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8.4  Other Components of National Income Accounting


1) All of the following statements are correct EXCEPT

A) NDP = Gross Domestic Product (GDP) - depreciation (capital consumption allowance).

B) NI = NDP + indirect business taxes.

C) Net exports = total exports - total imports.

D) Gross Domestic Product (GDP) = NDP + capital consumption allowance (depreciation).


2) If consumption expenditures are $500, spending on fixed investment is $100, imports are $40, exports are $75, the capital consumption allowance is $25, government spending is $50, and inventories have fallen by $5, then Gross Domestic Product (GDP) is

A) $25 greater than NDP.

B) $20 greater than NDP.

C) $50 greater than NDP.

D) the same as NDP.

3) National income includes all of the following EXCEPT

A) proprietors' income.

B) net interest.

C) corporate profits.

D) depreciation.


4) The amount of income households receive after personal income taxes have been paid is known as

A) national income.

B) personal income.

C) disposable personal income.

D) gross domestic income.


5) National income is equal to

A) Gross Domestic Product (GDP) plus depreciation and indirect business taxes.

B) the sum of all factor payments to resource owners.

C) Gross Domestic Product (GDP) minus indirect business taxes.

D) Gross Domestic Product (GDP) minus NDP.


6) The annual cost of producing the entire output of final goods and services in an economy is

A) equal to the quantity of total output produced.

B) greater than the total income of households in the economy.

C) equal to total income.

D) equal to the total income of households in the economy only if profits are zero.

7) The total factor payments to all resource owners is called

A) net domestic product.

B) personal income.

C) national income.

D) gross domestic income.


8) Suppose net domestic product is $4.8 billion, net income earned abroad is $0.7 billion, other business income adjustments net of indirect business taxes and transfers are $0.4 billion, and personal income taxes are $0.8 billion. Then, national income equals

A) $2.9 billion.

B) $3.6 billion.

C) $5.9 billion.

D) $6.7 billion.


9) Gross Domestic Product (GDP) = $13.0 trillion, consumption = $9.5 trillion, depreciation = $1.8 trillion, other business income adjustments less indirect business taxes = $0.2 trillion, and net U.S. income earned abroad = $0.1 trillion. Use this information to calculate national income (NI).

A) NI = $11.0 billion

B) NI = $11.3 billion

C) NI = $11.4 billion

D) NI = $11.5 billion


10) National income is income ________ the factors of production.

A) paid by

B) earned by

C) invested in

D) households owe to



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