CHAPTER 5: MEASURING A NATION’S INCOME
Identify the choice that best completes the statement or answers the question.
1. When GDP falls,
a. income and expenditure must both fall.
b. income and expenditure can both rise.
c. income must fall, but expenditure may rise or fall.
d. expenditure must fall, but income may rise or fall.
2. Income equals expenditure because
a. firms always pay out all their revenue as income to someone.
b. each time a sale is made, there is a buyer and a seller.
c. households own the factors of production used to generate incomes.
d. All of the above are correct.
3. If a province makes the production and sale of illicit drugs legal, then GDP
a. must increase.
b. must decrease.
c. wouldn't change.
d. may increase or decrease.
4. When a government provides subsidies to encourage growth of small businesses, the subsidies would
a. be included in GDP because they are invested by businesses.
b. be included in GDP because they are a form of government spending.
c. not be included in GDP because they are transfer payments.
d. may or may not be included in GDP, depending on how the funds are used.
5. Diesel fuel is
a. always considered a final good.
b. counted as an intermediate good if a company uses it to provide transportation services.
c. counted as a final good if a farmer uses it to run a tractor to grow crops.
d. Both b and c are correct.
6. Gross domestic product
a. is the market value of all final goods and services produced within a country in a given period (usually a year)
b. is the income in the hands of individuals after deducting income taxes; income available to households to spend and
c. is the value of goods and services purchased by all levels of government— federal, provincial, and local—in a given
d. is the market value of all final goods and services produced by permanen