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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

Tina walks into Ted’s sporting goods store and buys a punching bag for \(100. That \)100 payment counts as ______________ for Tina and _____________ for Ted.

a. income; expenditure

b. value added; multiple counting

c. expenditure; income

d. rents; profits

Contrast nominal GDP and real GDP. Why is one more reliable than the other for comparing changes in the standard of living over a series of years? What is the GDP price index, and what is its role in differentiating nominal GDP and real GDP?

Suppose that annual output in year 1 in a three-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the prices in both years are \(4 per quart for ice cream, \)3 per bottle of shampoo, and $2 per jar of peanut butter, what was the economy’s GDP in year 1? What was its GDP in year 2?

Suppose that in 1994 the total output in a single-good economy was

7,000 buckets of chicken. Also suppose that in 1994 each bucket of chicken was

priced at \(10. Finally, assume that in 2015 the price per bucket of chicken was

\)16 and that 22,000 buckets were produced. Determine the GDP price index for

1994, using 2015 as the base year. By what percentage did the price level, as

measured by this index, rise between 1994 and 2015? What were the amounts of

real GDP in 1994 and 2015?

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
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