CHAPTER 23: MEASURING A NATION'S INCOME

True/False

Indicate whether the statement is true or false.

1.

The circular flow diagram describes all transactions between households and firms in a simple economy and shows the equality of expenditures and income.

ANSWER: T

POINTS: 0 / 1

2.

Gross domestic product includes most items produced and sold illicitly.

ANSWER: F

POINTS: 0 / 1

3.

Net national product is the total income of a nation's residents minus losses from depreciation.

ANSWER: T

POINTS: 0 / 1

4. Disposable personal income is the income that households and unincorporated business have left after satisfying all their obligations to the government. It equals personal income minus personal taxes and certain non-tax payments to government.

ANSWER: T

POINTS: 0 / 1

5.

The purchase of new houses by households is included in the calculation of personal consumption expenditures of GDP.