QB_Ch15(Eng)_output_revised 022011.doc

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. ## B In 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 government’s cost of providing them. Option D is incorrect. GDP at market prices = GDP at factor cost + Indirect taxes – Subsidies Without 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 Kong’s GDP for 2010? A. the old age allowance paid by the government in 2010 B. the value of a computer produced in 2009 but sold in 2010 C. the value of a gift received by a Hong Kong resident from a Mainland resident in 2010 D. the salary of a salesperson from working in a shop selling second-hand goods in 2010 ## D The 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