Reading 20: Measuring Economic Activity - LOS a ～ Q1-5

答案和详解如下：

1.When considering the effect of depreciation on the measurement of a country’s economic activity, most economists believe it:

A)   must be included in the calculation in order to provide the most accurate assessment of the country’s economic position.

B)   is difficult to accurately quantify and is generally excluded from the calculation.

C)   may or may not be included in the calculation as long the calculation is clearly identified as a “gross” or “net” number.

D)   should only be included if it represents an amount greater than 5% of total production.

The correct answer was B)

Depreciation is an estimate of an asset’s usage based on accounting conventions and not the actual amount consumed. Because it is difficult to reliably calculate, depreciation is generally excluded from productivity measures.

2.Gross Domestic Product (GDP) typically understates a country’s productivity because it does not fully account for:

A)   depreciation / depletion of assets.

B)   the country’s shadow economy.

C)   any productive assets physically located in other countries.

D)   transfer payments.

The correct answer was B)

Transactions that are intentionally hidden from authorities (for whatever reason) cannot be included in a measure of productivity, thus resulting in an understatement of a country’s productivity.

3.Which of the following would NOT be included in the calculation of Gross Domestic Product (GDP) for the United States?

A)   Profits of a factory in located in California that is owned by a Japanese corporation.

B)   Profits from a customer service center located in India that is owned by a U.S. corporation.

C)   Profits of a farm in located in New York that relies upon immigrant (non-U.S. citizen) labor.

D)   Rental income from apartment buildings located in Texas.

The correct answer was B)

The GDP calculation includes only counts those goods and services produced within the geographic boundaries of the country.

4.James Willingham, CFA, is an equity portfolio manager and partner in a large investment firm in New York. The firm hires a group of new college graduates each year for its internship program, in which the interns rotate through each of the investment departments of the firm for a six week period to gain insight into the different areas of the firm’s operations. The interns attended top universities around the country and have studied the basic theories of finance, but for the most part have no practical experience working with investments.

Willingham, as head of the domestic equity desk, is responsible for the supervision of the interns while they are in his department. Over the past several years, Willingham has noticed that although the interns are selected from a highly qualified pool of candidates, they seem to not have a firm working knowledge of some of the basic economic principles necessary to successfully manage an investment portfolio. Willingham has written a sample case study for the interns to analyze to strengthen their skills when assessing equities for investment. He feels that it will provide knowledge that will be useful as they rotate through each of the departments of the firm.

The case study begins with a review of the most common measures of economic activity: gross domestic product (GDP), gross national income (GNI) and net national income (NNI). Willingham believes it is very important to understand the differences in the composition of the three measures in order to meaningfully compare and contrast the reported results among different countries. He formulates sample data for a country in order for each of the interns to practice calculating the different measures of a country’s productivity.

                Sample Data (year ending 12/31/05)

Willingham also expects the interns to have a full working knowledge of the three components of GDP: output, expenditure, and income. He believes that knowing the interrelationship of these three measures, how they are derived, and how they should be interpreted is crucial for assessment of a country’s economy as well as the effect it can have on an individual stock.

Among the three most widely used measures of economic activity:

A)   GDP only counts production from within a country’s geographic boundaries, while GNI includes productivity of a country’s citizens regardless of where assets are located.

B)   GNI is theoretically the most accurate, although not widely used because of the difficulty in quantifying the economic cost of depreciation.

C)   there is typically very little difference between the GDP and NNI of a country.

D)   GDP understates economic activity to the greatest degree because the production of the underground economy is not included in the measure.

The correct answer was A)

There is typically very little difference between GDP and GNI, in spite of the fact that they are two distinct measures of a country’s productivity.

5.Calculate the GDP based upon the information given above:

A)   $48,375,000.

B)   $45,470,000.

C)   $41,625,000.

D)   $37,750,000.

The correct answer was C)

Working backwards: NNI + depreciation – net property income from abroad = GDP $45,000,000 + $3,875,000 – $7,250,000 = $41,625,000