ch.4-6 macroeconomics

Short-term fluctuations experienced in the economy due to changes in levels of economic activity describe the:

the business cycle

Nominal gross domestic product measures the dollar value of:

the final goods and services that are produced during a fixed period of time

Salaries in the private sector are not included in nominal GDP, but the salaries of government employees ,such as police officers, teachers, and judges are included in nominal GDP. This is because:

the government will not later sell the services for which it pays government employees, but the wage that a private firm pays is incorporated into the product price.

Consumption and government purchases are: Multiple choice question.

the largest components of GDP.

The recession phase of the business cycle is characterized by a decline in real output for at least______consecutive quarters.

two

GDP _______ the actual amount of output produced in an economy because informal market transactions result in increases in output produced.

underestimates

When measuring GDP, we classify expenditures into four categories because:

we like to know who is consuming what.

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, two cranes wear out. At the same time, we invest in capital and purchase three new cranes. Gross investment is equal to___cranes and depreciation is equal to ___cranes.

- 3 - 2

Suppose at the beginning of Year 1, there are ten cranes in an economy. During the course of Year 2, two cranes wear out. At the same time, the government invests in capital and purchases three new cranes. Gross investment is equal to ____ cranes, and depreciation is equal to_____cranes. Therefore, net investment is equal to____ crane(s).

- 3 - 2 - 1

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, two cranes wear out. At the same time, we invest in capital and purchase three new cranes. Gross investment is equal to ____ cranes and depreciation is equal to _____ cranes.

- 3 - 2

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, four cranes wear out. At the same time, we invest in capital and purchase six new cranes. Gross investment is equal _____ to cranes and depreciation is equal to _____ cranes. (Use one word for the blank.)

- 6 - 4

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, four cranes wear out. At the same time, we invest in capital and purchase six new cranes. Gross investment is equal to ______ cranes and depreciation is equal _______ to cranes, so net investment is equal _________ to cranes. (Use one word for each blank.)

- 6 - 4 - 2

Which of the following is true of real GDP?

- It tells us how much output was produced in a country. - It tells us whether more output was produced in one year relative to another.

To calculate ______ ______ ,multiply the quantities of each good produced in each year by base-year prices.

- Real - GDP

Indicate which of the following are not included directly in the calculation of GDP.

- Used goods - Intermediate goods

According to a(n) ________ , a piece of machinery that is still in use and highly productive could be fully depreciated. On the other hand, a(n)_______ would say that a machine should not be counted in depreciation because it is still in use and part of the productive process.

- accountant - economist

If nominal GDP is calculated using prices ____ and ____ output, you cannot really know what causes nominal GDP to change from one year to the next.

- current - current

Net exports equal _____ minus ______.

- exports - imports

Imports constitute around Blank______ of nominal GDP in the United States.

15%

Imports constitute around Blank______ of nominal GDP in the United States. Multiple choice question.

15%

Suppose real GDP is roughly $750 billion and the population is approximately 50 million people. Real GDP per capita is $____.

15000

The labor force does not include individuals who are under the age of ______

16

Suppose real GDP is roughly $900 billion and the population is approximately 50 million people. Real GDP per capita is $____.

18,000

If an economy exports $12 billion worth of goods and services and imports $8 billion worth, the amount of its net exports is $ ______ billion. (Only use number; $ has been provided for you.)

4

Suppose at the beginning of the year there are ten cranes in the economy. During the course of the year, two cranes wear out and are replaced. At the same time, net investment is equal to two cranes. Gross investment is equal to ___ cranes.

4

Suppose that last year a total of $12 billion in goods and services was exported to other countries, while $8 billion was imported. Net exports equals $ ____billion.

4

Suppose that at the beginning of the year, there are ten cranes in the economy. During the course of the year, three cranes wear out and are replaced. At the same time, net investment is equal to three cranes. Gross investment is equal to _____ cranes.

6

If an economy exports $15 billion worth of goods and services and imports $8 billion worth, the amount of its net exports is $ ____ billion. (Only use number; $ has been provided for you.)

7

Suppose that in the last year consumers spent $10 billion on durable goods, $40 billion on nondurable goods, and $35 billion on services. Consumption equals $___billion. (Only use number; $ has been provided for you.)

85

Suppose that in the last year consumers spent $14 billion on durable goods, $35 billion on non-durable goods, and $46 billion on services. Consumption equals $_____ billion.

95

______ refers to spending by firms on capital goods designed to improve the future productivity of the firms.

Business investment

Gross domestic product equals:

C + I + G + NX

_______ is the largest component of GDP in the United States.

Consumption or Consumer spending

Suppose Country A has a real GDP per capita of $18,000 and Country B has a real GDP per capita of $24,000. We can conclude that:

Country B is more likely to have a higher standard of living than Country A.

One problem with developing countries is that measures of GDP often underestimate the amount of production that actually occurs. Why is this true?

Developing countries often have relatively large informal markets.

Which investment occurs when firms invest in new buildings or replace machines, adding to the capital stock that allows an economy to produce more in the future?

Gross investment

Suppose at the beginning of the year, there are ten cranes in the economy. During the course of the year, two cranes wear out and are replaced. At the same time, net investment is equal to two cranes. Calculate gross investment from the given information. Multiple choice question.

Gross investment is equal to four cranes.

