DEC5028 MACROECONOMICS TRI2 2015/16

TUTORIAL 2 NATIONAL INCOME ACCOUNTING

SECTION A: MULTIPLE CHOICES QUESTION

1.

Gross Domestic Product is equal to the market value of all the final goods and services
____________ in a given period of time.

A)
B)
C)
D.

consumed within a country

produced within a country
produced by the citizens of a country
produced and consume within a country

2.

Double counting (counting the same thing twice) in GDP accounting is avoided by not
including

A)
B)
C)
D)

net exports.
intermediate good
illegal activities
depreciation

3.

Which of the following is an example of a final good or service?

A)
B)
C)
D)

wheat a bakery purchases to make bread.

coffee beans Starbucks purchases to make coffee.
lumber purchased by a construction company to used in building houses.
a computer purchased by Federal Express to track shipments.

4.

The expenditure approach measures GDP by adding

A)

compensation of employees, rental income, corporate profits, net interest, and

proprietors income.
compensation of employees, rental income, corporate profits, net interest, proprietors
income, subsidies paid by the government, indirect taxes paid, and depreciation.
compensation of employees, rental income, corporate profits, net interest, proprietors
income, indirect taxes paid, and depreciation and subtracting subsidies paid by the
government.
consumption expenditure, gross private domestic investment, net exports of goods and
services, and government expenditure on goods and services.

B)
C)

D)

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DEC5028 MACROECONOMICS TRI2 2015/16

5.

If Nike, an American corporation, produces sneakers in Thailand this would

A)
B)
C)
D)

count as part of U.S. GDP since it is a U.S. corporation.

count for both Thailands GDP and U.S. GDP.
add to Thailands GDP but not to U.S. GDP.
add to neither U.S. GDP nor Thailands GDP.

6.

In calculating GDP, governmental transfer payments, such as social security or

unemployment compensation, are:

A)
B)
C)
D)

not counted.
counted as investment spending.
counted as government spending.
counted as consumption spending.

7.

In national income accounting, government purchases include:

A)
B)
C)
D)

purchases by Federal, state, and local governments.

purchases by the Federal government only.
government transfer payments.
purchases of goods for consumption, but not public capital goods.

8.

Which of the following is NOT counted in the GNP of the United States?

A)
B)
C)

The wage of a U.S. citizen who works in a foreign country for a foreign firm.
The interest earned by a U.S. bank on loans to a business firm located in Brazil.
The profit earned by a restaurant located in the United States but owned by a Mexican
company.
The value of services that are produced by state and local governments in the United
States.

D)

9.

Profits earned in the United States by foreign-owned companies are included in

A)
B)
C)
D)

the U.S. GDP but not GNP.

neither the U.S. GDP nor GNP.
the U.S. GNP but not GDP.
both the U.S. GDP and GNP.

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Table 1
10.

Refer to Table 1, Personal consumption expenditures in billions of dollars are

A)
B)
C)
D)

900.
1,100.
1,400.
1,600.

11.

Refer to Table 1. The value for gross private domestic investment in billions of dollars is

A)
B)
C)
D)

740.
810.
850.
890.

12.

Refer to Table 1. The value for net exports in billions of dollars is

A)
B)
C)
D)

-200.
-150.
50.
250.

13)

Refer to Table 1. The value for gross domestic product in billions of dollars is

A)
B)
C)
D)

2,900.
3,140.
3,440.
3,650.

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14)

Refer to Table 1. The value of government spending in billions of dollars is

A)
B)
C)
D)

200.
600.
800.
1,000.

15.

Which of the following is subtracted from national income to get to personal income?

A)
B)
C)
D)

retained earnings
personal interest income
depreciation
personal Taxes

16.

If personal income is $925 billion and personal income taxes are $70 billion, the value of
disposable personal income is

A)
B)
C)
D)

$835 billion.
$855 billion.
$890 billion.
$995 billion.

17.

Nominal GDP measures the value of all goods and services

A)
B)
C)
D)

in constant dollars.
in current dollars.
in fixed dollars.
without inflation.

18.

Gross domestic product measured in terms of the prices of a fixed, or base, year is

A)
B)
C)
D)

current GDP.
base GDP.
real GDP.
nominal GDP.

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DEC5028 MACROECONOMICS TRI2 2015/16

19.

The GDP deflator is the

A)
B)
C)
D)

difference between real GDP and nominal GDP multiplied by 100.

difference between nominal GDP and real GDP multiplied by 100.
ratio of nominal GDP to real GDP multiplied by 100.
ratio of real GDP to nominal GDP multiplied by 100.

20.

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP
price index for that year is:

A)
B)
C)
D)

100.
200.
240.
300.
Use the following table for a hypothetical single-product economy.

21.

Refer to the above data. Nominal GDP in year 3 is:

A)
B)
C)
D)

$100.
$450.
$225.
$150.

22.

Refer to the above data. Real GDP in year 3 is:

A)
B)
C)
D)

$100.
$450.
$225.
$150.

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DEC5028 MACROECONOMICS TRI2 2015/16

SECTION B: STRUCTURED QUESTION

QUESTION 1

1. Below table show a list of domestic output and national income figures for a Year 2008.
Items
Wages
Interest
Personal Consumption
Export
Government Purchase
Income earned from the rest of the world
Indirect Business Taxes
Inventory Investment
Income earned by the rest of the world
Residential Investment
Corporate Taxes
Personal Income Taxes
Import
Statistical Adjustment
Retained Earnings
Rents
Corporate Profit
Depreciation

RM (million)
500
34
1,200
380
247
150
36
80
200
80
180
60
238
10
248
15
68
220

a) Using the above data, determine Gross Domestic Product using the expenditure method.

b) Determine National Income

c) With the answer that you obtained from b), now determine Personal Income by making the
required adjustments.

d) Make necessary adjustments of Personal Income from part b) in deriving Disposable Income.

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DEC5028 MACROECONOMICS TRI2 2015/16

QUESTION 2
Table 2 show a list of domestic output and national income figures for a Year 2011.
Items
Wages and salaries
Personal Consumption
Export
Government Purchase
Income earned from the rest of the world
Indirect Business Taxes
Interest receive on loans
Inventory Investment
Income earned by the rest of the world
Interest paid on borrowings
Residential Investment
Corporate Taxes
Proprietors income
Pension Payment
Import
Retained Earnings
Rents
Corporate Profit
Capital Consumption

RM (billion)
650
1,250
150
140
150
36
64
100
200
30
100
100
45
60
580
248
15
68
220
Table 2

a) Using the above data, compute:

i) National Income for year 2011.

ii) GDP by making three (3) adjustments from total of National Income.

iii) Gross National Product(GNP) by making two adjustments from total GDP.

iv) Personal Income

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Question 3
(i)

A country produces only watch and MP4, in year 2012, price for watch was RM88 each,
and quantities produced were 10 pcs. Price for MP4 was RM 200 and quantities produced
were 5 units. On second year, the country produced 20 watches at RM 99 each and 8
units MP4 at RM 188 each.

Watch
MP4

Qty
10
5

2012
Price
RM 88
RM 200

Qty
20
8

2013
Price
RM 99
RM 188

a) Calculate Nominal GDP on year 2012

b) Calculate Nominal GDP on year 2013

c) Calculate Real GDP on year 2012 ( base year 2012)

d) Calculate GDP Deflator 2013

Question 4
List and discuss various types of goods and services omitted from measured GDP.

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