Question 1

Which of the following transactions would be included in the calculation of Canada’s GDP using the Expenditures Approach?

Accepted Answer

A Canadian company sells wheat to a bakery in France.

Question 2

Suppose in 2020, Canada’s GDP at market prices (Expenditures Approach) was $$2,206,954 million, and at market prices (Income Approach) was 2$$,206,578 million. How does Statistics Canada report the official GDP figure?

Accepted Answer

By taking the average of the two approaches: $2,206,766 million.

Question 3

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GDP measures output produced within a country’s borders, while GNP measures output produced by a country’s residents regardless of location.

Question 4

A Canadian business produced $$1 million worth of goods in 2022, but only sold 900$$,000 worth. According to the Expenditures Approach, how is the unsold $100,000 treated in GDP calculation?

Accepted Answer

It is counted as an increase in business inventories under investment.

Question 5

Which of the following is NOT a limitation of using GDP per capita as a measure of standard of living?

Accepted Answer

It accurately reflects the distribution of wealth among all citizens.

Question 6

If Canada’s Nominal GDP in 2020 was $$2,206,764 million and the GDP Deflator for 2020 was 110, what was Canada’s Real GDP for 2020? Use the formula $$	ext{Real GDP} = \frac{	ext{Nominal GDP}}{	ext{GDP Deflator}} 	imes 100$.

Accepted Answer

$$2,006,149$$ million

Question 7

Which of the following is included in the calculation of Personal Income (PI) but NOT in National Income (NI)?

Accepted Answer

Government transfer payments such as Employment Insurance benefits.

Question 8

Suppose the cost of a fixed basket of goods was $$500 in the base year and 600 in $$the current year. What is the Consumer Price Index (CPI) for the current year? Use the formula $$	ext{CPI} = \frac{	ext{Cost in Current Year}}{	ext{Cost in Base Year}} 	imes 100.$$

Accepted Answer

$$120$$

Question 9

Which of the following best explains why the GDP Deflator and the Consumer Price Index (CPI) can show different rates of inflation in the same year?

Accepted Answer

The GDP Deflator includes all domestically produced goods and services, while the CPI includes only a fixed basket of consumer goods, including imports.

Question 10

A country’s GDP per capita increased from $$40,000 to 42$$,000 over one year, but the population also increased from 30 million to 32 million. What happened to the country’s total GDP?

Accepted Answer

It increased from $$1,200,000 million to 1$$,344,000 million.

Question 11

Which of the following is a correct formula for calculating Net Exports (NX) in the Expenditures Approach?

Accepted Answer

$$NX = X - IM$$

Question 12

If a Canadian company operating in the United States earns $$50 million in profits, and a U.S. company operating in Canada earns 30 $$million in profits, how is this reflected in Canada’s GNP calculation?

Accepted Answer

Add $$50 million and subtract 30 $$million from Canada’s GDP.

Question 13

Which of the following is NOT counted in Canada’s GDP according to the rules of national income accounting?

Accepted Answer

A Canadian receives a birthday gift of $500 from a relative.

Question 14

If the GDP Deflator in 2019 was 105 and in 2020 it was 110, what was the rate of inflation between 2019 and 2020? Use the formula $$	ext{Inflation Rate} = \frac{	ext{GDP Deflator}_{2020} - 	ext{GDP Deflator}_{2019}}{	ext{GDP Deflator}_{2019}} 	imes 100.$$

Accepted Answer

$$4.76\%$$

Question 15

Which of the following best explains why unanticipated high inflation can arbitrarily redistribute wealth?

Accepted Answer

It reduces the real value of money owed, benefiting borrowers at the expense of lenders.

Question 16

A small business owner’s income is classified as Net Mixed Income in the Income Approach to GDP. Which of the following best explains why?

Accepted Answer

Because the owner’s labour and capital income are not separately recorded.

Question 17

Which of the following would cause Actual Expenditures (AEa) to be greater than GDP in a given year?

Accepted Answer

Businesses sell more than they produce, leading to a decrease in inventories.

Question 18

If the only change in a country’s GDP components is an increase in imports, what is the effect on GDP, all else equal?

Accepted Answer

GDP decreases by the amount of the increase in imports.

Question 19

Which of the following is a correct formula for calculating GDP using the Expenditures Approach?

Accepted Answer

$$GDP = C + I_a + G + X - IM$$

Question 20

Which of the following is a reason why GDP may understate the true level of economic activity in a country?

Accepted Answer

It does not include the value of non-market activities such as volunteer work.

Measuring National Income: National Income Accounting and GDP

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