Question

1.Other things equal, a decline in imports is associated with an increase in gross domestic product.

True

False

2.The income that individuals actually use to invest in their future is called disposable income.

True

False

3.Which of the following is not included in national income?

	A.	Corporate profits
	B.	Rental income
	C.	Capital consumption allowance
	D.	Stockbroker commissions
	E.	Interest earnings

4.A car manufactured in Japan and sold in the USA is included in the US GDP

True

False

5.

Production Data

Prices per Unit

Output

Production	1995	2003	1995	2003
Vegetables Meat	$2 $8	$4 $12	250 500	300 550

Refer to the table above. What is the real GDP growth from 1995 to 2003 using 1995 as the base year?

	A.	13.6 percent
	B.	11.1 percent
	C.	55.5 percent
	D.	11.4 percent
	E.	73.3 percent

6.

Production Data

Prices per Unit

Output

Production	1995	2003	1995	2003
Vegetables Meat	$2 $8	$4 $12	250 500	300 550

Refer to the table above. What is the real GDP growth from 1995 to 2003 using 2003 as the base year?

	A.	55.5 percent
	B.	11.0 percent
	C.	73.3 percent
	D.	11.4 percent
	E.	13.6 percent

Answer 1

1. Ans: True

Explanation:

GDP = C + I + G + (X - M)

If M declined, GDP will increase. Thus, the statement is true.

2. Ans: False

Explanation:

Disposable Income = Gross income - Direct taxes. Thus, the statement is false.

3. Ans: Capital consumption allowance

4. Ans: False

Explanation:

It will be included in Japan's GDP

5. Ans: 11.1 percent

Explanation:

Real GDP = Base year price * Current year quantity

Real GDP in 1995 = ($2 * 250) + ($8 * 500) = 500 + 4000 = $4500

Real GDP in 2003 = ($2 * 300) + ($8 * 550) = 600 + 4400 = $5000

Real GDP growth from 1995 to 2003 = [(5000 - 4500) / 4500] * 100 = 11.1%

6. Ans: 11.4 percent

Explanation:

Real GDP = Base year price * Current year quantity

Real GDP in 1995 = ($4 * 250) + ($12 * 500) = 1000 + 6000 = $7000

Real GDP in 2003 = ($4 * 300) + ($12 * 550) = 1200 + 6600 = $7800

Real GDP growth from 1995 to 2003 = [(7800 - 7000) / 7000] * 100 = 11.4%