ECON 252 Chapter 3 Review Questions with Correct Answers
(Grade A+)
Question 1: Gross Domestic Product is the (market/intrinsic/social) value of the final goods and services
produced (within the borders/by the resources) of a country during a particular period of time.
Answer: market; within the borders
Question 2: Production-based accounting is used to estimate GDP by:
A. computing for each firm the difference between sales and revenue and the purchase of intermediate
products, then summing this difference across all firms
B. adding up the incomes received by all the resources that contributed to production
C. summing each firm's value added to the production process
D. all of the above
E. A and C only
Answer: E. A and C only
Question 3: GDP is estimated using expenditure-based accounting by using the equation:
A. GDP= C + I + G + X - M
B. GDP= C + I + G + X + M
C. GDP= C + I + G
D. GDP= C + I + G + X
Answer: A. GDP= C + I + G + X - M
Question 4: The category of expenditure that accounts for the highest share of GDP in the United States
is _________________.
Answer: consumption
Question 5: If the level of aggregate expenditure was $16.8 trillion in 2013, the level of aggregate income
in the economy during 2013 was:
A. less than $16.8 trillion because taxes will reduce income below aggregate expenditure
B. less than $16.8 trillion because the United States imports more than it exports
C. also $16.8 trillion because of the identity between aggregate expenditure and income
D. more than $16.8 trillion because transfers (entitlements) allow income to exceed aggregate expenditure
Answer: C. also $16.8 trillion because of the identity between aggregate expenditure and income
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(Grade A+)
Question 1: Gross Domestic Product is the (market/intrinsic/social) value of the final goods and services
produced (within the borders/by the resources) of a country during a particular period of time.
Answer: market; within the borders
Question 2: Production-based accounting is used to estimate GDP by:
A. computing for each firm the difference between sales and revenue and the purchase of intermediate
products, then summing this difference across all firms
B. adding up the incomes received by all the resources that contributed to production
C. summing each firm's value added to the production process
D. all of the above
E. A and C only
Answer: E. A and C only
Question 3: GDP is estimated using expenditure-based accounting by using the equation:
A. GDP= C + I + G + X - M
B. GDP= C + I + G + X + M
C. GDP= C + I + G
D. GDP= C + I + G + X
Answer: A. GDP= C + I + G + X - M
Question 4: The category of expenditure that accounts for the highest share of GDP in the United States
is _________________.
Answer: consumption
Question 5: If the level of aggregate expenditure was $16.8 trillion in 2013, the level of aggregate income
in the economy during 2013 was:
A. less than $16.8 trillion because taxes will reduce income below aggregate expenditure
B. less than $16.8 trillion because the United States imports more than it exports
C. also $16.8 trillion because of the identity between aggregate expenditure and income
D. more than $16.8 trillion because transfers (entitlements) allow income to exceed aggregate expenditure
Answer: C. also $16.8 trillion because of the identity between aggregate expenditure and income
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