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Chapter 7: Q1. (page 151)

In what ways are national income statistics useful?

Short Answer

Expert verified

National income statistics help in measuring the economic performance of a nation, and therefore, is a useful statistic.

Step by step solution

01

Meaning of national income statistics

The national income statistics measure the aggregate output production in the country.Gross Domestic Product (GDP) is one of the ways of measuring national income where the dollar value of the output produced within the domestic territory is calculated during a period of time.

The national income of the US is calculated by an agency of the US Commerce Department, called the Bureau of Economic Analysis (BEA). For example, the GDP of the US was $20.93 trillion in 2020.

02

Importance of national income statistics

The national income helps the policymakers in the following ways:

  • Evaluating the health of the economy by calculating the production levels.

  • Estimating the employment generation capacity of the economy.

  • Estimating the Long-run growth.

  • Understanding how economic policies should be altered to improve the economic state of the country.

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Most popular questions from this chapter

Why is gross output a better measure of overall economic activity than GDP is? How could you construct a new statistic that focuses only on nonfinal economic activity? Given what you know about the behavior of GO and GDP during the Great Recession, would you expect your new statistic to show more or less volatility than GO and GDP? Why? How would you rank the three in terms of volatility?

Which of the following transactions are counted in GDP?Select one or more answers from the choices shown.

a. Kerry buys a new sweater to wear this winter.

b. Patricia receives a Social Security check.

c. Roberto gives his daughter \(50 for her birthday.

d. Nayana sells \)1,000 of General Electric stock.

e. Jasmine buys a new car.

f. Molly buys a used car

Suppose that this year a small country has a GDP of \(100 billion. Also assume that Ig = \)30 billion, C = \(60 billion, and Xn = 鈭� \)10 billion. What is the value of G?

a. \(0

b. \)10 billion

c. \(20 billion

d. \)30 billion

Which of the following items are included in official U.S. GDP statistics? Select one or more answers from the choices shown.

a. Revenue generated by illegal marijuana growers.

b. money spent to clean up a toxic waste site in Ohio.

c. Revenue generated by legal medical marijuana sales in California.

d. The dollar value of the annoyance felt by local citizens living near a noisy airport in Georgia.

e. Andre paying Ted for a haircut in Chicago.

f. Emily and Aliya trading an hour of dance lessons for a haircut in Dallas.

Suppose GDP is \(15 trillion, with \)8 trillion coming from consumption, \(2.5 trillion coming from gross investment, \)3.5 trillion coming from government expenditures, and \(1 trillion coming from net exports. Also suppose that across the whole economy, personal income is \)12 trillion. If the government collects \(1.5 trillion in personal taxes, then disposable income is:

a. \)13.5 trillion

b. \(12.0 trillion

c. \)10.5 trillion

d. none of the above
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