GDP National Income Accounting 5

Question 1

If a country's GDP deflator is 125 and nominal GDP is $5 trillion, what is real GDP (base year = 100)?

Accepted Answer

$4 trillion

Answer

Real GDP = (Nominal GDP / GDP Deflator) × 100 = ($5T / 125) × 100 = $4 trillion.

Question 2

Net investment equals gross investment minus:

Accepted Answer

Depreciation (capital consumption allowance)

Answer

Net investment is gross investment less depreciation, measuring the actual addition to the capital stock after replacing worn-out capital.

Question 3

Which of these is an example of a 'final good' correctly included in GDP?

Accepted Answer

A car sold by a dealership to a consumer

Answer

A car sold to an end consumer is a final good; the flour, steel, and cotton are intermediate goods used in further production.

Question 4

Social insurance (payroll) taxes paid by employers affect national income accounts by:

Accepted Answer

Being subtracted from National Income to arrive at Personal Income

Answer

Social insurance contributions are part of compensation recorded in National Income but are deducted (along with corporate taxes and retained earnings) when deriving Personal Income.

Question 5

The 'leakages-injections' framework of national income accounting states that in equilibrium:

Accepted Answer

Saving + Taxes + Imports = Investment + Government spending + Exports

Answer

In a three-sector open economy, all leakages (S + T + M) must equal all injections (I + G + X) for income to be in equilibrium.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP National Income Accounting 5