Question 1

Which of the following best describes the fundamental identity in national income accounting?

Accepted Answer

The value of total production equals the value of total expenditure, which equals the value of total income.

Question 2

Using the expenditure approach, which of the following is the correct formula for GDP?

Accepted Answer

$$Y = C + I + G + NX$$

Question 3

In the product approach to GDP, why are intermediate goods excluded from the calculation?

Accepted Answer

To avoid double counting, since their value is already included in the value-added of final goods.

Question 4

Given the following transactions for Apple Inc. and Juice Inc., what is the total GDP using the product approach?

Apple Inc.: Sales of apples to public $$10,000$$, sales to Juice Inc. $$25,000$$
Juice Inc.: Sales of juice $$40,000$$, apples purchased from Apple Inc. $$25,000$$

Accepted Answer

$$50,000$$

Question 5

Which of the following is NOT included in government expenditure ($$G) $$when calculating GDP using the expenditure approach?

Accepted Answer

Government transfers ($$TR)$$

Question 6

If a country has the following values: GDP ($$Y$$) = $$2,000$$, Net Factor Payments from Abroad ($$NFP$$) = $$100$$, what is its Gross National Product ($$GNP$$)?

Accepted Answer

$$2,100$$

Question 7

Private disposable income ($$Y_d) is $$calculated as:

Accepted Answer

$$Y_d = Y + NFP + TR + INT - T$$

Question 8

Which of the following statements about GDP and national wealth is correct?

Accepted Answer

GDP is a flow per period, while national wealth is a stock.

Question 9

If private saving ($$S_p) is $$given by $$S_p = Y_d - C$$, and $$Y_d = Y + NFP - T + TR + INT$$, which of the following correctly expresses private saving?

Accepted Answer

$$S_p = Y + NFP - T + TR + INT - C$$

Question 10

Suppose a country has the following values: $$C = 1,000$$, $$I = 500$$, $$G = 400$$, $$NX = -50$$, $$NFP = 20. $$What is the national saving ($$S$$)?

Accepted Answer

$$S = Y + NFP - C - G = (C + I + G + NX) + NFP - C - G = (1,000 + 500 + 400 - 50) + 20 - 1,000 - 400 = 1,850 + 20 - 1,400 = 470$$

Question 11

The current account ($$CA) is $$defined as:

Accepted Answer

$$CA = NX + NFP$$

Question 12

If national saving ($$S) is $$used for investment ($$I) $$and the current account ($$CA$$), which equation correctly represents this relationship?

Accepted Answer

$$S = I + CA$$

Question 13

Which of the following is a plausible reason for the household savings rate in Canada to rise dramatically during COVID-19?

Accepted Answer

Reduced consumption opportunities and increased uncertainty led households to save more.

Question 14

If government saving ($$S_g) is $$given by $$S_g = T - TR - INT - G$$, which of the following would increase government saving?

Accepted Answer

An increase in tax revenue ($$T)$$

Question 15

A country has the following:

Tax revenue ($$T$$) = $$300$$, Government transfers ($$TR$$) = $$50$$, Interest payments ($$INT$$) = $$20$$, Government consumption ($$G$$) = $$100.

$$What is the government saving ($$S_g$$)?

Accepted Answer

$$S_g = T - TR - INT - G = 300 - 50 - 20 - 100 = 130$$

Question 16

Which of the following best explains why GDP does not measure a nation's wealth?

Accepted Answer

GDP is a flow variable measured per period, while wealth is a stock variable accumulated over time.

Question 17

If a country has a negative net exports ($$NX) $$and positive net factor payments from abroad ($$NFP$$), what can be said about its current account ($$CA$$)?

Accepted Answer

The current account could be positive or negative depending on the relative sizes of $$NX$$ and $$NFP.$$

Question 18

Which of the following is NOT a use of private saving in the national accounts framework?

Accepted Answer

To pay for government transfers

Question 19

National wealth is defined as:

Accepted Answer

Domestic capital stock plus foreign assets minus foreign liabilities

National Income Accounts: Three Approaches, Savings, and Wealth

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