial transfer between parties and adds no new production; only newly constructed or manufactured capital is counted.

Question 5

If nominal GDP grows 6% and the GDP deflator rises from 100 to 104, real GDP growth is approximately:

Accepted Answer

2%

Answer

Real GDP growth ≈ nominal growth minus inflation: 6% − 4% ≈ 2%, reflecting actual output expansion after removing the price-level effect.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP National Income Accounting 3