QB_Ch15(Eng)_output_revised 022011.doc

Economics Inquiry for HKDSE Macroeconomics 1Chapter 15 Measurement of Economic Performance (I)Multiple Choice Questions|!|EM41001|!|Which of the following statements about GDP is CORRECT?A.Under the income approach, GDP will be equal to the total income of all local workers.B.Using the value added approach to calculate GDP can avoid the problem of double counting.C.Every transaction is recorded at cost.D.If the government imposes indirect taxes, GDP at market prices will be smaller than GDP at factor cost.#BIn reality, it is difficult to tell whether an output is a final product or an intermediate product. By using the value added approach, GDP is equal to the sum of the value added of all products at different stages of production. The problem of double counting can therefore be avoided.Option A is incorrect. Under the income approach, GDP is measured by summing up the income that firms pay households for factors of production.Option C is incorrect. GDP measures the total market value of final goods and services of an economy. Only goods and services provided by the government are included in GDP at governments cost of providing them.Option D is incorrect.GDP at market prices = GDP at factor cost + Indirect taxes SubsidiesWithout the data about subsidies, we do not know if GDP at market prices is smaller than GDP at factor cost or not.#|!|EM41002|!|Which of the following should be included in Hong Kongs GDP for 2010?A.the old age allowance paid by the government in 2010B.the value of a computer produced in 2009 but sold in 2010C.the value of a gift received by a Hong Kong resident from a Mainland resident in 2010D.the salary of a salesperson from working in a shop selling second-hand goods in 2010#DThe salary reflects the value of the service provided by the salesperson in 2010.Options A and C are incorrect. They do not involve any production.Option B is incorrect. The computer is not produced in 2010, so it is not included in the GDP for 2010.#|!|EM41003|!|Which of the following should NOT be included in the calculation of the gross domestic product of Hong Kong?A.the income earned by a Filipino maid from providing services to her Hong Kong employerB.the expense paid by a Japanese businessman on a suit he bought in Hong KongC.the money earned by a housewife from speculation in the stock marketD.the commission received by a salesperson from promoting broadband service#CThis sum of money does not involve any production.Options A, B and D are incorrect. They are all market value of final goods and services produced by the resident producing units of Hong Kong, and thus should be included in the calculation of the gross domestic product of Hong Kong.#|!|EM41004|!|The following descriptions about GDP are correct EXCEPT thatA.changes in inventories are included.B.GDP at market prices is always greater than GDP at factor cost.C.unemployment assistance is not included in the GDP calculation.D.GDP may overestimate an economys living standard.#BGDP at market prices = GDP at factor cost + Indirect taxes SubsidiesWhen subsidies are greater than indirect taxes, GDP at market prices will be smaller than GDP at factor cost.Option A is correct. Changes in inventories are included in the gross investment, which is a component of GDP under the expenditure approach.Option C is correct. Unemployment assistant does not involve any production, so it is not included in GDP.Option D is correct. For example, if the growth rate of population size is higher than the growth rate of GDP, per capita GDP decreases. The economys living standard is therefore overestimated.#|!|EM41005|!|Which of the following should NOT be included in the calculation of GDP?(1)income of unlicensed hawkers(2)profit earned from selling illegal drugs(3)money received from smuggling chickens from the MainlandA.(1) and (2) onlyB.(1) and (3) onlyC.(1), (2) and (3)D.None of the above.#DAlthough the above production activities are illegal, theoretically, their values should be included in GDP.#|!|EM41006|!|Which of the following is/are included in the calculation of the gross domestic product of Hong Kong?(1)an increase in the price of shares of a commercial bank in Hong Kong(2)a cake baked for celebration of a friends birthday(3)the estimated rental value of an owner-occupied property in Hong KongA.(1) onlyB.(3) onlyC.(2) and (3) onlyD.None of the above.#BThe owner-occupied property is viewed as self-rented and the estimated rental value is included in the GDP of Hong Kong.(1) does not involve any production of goods and services, while (2) does not have market value, so they are not included in the calculation of GDP.#|!|EM41007|!|Which of the following should NOT be included in the GDP calculation?A.the value of an increase in the inventory of paper held by a publisherB.the market value of a new flat purchased by Mr. LeeC.$10,000 worth of newly-issued shares sold on the stock marketD.governments expenditure on infrastructure#CThe value of shares is not included because the transaction only represents a transfer of wealth and no production is involved.Options A, B and D are incorrect. They involve current production and thus should be included in the GDP calculation.#|!|EM41008|!| (revised)Which of the following items is included in the calculation of Hong Kongs GDP?A.a scholarship received by a university studentB.prizes from the Mark SixC.government subsidies to tertiary educationD.the value of housework done by a housewife#CThis is the amount paid for the services provided by universities.Options A and B are incorrect. They do not involve any production.Option D is incorrect. The housework does not have market value as the production has not gone through the market.