All of the following are counted as part of GDP except:

a farmer growing their own food

Nominal gross domestic product measures the dollar value of: Multiple choice question.

all final goods and services that are produced during a fixed period of time.

RGDP uses current-year quantities and _____ -year prices. (Enter one word in the blank.)

base

Real GDP uses current-year quantities and ____ -year prices. (Enter one word in the blank.)

base

The ______ cycle consists of the short-term fluctuations experienced in an economy due to changes in the levels of economic activity.

business

Purchases by firms of new capital goods such as offices, factories, tools, and machinery are called: Multiple choice question.

business fixed investment.

Real GDP per____ is the same as real GDP per person.

capita

The more _______ that is available to its workers, the more productive a nation will be.

capital

_______ depreciates when it becomes obsolete.

capital

Gross domestic product is equal to the total sum of four categories:

consumption (C), gross investment (I), government purchases (G), and net exports (NX).

Gross domestic product equals the total sum of four categories:

consumption, gross investment, government purchases, and net exports.

Purchases made by households are called:

consumption.

In calculating real GDP, we use:

current-year quantities and base-year prices.

Informal-market transactions are especially problematic for:

developing countries in which a large fraction of total production is exchanged in informal markets.

Net exports is the ________.

difference between exports and imports

Goods that have an average useful life of three years or more are known as ______ goods.

durable

Consider a piece of machinery that is still in use and highly productive. A(n) _______ would say that the machine should not be counted in depreciation because it is still part of the productive process.

economist

Anne is a computer programmer and works at an office in her house. She is 38 years old. Anne is: Multiple choice question.

employed

The transactions that are part of an underground economy are ____ from the calculations of GDP.

excluded

Because ______ are produced domestically, they must be included in gross domestic product. (Enter one word in the blank.)

exports

For the economy as a whole, we keep track of the output flowing between countries using the concept of net .

exports

Goods and services that are manufactured domestically but sold abroad are called ______

exports

All adults over 16 years of age are included in the labor force. (True or False)

false

A(n) ________ good or service is the one that is sold to the end user and is not used to produce another product for subsequent sale. (Enter one word in the blank.)

final

Only _______ goods and services are included in the estimation of nominal GDP, the dollar value of output produced in an economy.

final

Higher the amount of capital available to workers, higher the productivity of the nation. The more productive the nation, the _______ the wages and standards of living.

higher

Consumption includes purchases made by ________.

households

Consumption includes purchases made by _________.

households

Newly produced goods and services that households buy are considered consumption expenditure with one very important exception. Which of the following is the exception?

houses

Gross investment tells:

how much capital is being created.

Because ______ are not produced domestically, they need to be subtracted from gross domestic product.

imports

______ are not counted in nominal GDP because they are produced somewhere else.

imports

Real GDP is an _______-adjusted measure that reflects the value of all final goods and services produced in a country during a fixed period of time. Multiple choice question.

inflation

Markets that are part of the____ economy exchanging illegal goods and services or engaging in illegal transactions are called black markets.

informal

GDP cannot account for:

intangibles such as happiness.

The reason why _______ goods and services are not included in the calculation of GDP is that they would be counted twice.

intermediate

_______ goods are not part of GDP because their prices are included in the final price of the products.

intermediate

In economics, ______ does not solely refer to saving money or buying stocks or bonds. Multiple choice question.

investment

In economics,_______ includes purchasing housing, tractors, tools, and factories.

investment

______ represents the accumulation of new capital.

investment

In The United States, imports constitute:

less than 20% of nominal GDP.

In The United States, imports constitute: Multiple choice question.

less than 20% of nominal GDP.

An increase in _____ GDP can be caused by increases in quantities or increases in prices.

nominal

The dollar value of all the final goods and services that are produced during a fixed period of time is:

nominal gross domestic product.

The expenditures or the dollar value of all the final goods and services that are produced during a fixed period of time are:

nominal gross domestic product.

Goods that have an average useful life of fewer than three years are known as goods.

nondurable

Real GDP per capita is calculated by dividing a country's real GDP in a given year by the country's:

population

Real GDP per capita is calculated by dividing a country's real GDP in a given year by the country's: Multiple choice question.

population

If inventories are growing, inventory investment is _______

positive

Investment can be:

positive, negative, or zero.

When studying GDP, we use real GDP because we need a metric that holds:

prices constant to compare GDP from one time period to the next.

Salaries in the _______ sector are not included in nominal GDP. (Choose from two words: private/public)

private

_____ GDP uses prices from a base year also referred to as constant prices.

real

The dollar value adjusted for inflation of all final goods and services produced in a country during a fixed period of time is called: Multiple choice question.

real GDP

Real GDP per capita is the same as:

real GDP per person.

The National Bureau of Economic Research determines when _____ begin and end. (Enter one word in the blank.)

recessions, recession, depressions, or depression

Sales of ___________ do not represent new production, just the reallocation of past production that was already counted as part of GDP in another year.

secondhand goods

Which of the following is true of GDP?

It accounts for output in the year it is produced instead of the year that it is sold.

What happens to capital when it becomes obsolete? Multiple choice question.

It depreciates.

Which of the following statements is true? Multiple choice question.

NX = X - M.

Identify a correct statement about net exports.

Net exports are positive when exports exceed imports.

Suppose that last year a total of $12 billion in goods and services was exported to other countries while $8 billion was imported.

Net exports equals $4 billion