King: Economics Chapter 18 Instructions Answer the following questions and then press 'Submit' to get your score. Question 1 One week, a firm receives £9,000 from its customers. It has to pay £1,000 in taxes on products and £500 in other taxes on production; and it receives £100 in subsidies on products and £50 in other subsidies. Which of the following equals £7,650? a) The value of its products sold at market prices. b) The value of its products sold at basic prices. c) The value of its products sold at factor cost. d) None of the above. Question 2 Return to the firm in question 1. Suppose that in the week concerned it adds £350 worth of finished products to its inventories. Also, it buys £3,000 worth of intermediate products from other firms but adds £300 worth of these to its inventories. What is its value added at factor cost? a) £8,000 b) £5,300 c) £4,700 d) £4,000 Question 3 Return to the firm in questions 1 and 2. Suppose that in the week concerned it pays compensation to its employees of £5,000. What is its operating surplus? a) £300 b) £650 c) £650 d) £950 Question 4 GDP at factor cost equals the total value added at factor cost of all producers. Which of the following can be used to discover this total? a) The total operating surpluses of all producers. b) The total compensation of employees of all producers. c) The total compensation of employees of all producers minus the total operating surpluses of all producers. d) The total compensation of employees of all producers plus the total operating surpluses of all producers. Question 5 Expenditure in an economy for one quarter of a year is as follows, all figures being at market prices and in £ billion: Consumption expenditure by households 80, consumption expenditure by non-profit institutions 5, consumption expenditure by general government 35, gross domestic fixed capital formation 20, changes in inventories 6, acquisition less disposals of valuables 1, exports 40, imports 45. What is GDP at market prices for that quarter? a) £140 billion b) £142 billion c) £240 billion d) £242 billion Question 6 GDP at market prices in an economy one year is £1,500 billion. Net income from abroad is £20 billion, net current transfers paid abroad are £15 billion, and capital consumption is £150 billion. Which of the following statements is false? a) Gross national income at market prices is £1,520 billion. b) Gross national disposable income at market prices is £1,535 billion. c) Net domestic product at market prices is £1,350 billion. d) Net national income at market prices is £1,370 billion. Question 7 Country A uses sterling and has a GDP per head of £30,000. Country B uses another currency. If this is converted to sterling at the current exchange rate, its GDP per head is £5,000. Which of the following statements is false? a) To get a better comparison of output per head, it would be better to convert country B's currency into sterling using purchasing power parities (PPPs). b) If PPPs were used, it is most likely that B's output per head would seem closer than it does using exchange rates. c) Exchange rates generally settle so that the prices of tradable products in each country are similar. d) PPPs are the rates which ensure that the prices of all products in each country are similar. Question 8 Suppose that, over time, the share of manufacturing industry in a country's GDP falls. Which of the following statements is true?1. The quantity of the goods and services produced by manufacturing industry must be falling.2. The value of the goods and services produced by manufacturing industry must be falling. a) Both 1 and 2 b) 1 only c) 2 only d) Neither 1 nor 2 Question 9 Which of the following statements is true?1. Total welfare is affected by many factors including economic welfare.2. Economic welfare refers to living standards. a) Both 1 and 2 b) 1 only c) 2 only d) Neither 1 nor 2 Question 10 Suppose that over the course of a decade an economy had a stable population and real GNDI increased by 20%. However, an economist estimates that economic welfare increased by less than 20%. Which of the following would not be a factor that could help to explain this? a) Household production (excluding owner-occupied property) increased by less than 20%. b) Output by the underground economy increased by less than 20%. c) Leisure time increased by less than 20%. d) Prices increased by more than 20%.