Question

1. When we export goods to foreign countries, we

		decrease our inflation rate.
		we make payments to the rest of the world (-debit)
		increase our inflation rate.
		we receive payments from the rest of the world (+credit).

2. Gross domestic product can be calculated

		by adding up the value of all intermediate goods used in the economy.
		by adding up the income tax returns of all members of the society.
		by adding up the personal consumption of all members of the society.
		either by valuing the nation's output of goods and services or by valuing the income generated in the production process.

3. Which of the following is included in GDP?

		"bads" such as pollution, congestion, and crime
		automobile manufacture
		production in the home
		the measurable effects of income distribution
		none of the above are included in real GDP calculations

Answer 1

Answer 1 - we receive payment from the rest of the world

Reason - exporting goods means selling goods to countries other than home country. Here we receive payment from other countries which helps the home country maintain a positive balance of payment.

Answer 2 - either by valuing the nation's output of goods and services or by valuing the income generated in the production process.

Reason - calculation of GDP has three possible approach - (1) Value added approach; (2) Income approach (3) expenditure approach.

Value added approach finds GDP by adding the value of all goods and services in the country in a year. Income approach sums the factor income of all factor of production to calculate GDP, expenditure approach sums up consumption, investment, government expenditure an d exports and deducts imports to find GDP.

Answer 3 - production in home.

Reason - production in home means production of goods and services in home country. GDP of a country is calculated by adding up the value of all the goods and services produced in a country during a year.