Question

Q#1: There are two methods to compute national​ income: (1) add up total

A. expenditure

B. private expenditure

C. taxes paid

domestic​ output; and​ (2) add up total

A. tax revenue

B. income

C. interest

generated by producing that output. The first measure is called GDP from the

A. expenditure

B. output

C. left

​side; the second measure is called the GDP from the

A. income

B. right

C. input

side. The value calculated by the first method is

A. greater than

B. equal to

C. less than

the value calculated by the second​ method, other than errors of measurement.

Q#2:

Which of the following transactions would not be included in the calculation of GDP on the expenditure​ side?

A.The purchase of a lawyer's services by a household.

B.The purchase of a new auto by a household.

C.The purchase of a locomotive by VIA Rail Canada.

D.The purchase of ground beef by Taco Bell.

Answer 1

Q#1: GDP can be calculated from income side and expenditure side. Income side adds up all sources of income including wages, interest income, profit, rents, etc. Expenditure side adds up all expenditure from consumers producers government, and net exports.

There are two methods to compute national​ income: (1) add up total (A. expenditure) domestic​ output; and​ (2) add up total (B. income) generated by producing that output. The first measure is called GDP from the (A. expenditure) ​side; the second measure is called the GDP from the (A. income) side. The value calculated by the first method is B. equal to the value calculated by the second​ method, other than errors of measurement.

Q#2: Following transactions would not be included in GDP: D.The purchase of ground beef by Taco Bell (Used as intermediate good while GDP uses value of only final good.