HKAL Economics Past Examination Papers Multiple-choice Questions Chapter 1: National Income Accounting

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1 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.1 of 7 HKAL Economics Past Examination Papers Multiple-choice Questions Chapter 1: National Income Accounting 1- The value of the vegetables a retired businessman grows for his own consumption is excluded from national income calculation because A. retired people's activities are not included in the calculation. B. the goods are not transacted in the market. C. its inclusion would mean double-counting. D. its contribution to national income is usually small and thus is ignored in the calculation. 2- Which of the following are included in an economy's GDP? (1) rental value of an owner-occupied flat. (2) commission paid for the purchase of a second-hand car. (3) dividends generated in the local economy but remitted overseas. A. (1) and (2) only B. (1), (2) and (3) C. (2) and (3) only D. (1) and (3) only 3- A hypothetical economy's GNP at current prices has increased 5 times over the past 5 years while its GNP at constant prices has increased 10 times over the same period of time. Which of the following conclusions can be drawn? (1) The price level has doubled. (2) The new price level is one-fifth of the original price level. (3) Everyone is better off. (4) Real per capita income has fallen. A. (1), (3) and (4) only B. (2) and (4) only C. none of the above D. (1) and (3) only 4- Which of the following statements about national income accounting are correct? (1) An increase in interest paid on a government bond will raise the national income level. (2) A rise in the salary of a citizen working overseas will leave the GDP unchanged. (3) A previously self-occupied apartment which is now rented out at the officially estimated valued will have no effect on the national income level. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)

2 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.2 of 7 5- Which of the following are included in the national income of HK? (1) government spending on public assistance (2) commission from the sale of second-hand cars (3) salaries of the employees of the Jockey Club (4) receipts from the sale of stocks and shares A. (1) & (2) only B. (1) & (4) C. (2) & (3) D. (3) & (4) only 1991 Questions 6 and 7: Refer to the following national income statistics of a hypothetical economy: () Consumers' expenditure 1150 Government final consumption 380 Gross domestic fixed capital formation 340 Value of physical increase in stocks and work in progress 30 Exports of goods and services 550 Imports of goods and services 540 Net property income from abroad 10 Taxes on expenditure 300 Subsidies on production units 40 Capital consumption The gross national product at market prices is A. $1880 billion B. $1920 billion C. $2140 billion D. $2400 billion 7- The difference between national income at market prices and national income at factor cost is A. $220 billion B. $260 billion C. $300 billion D. $340 billion 8- Which of the following is NOT a reason why international comparisons of national income statistics can be misleading? A. The rates of inflation vary between countries. B. The methods of calculating national income vary between countries. C. Some economies have more non-market goods and services. D. The exchange rates may not reflect differences in the domestic purchasing power of currencies.

3 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.3 of 7 9- Below are the national income statistics of an economy in a certain year: $ million Wages 60 Rent 50 Depreciation 30 Interest 25 Expenditure taxes 20 Dividends 15 Subsidies 11 Retained profits 10 Profit tax 8 The amount of national income at a factor cost is: A. $159 million B. $160 million C. $168 million D. $177 million 10- Which of the following items should be excluded from GNP at market prices in order to calculate disposable personal income? (1) indirect business tax (2) income tax (3) retained earnings (4) transfer payments (5) subsidies A. (1), (2) & (3) only B. (1), (2) & (4) only C. (1), (3) & (5) only D. (2), (4) & (5) only 11- Which of the following statements is/are correct? (1) Gross national product (GNP) is always larger than the net national product. (2) GNP is always larger than gross domestic product (GDP) (3) GNP at current market prices is always larger than GNP at constant market prices. A. (1) only B. (1) and (2) only C. (2) and (3) only D. (1), (2) and (3)

