The Economy Today Bradley Schiller 15th Edition – Test Bank

The Economy Today Bradley Schiller 15th Edition – Test Bank

The Economy Today, 15e (Schiller)

Chapter 5   National Income Accounting

1) National income accounting is defined as the

A) Use of economic theory to predict future income.

B) Measurement of aggregate economic activity.

C) Accounting cost associated with economic choices.

D) Assessment of the distribution of output.

Answer:  B

Explanation:  The prosperity of a nation may be measured by its total income created by all factors of production.

Difficulty: 1 Easy

Topic:  Measures of Output

Learning Objective:  05-01 What GDP measures—and what it doesn’t.

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

2) National income accounts assist

A) Market investors in making more profitable investments.

B) Individuals in maximizing their incomes.

C) Economic policy makers in formulating policies and evaluating performance.

D) Analysts in measuring the performance of the stock market.

Answer:  C

Explanation:  National income is one way to calculate an economy’s well-being.

Difficulty: 2 Medium

Topic:  Measures of Output

Learning Objective:  05-01 What GDP measures—and what it doesn’t.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

3) Prices are used in national income accounting for all of the following reasons except to

A) Add the values of output from different sectors of the economy.

B) Compare the value of output of one period with that of another.

C) Provide an index to measure the rate of inflation.

D) Provide an index to measure unemployment.

Answer:  D

Explanation:  Prices are used to track the market value of output.

Difficulty: 2 Medium

Topic:  Measures of Output

Learning Objective:  05-01 What GDP measures—and what it doesn’t.

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

4) A nation’s GDP is

A) C + I + G + (X – M).

B) The sum of value added at some stages of the production process.

C) The total market value of all intermediate goods and services.

D) The total amount of money in circulation.

Answer:  A

Explanation:  GDP is a measure of total market value of all final goods and services produced within a nation’s borders. It can be represented by the equation: C+I+G+(X-M). Where C is consumption, I is investment, G is government spending, and N and X represent exports minus imports.

Difficulty: 3 Hard

Topic:  The Uses of Output

Learning Objective:  05-01 What GDP measures—and what it doesn’t.

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

5) GDP can be calculated by all of the following methods except

A) Adding up the spending on goods and services by business, government, households, and foreigners, and subtracting imports.

B) Adding up the “value added” at every stage of production in the economy.

C) Adding up all of the receipts of households, government, and business.

D) Adding up all income and expenses by consumers and businesses.

Answer:  D

Explanation:  GDP can be measured through total expenditures, total income, or total value added.

Difficulty: 1 Easy

Topic:  Measures of Output

Learning Objective:  05-01 What GDP measures—and what it doesn’t.

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

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