Chapter 7 Exam Questions with
Answers
1. Assessing The Economy's Performance correct answer: National Income
Accounting measures the economy's overall performance.
Like your annual check-up. "Doctors visits for the economy"
BEA does the NIPA (National Income and Product Accounts) tables.
Enables economists to track the long-run "health" of our economy to see whether it has grown, been
constant, or declined.
Sometimes then Policies will be formulated and implemented to maintain (safeguard) or improve our
economy's health.
2. GDP correct answer: Gross Domestic Product
-This is the primary tool for assessing the overall health of our economy.
-It is an Aggregate measure of DOMESTIC production.
-Monetary Measure.
-Big Number
-If it wasn't money it would be a long list of domestic goods and products. Money means a lot more.
-Important because it is CURRENT
-GDP is reported each year. (One full calendar year)
3. GDP- Included correct answer: All FINAL goods and services within a given year must be
counted (included) once- but only once.
Can count the final product, or the value-added during each stage of production.
4. GDP- Excluded correct answer: Intermediate goods. Those goods. Those goods that are
purchased to produce another good. (Car, radios, windows, leather etc..) These are excluded to avoid
multiple counting. (Which would make the GDP larger- Overstated)
Nonproduction transactions.
1) Financial and 2) Second-
hand 1a)Public
Transfer(Public=Gov)
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11
, 1b)Private Transfer Payments(Cash from Dad)
1c)Stock & Bond Transaction
2) Re-Sales
^Pre owned vehicles, and Pre-owned clothes(Thrift Store).
5. Two approaches to GDP correct answer: income approach and expenditure approach
6. Expenditure Approach correct answer: Consumption by Households+ Investment by
Businesses+ Government Purchas- es+ Expenditures by Foreigners
2/
11
Answers
1. Assessing The Economy's Performance correct answer: National Income
Accounting measures the economy's overall performance.
Like your annual check-up. "Doctors visits for the economy"
BEA does the NIPA (National Income and Product Accounts) tables.
Enables economists to track the long-run "health" of our economy to see whether it has grown, been
constant, or declined.
Sometimes then Policies will be formulated and implemented to maintain (safeguard) or improve our
economy's health.
2. GDP correct answer: Gross Domestic Product
-This is the primary tool for assessing the overall health of our economy.
-It is an Aggregate measure of DOMESTIC production.
-Monetary Measure.
-Big Number
-If it wasn't money it would be a long list of domestic goods and products. Money means a lot more.
-Important because it is CURRENT
-GDP is reported each year. (One full calendar year)
3. GDP- Included correct answer: All FINAL goods and services within a given year must be
counted (included) once- but only once.
Can count the final product, or the value-added during each stage of production.
4. GDP- Excluded correct answer: Intermediate goods. Those goods. Those goods that are
purchased to produce another good. (Car, radios, windows, leather etc..) These are excluded to avoid
multiple counting. (Which would make the GDP larger- Overstated)
Nonproduction transactions.
1) Financial and 2) Second-
hand 1a)Public
Transfer(Public=Gov)
1/
11
, 1b)Private Transfer Payments(Cash from Dad)
1c)Stock & Bond Transaction
2) Re-Sales
^Pre owned vehicles, and Pre-owned clothes(Thrift Store).
5. Two approaches to GDP correct answer: income approach and expenditure approach
6. Expenditure Approach correct answer: Consumption by Households+ Investment by
Businesses+ Government Purchas- es+ Expenditures by Foreigners
2/
11