#|!|EM41009|!|Which of the following should be included in the calculation of Hong Kongs GDP?(1)the revenue of a subsidiary of an American firm in Hong Kong(2)the sales revenue of a shop in Mongkok operated by a Canadian(3)the revenue of a gift shop in the UK that is run by a Hong Kong residentA.(1) only B.(3) only C.(1) and (2) onlyD.(1) and (3) only#CFor (1) and (2), the subsidiary and the shop are resident producing units of Hong Kong. Their revenue should be included in Hong Kongs GDP.(3) is incorrect. The shop is a resident producing unit of the UK.#|!|EM41010|!| (revised)Some supermarkets offer free delivery service to customers who have purchased above specified amount. Customers that do not spend enough can also order the delivery service, but a charge is involved. The value of the free delivery serviceA.is included in the GDP because it is a service provided by a resident producing unit.B.is included in the GDP because the delivery service is enjoyed by the local residents.C.is not included in the GDP because the problem of double counting will arise. D.is not included in the GDP because it is free of charge.#A#|!|EM41011|!|Firms usually put lots of resources into advertisements to promote their new products. The money spent on advertising is included in GDP calculation becauseA.it is regarded as an expenditure of firms.B.advertisements are final services.C.there are corresponding production activities by resident producing units.D.it increases the inventories of the companies.#C#|!|EM41012|!|Money won in soccer betting isA.included in GDP, as it is a market transaction.B.included in GDP, as it is a return on investment.C.not included in GDP, as it is a transfer of wealth.D.not included in GDP, as it is illegal.#CThe money does not involve any production.Option D is incorrect. Theoretically, the value of illegal transactions should be included in GDP calculation.#|!|EM41013|!|Government expenditure on the Comprehensive Social Security Assistance (CSSA) to people in need isA.included in the GDP because it is a kind of government expenditure.B.included in the GDP because it is spent by people on basic necessities.C.excluded from the GDP because the money may not be spent within a given period.D.excluded from the GDP because no corresponding production is involved.#DThe expenditure is a kind of transfer payment. It does not involve any production of goods and services.#|!|EM41014|!|ABC Company was listed in 2005. In June 2008, Paul sold out all of ABC Companys shares that he held and earned a huge profit. The profit isA.excluded from the GDP for 2008 because the shares are not issued in 2008.B.excluded from the GDP for 2008 because this is a transfer of wealth only.C.included in the GDP for 2008 because the profit is earned in 2008.D.included in the GDP for 2008 because it is an income.#BTransaction of shares is excluded because it is only a transfer of wealth and does not involve any production. It should not be counted in the GDP.#|!|EM41015|!|A jewelry producer produced $38 million of jewelry in 2007. Unfortunately, a diamond ring worth $2 million was stolen. The insurance company then gave a reimbursement of $1.2 million. How would the GDP for 2007 be affected by the above events?A.The GDP for 2007 would increase by $36 million.B.The GDP for 2007 would increase by $37.2 million.C.The GDP for 2007 would increase by $38 million.D.The GDP for 2007 would increase by $39.2 million.#CThe $38 million of jewelry is counted in the GDP. The $2 million diamond ring being stolen and the reimbursement given by the insurance company would not affect the GDP for 2007 because they represented transfers of wealth only.#|!|EM41016|!|Which of the following is NOT a resident producing unit of Hong Kong?A.a Hong Kong resident who has been working in Shenzhen for 3 yearsB.a Hong Kong resident who has employed a Filipino domestic helper for 5 yearsC.a restaurant in Tsim Sha Tsui owned by a ThaiD.a bookstore that has opened in Kowloon City#AThe residents centre of economic interest is in Shenzhen, not in Hong Kong. Thus, he is not a resident producing unit of Hong Kong.Options B, C and D are incorrect. The Hong Kong residents, the restaurants and the bookstores centre of economic interest is maintained in Hong Kong. They are thus resident producing units of Hong Kong.#|!|EM41017|!|Which of the following items MUST be an intermediate product?A.a televisionB.a computerC.a washing machineD.None of the above.#DAll the goods above can be final products or intermediate products, which depend on how people use them.#|!|EM41018|!|Which of the following is the LEAST likely to be an intermediate product?A.a piece of cloth bought by a fashion designer for her customerB.an ice-cream bought by a girl from a convenience storeC.a magazine bought by a hairstylist for his salonD.a bottle of milk bought by a caf owner for his caf#B#|!|EM41019|!|A housing estate was built in 2001. In 2007, Mr. Chan bought one of the flats secondhand, which cost him $1.3 million. He also used $0.3 million for renovation. The contribution to the GDP for 2007 would beA.$1.6 million.B.$1.3 million.C.$1 million.D.$0.3 million.#DThe value of the second-hand flat should not be counted in the GDP for 2007 because it is not involved in the production of the current period. However, the renovation is the production in 2007 and it should be counted in the GDP for 2007.#|!|EM41020|!