Section B: Answer all questions1. State with reasons which of the transactions listed below will NOT be counted in GDP: A meat processing company builds a new plant A drug dealer sells $5000 worth of illegal drugs A student purchases a used text book Company A launches a hostile takeover of company B and purchases its stock A public utility company installs new turbines and cooling equipment [15]2. Why are additions to inventory a component of net investment [3]3. Use the data in Table 1 to determine Gross Domestic Product by both the expenditure and income approach. Then determine Net Domestic Product [8] TABLE 1

Personal Consumption expenditures$245

Net Foreign factor income4

Transfer payments12

Rents14

Consumption of fixed capital27

Social security contributions20

Interest13

Proprietor's Income33

Net exports11

Dividend16

Compensation of employees223

Indirect business taxes18

Undistributed corporate profits21

Personal taxes26

Corporate income taxes19

Corporate profits56

Government purchases72

Net private domestic investments33

Personal saving20

4. Discuss four reasons why Gross Domestic Product is not always a true measure of economic well-being. [12]

5. Explain the difference between GDP and GNP. [3]

Section A: Multiple-Choice1. The term G in C+I+G+X-M includes all of the following except:a) Government purchases of new computers of new computersb) Pensions paid to retireesc) Salaries paid to public servantsd) Government capital expenditures2. According to the circular flow of income, the consumers are:a) The owners of factors of productionb) Consumers of goods and servicesc) Producers of goods and servicesd) Both the owners of factors of production and consumers of goods and services3. In calculating GDP:a) Both exports and imports are addedb) Neither exports nor imports are addedc) Exports are added and imports are subtractedd) Imports are added and exports are subtracted4. The method of calculating GDP by summing wages, interest, rent and profit is known as:a) Income methodb) Expenditure methodc) Output methodd) GDP at factor cost5. An item that is excluded from GDP of T&T and included in GNP of T&T is the income earned by a:a) T&T investor who receives dividends from shares owned in a T&T companyb) Jamaican investor who receives dividends from shares owned in a T&T companyc) T&T investor who receives dividends from shares owned in a Jamaican companyd) Jamaican investor who receives dividends from shares owned in a Jamaican company6. The value added of a firm is the:a) Value of the firms output after the cost of intermediate goods and services has been subtractedb) Profit margin of the firmc) Sum of all income: wages, profits, rents and interest that it generatesd) Value of all its assets: plant and equipment that are used in production

7. The table shows figures for a certain economy$m

Consumption, investment and government expenditure100

exports25

imports20

Indirect taxes12

subsidies14

Net property income from abroad1

Capital consumption10

What is the net national product at factor cost?a) $98mb) $105mc) $106md) $1088. Real GDP is not a good indicator of economic welfare because it:a) Does not take account of leisure timeb) Does not measure the value of the black economyc) Does not include the external costs and benefits created by externalitiesd) All of the above9. Assume a bakery purchases $5,000 in flour per week and bakes $12,000 in bread. If it pays electricity, what is the firms weekly contribution to GDP?a) $12,000b) $7,000c) $5,000d) $3,50010. Which of the following would be included in GDP in a given year?a) The value of used textbooks soldb) The value of the printer used to print new textbooks printed for the book season during the yearc) The value of new textbooks printed for the book season during the yeard) The value of the paper used to print textbooks11. Which of the following is not a limitation of real national income statistics?a) Failure to take into account tax evasion and black marketsb) Failure to include environmental degradation and other negative externalitiesc) Failure to consider the number of leisure and working hoursd) Failure to include intermediate foods and services