4 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.4 of Suppose gross national product increases but gross domestic product falls. Then the net income from abroad A. is negative. B. is positive. C. increases. D. decreases. 12- GDP Components Private consumption expenditure Gross domestic fixed capital formation Government consumption expenditure Capital consumption allowances Indirect taxes Subsidies Net export of goods and services Net income from abroad Refer to the above table, the GNP at factor cost (in billion $) is A. 36 B. 41 C. 42 D Which of the following transactions is regarded as investment in the national income accounts? A. The Hong Kong Cultural Centre buys a painting of the 18 th century for $5 million. B. You buy shares of Hong Kong Telecom stock. C. Your father buys a newly constructed flat for $7 million. D. All of the above Real gross domestic product is NOT a good measure of the welfare of a country because it does not take into account (1) the population size. (2) non-market transactions. (3) the change in the price level. A. (1) and (2) only B. (1) and (3) only C. (2) and (3) only D. (1), (2) and (3)

5 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.5 of 7 What is the net national product at factor cost? A. $3 300m B. $4 300m C. $5 000m D. $7 100m 16- Study the following information of an economy: $ million Consumption expenditure Indirect tax Gross domestic fixed capital formation Depreciation 300 Gross national product Subsidies Suppose over a period of one year, nominal GDP, population and the price level increase by 5%, 2% and 6% respectively. Which of the following is correct? A. The per capita nominal GDP increases but the per capita real GDP decreases. B. The per capita nominal GDP decreases but the per capita real GDP increases. C. Both the per capita nominal GDP and the per capita real GDP increase. D. Both the per capita nominal GDP and the per capita real GDP decrease. 18- Private consumption expenditure 50 Government consumption expenditure 30 Net domestic fixed capital formation 20 Increase in inventory 5 Depreciation 10 Indirect taxes 4 Subsidies 3 Net exports 15 Net profit 12 Profits tax 6 Refer to the above table. The GDP at factor cost (in billion $) is A. 119 B. 123 C. 129 D. 150

6 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.6 of 7 The net national product at factor cost (in $billion) is A. 265 B. 275 C. 277 D. 285 Refer to the above table. The GNP at factor cost (in $billion) is A. 42. B. 43. C. 46. D Refer to the table below. Gross National Product (GNP) Components Private consumption expenditure 160 Government consumption expenditure 60 Gross domestic fixed capital formation 20 Increase in inventory 5 Depreciation 4 Indirect taxes 8 Subsidies 2 Net exports of goods and services 40 Net income from abroad Gross National Product (GNP) Components Private consumption expenditure 30 Gross domestic fixed capital formation 10 Government consumption expenditure 12 Capital consumption allowances 4 Indirect taxes 2 Subsidies 3 Net exports of goods and services -6 Net income from abroad Suppose the GNP at current market prices and the GNP at constant market prices of an economy increase by the same percentage. This means that A. real output increases but price level remains unchanged. B. both real price level and real output increase by the same percentage. C. price level rises at a greater percentage than real output. D. price level rises but real output remains unchanged.

7 PASTpaper\AlmAcro\MCQ\CH1-National Income Accounting-SV.doc/P.7 of 7 The above table shows that there is a in price level and a/an in population. A. rise increase B. rise decrease C. fall increase D. fall decrease Refer to the table below: Gross National Product (GNP) Components Private consumption expenditure 100 Government consumption expenditure X Gross domestic fixed capital formation 40 Increase in inventory 10 Depreciation 20 Net exports 5 Indirect taxes 30 Subsidies 15 Net income from abroad 8 If net national product at factor cost is $140 billion, the value of X is A. 10 B. 12 C. 20 D Consider the following information on an economy: Nominal GNP Growth Rate -3% Real GNP Growth Rate -4% Per Capita Nominal GNP Growth Rate -5% If the growth rate of per-capita real Gross Domestic Product (GDP) is greater than that of the real GDP as well as that of the per-capita nominal GDP, we can conclude that A. both the population and the general price level have fallen. B. the growth rate of population is higher than that of real output and the standard of living has fallen. C. the growth rate of population is lower than that of real output and the standard of living has risen. D. the inflation rate is greater than the growth rate of real output.

MEASURING NATIONAL OUTPUT AND NATIONAL INCOME. Chapter 18

1 MEASURING NATIONAL OUTPUT AND NATIONAL INCOME Chapter 18 national income and product accounts Data collected and published by the government describing the various components of national income and output