|In 2009, Alex bought a second-hand wallet which cost $1,500. However, he lost the wallet later in the same year. What is the effect of the above events to the GDP for 2009?A.The GDP would increase by $1,500 because the $1,500 was consumption expenditure.B.The GDP would remain unchanged because Alex lost his wallet.C.The GDP would remain unchanged because the wallet was a second-hand good.D.None of the above.#CThe value of a second-hand good is not counted in the GDP for 2009, as its value was counted in the GDP when it was sold for the first time. The loss of the wallet did not affect the GDP for 2009.#|!|EM41021|!|In 2008, Mr. Chan bought an antique at an auction for $1 million. He sold it for $1.8 million later in the same year. GDP for 2008A.would increase by $1 million.B.would increase by $1.8 million.C.would increase by $2.8 million.D.would not change.#DSince the antique was not produced in 2008, the revenue from selling or re-selling it should not be counted in the GDP for 2008.#|!|EM41022|!|During 2008, the demand for dolls increased sharply. The supply of dolls could not meet the demand at that time. Some firms decided to sell the dolls in stock that were produced in 2006. Which of the following statements is CORRECT? A.All the sales revenue would be counted in the GDP for 2008.B.Only the value of dolls produced in 2008 would be counted in the GDP for 2008.C.Only the value of dolls produced in 2006 would be counted in the GDP for 2008.D.None of the sales revenue would be counted in the GDP for 2008.#BOnly the value of production that took place within 2008 would be counted in the GDP for 2008.Option A is incorrect. Part of the sales revenue came from the sale of dolls produced in 2006. This part of sales revenue should not be counted in the GDP for 2008.Option C is incorrect. The value of dolls produced in 2006 has been included in the GDP for 2006. It should not be counted in the GDP for 2008.Option D is incorrect. The sales revenue from selling the dolls produced in 2008 should be included in the GDP for 2008.#|!|EM41023|!|Firm AFirm BFirm CCloth,$500Local HouseholdsJeans,$750Skirts,$300Cloth,$200Foreign CountriesThe diagram below shows a production chain in an economy in a certain year.Refer to the above production chain. What is the total contribution of firm B and firm C to the GDP of the economy?A.$1,050B.$750C.$350D.$300#CFirm Bs contribution: $750 $500 = $250Firm Cs contribution: $300 $200 = $100Total contribution of firm B and firm C = $250 + $100 = $350#|!|EM41024|!| The following diagram shows the production chain of ice cream in an economy.US Milk ExporterIce Cream ManufacturerDomestic MarketForeign Market$360$440$2,500$2,800$3,200Local Milk SuppliersIce Cream RetailersWhat is the contribution of the above production chain to the economys GDP?A.$2,800B.$5,200C.$5,640D.$6,000#CUsing the value added approach, the contribution of the above production to GDP= ($2,800 + $3,200) $2,500 + $2,500 ($360 + $440) + $440= $5,640#|!|EM41025|!|The following diagram shows the production chain of handbags in an economy.$360ChinaLocal ProducersHandbags ManufacturerUSALocal ConsumersRaw materials, $230$240$270$780$890Raw materials, $150RetailerTrading CompanyForeign MarketsThe contribution of the above production chain to the economys GDP is _.A.$1,290B.$1,440C.$1,670D.$1,680#DUsing the value added approach, the contribution of the above production chain to GDP= ($780 $360) + ($890 $270) + ($240 + $360 + $270) ($230 + $150) + $150= $1,680#|!|EM41026|!|Foreign Raw Material Exporters ToyManufacturerForeign Market$600$550$2,000$3,500Local Raw Materials ProducersToyRetailersThe following table shows the production chain of toys in an economy.The value added of toy retailers is and the total value added of all the production stages is .A.$3,500 $1,500B.$3,500 $4,050C.$1,500 $2,900D.$1,500 $3,500#CThe value added of toy retailers= $3,500 $2,000= $1,500Total value added of all the production stages= ($3,500 $2,000) + $2,000 ($550 + $600) + $550= $2,900#|!|EM41027|!|Which of the following is regarded as private consumption expenditure in calculating GDP under the expenditure approach?A.governments expenditure on educationB.a companys expenditure on machineryC.transfer payments recipients expenditure on educationD.a bakerys expenditure on flour#CThe expenditure on final goods spent by households is regarded as private consumption expenditure.Option A is incorrect. Governments expenditure on education should be included in government consumption expenditure.Options B and D are incorrect. A companys expenditure on machinery and a bakerys expenditure on flour should be included in gross investment.#|!|EM41028|!|Which of the following is/are included in private consumption expenditure in the calculation of GDP?(1)Marys expenditure on purchasing a newly completed flat(2)Peters expenditure on a second-hand car(3)Simons school feeA.(1) onlyB.(3) onlyC.(1) and (2) onlyD.(2) and (3) only#BSimons school fee is regarded as the expenditure on final goods of a household. Therefore, it is included in private consumption expenditure.(1) is incorrect. Marys expenditure for purchasing a newly completed flat is included in gross investment.(2) is incorrect. Peters expenditure on a second-hand car is not included in the GDP of the current year.#|!|EM41029|!|Which of the following is NOT included in gross domestic fixed capital formation?A.a companys expenditure on machineryB.a companys expenditure on air-conditionersC.a companys expenditure on purchasing an office premiseD.a companys expenditure on shares#DA companys expenditure on shares is considered as a transfer of wealth and does not invo