Chapter 5

The value of capital used up in the production of goods and services is called

depreciation

Investment currently claims about _____ of U.S. output.

one sixth

Which of the following two items are ADDED to national income to arrive at personal income? - Indirect business taxes - Corporate profits - Depreciation - Net foreign factor income - Personal taxes - Capital Income - Transfer payments

Capital income, transfer payments

The GDP for this economy is? Basketballs price: $35 Output: 30 million Cellphones Price: $450 Output: 20 million Corporate jets Price:$10 million Output: 200

(Basketball price * basketball output) + (cellphone price * cellphone output) + (jet price * jet output) = 12050

GDP accounts have two sides. One side focuses on the demand side (called the ________ approach) and the other side focuses on the supply side (called the _______ approach). - Income, expenditure - Value added, expenditure - Expenditure, income - Value added, price

- Expenditure, income

Which of the following is subtracted from national income to arrive at personal income?

- Indirect business taxes - Corporate profits

When calculating GDP, consumption makes up approximately

Two-thirds of total output.

Real GDP is the

Value of final output produced in a given period measured in current prices.

The GDP identifies the mix of output a country has selected, which also answers the question of _______ to produce.

What

The value of capital used up in the production of goods and services is called

depreciation or GDP

Nominal GDP measures the value of all goods and services

in current prices

Gross ________ product refers to output produced by American-owned factors of production

national

The flow of income that starts with GDP ultimately returns to the market in the form of:

new consumption, investment, and government purchases

Computing GDP using current prices gives us

nominal GDP

Net investment is:

what is left over from total new private investment after depreciation

Which of the following is equal to net investment?

Gross investment minus depreciation

GDP can be measured using the _____ approach, which adds the items that make up national earnings on the supply side. - total - national - expenditure - income

Income

Which of the following is SUBTRACTED from national income to arrive at personal income?

Indirect business taxes Corporate profits

American-owned factors of production employed in other nations creates an _____ of income for U.S. households.

Inflow

When describing the flow of income, GDP returns to the market in the form of which of the following? - Investment - Consumption - Sales revenue - Government spending - Transfer payments

Investment, consumption, government spending

National income (= income earned by factors of production)

Less: - Indirect business taxes - Corporate profits - Interest and miscellaneous payments - Social security taxes plus: - Transfer payments - Capital income

The GDP per capita is the most practical way to

Make international comparisons of the standard of living.

National income formula

NI= NET domestic product + NET foreign factor income

To avoid counting the same output more than once, the calculation of GDP includes

Only value of final goods

Disposable income formula

Personal income - personal taxes = Disposable income

True or false: Prices serve as a measure of value for calculating total output.

True Reason: Once we know the price of each good, we can calculate the value of output produced.

Depreciation is

the wearing out of plant and equipment

To measure an economy's output adjusted for changes in the price level, one would use

real gdp