Chapter 7: Measuring Domestic Output and National Income

The formula for calculating the price index of a basket of goods is:

(Price of market basket in specific year / Price of same market basket in base year) X100

A final good is:

A good directly consumed by individuals or businesses. Counted as part of GDP

An intermediate good is:

A good used only in the production of other products.

The primary measure of the economy's performance is its annual total output of goods and services, which is called its:

Aggregate output

_____ market transactions are not included in measuring GDP.

Black Stock Secondhand

GDP is calculated

C+Ig+G+Xn

The annual amount allocated to the wear and tear on private investment is called or termed:

Depreciation

The iew of GDP as the sum of money spent on buying it is called the aggregate ____approach.

Expenditure

which of the following are components of government purchases in GDP?

Expenditures for publicly owned capital. Expenditures for goods and services that the government consumes in providing public services.

In order to determine GDP using the expenditures approach, all spending on ____ goods and services, not intermediate goods, is added up.

Final

Net exports is exports minus ____.

Imports

As a measurement of economic output and the nation's wealth, GDP fails to account for:

Improved product quality Non-market activities The underground economy Leisure time

National ____ accounting measures the overall performance of the economy.

Income

Viewing GDP in terms of earnings derived or created by producing something is called the ____ approach.

Income

Including the value of ____ goods along with the value of final goods in the calculation of GDP would amount to multiple counting of goods and distort GDP.

Intermediate

The three types of private domestic investment include all final purchases of machinery, equipment, and tools; all construction; and all changes in business ______.

Inventories

What happens to the size of the capital stock when gross investment and depreciation are equal?

It stays the same

By ignoring the value of leisure time, how does national income accounting affect our well-being?

It understates our well-being.

A price index:

Measures the cost of purchasing a market basket of output across different years. Is normalized to 100 for the base year. Always includes a base year

In calculating gross private domestic investment, a ____ change in ____ must be subtracted from total investment for that particular year.

Negatie; Inventories

When gross investment is less than depreciation, net investment is _____.

Negative

Transfer payments are excluded from government purchases in GDP accounting because:

Nothing is being produced in return for the payment.

The term that covers all expenditures by households is ____ ____ expenditures

Personal consumption

A measure of the value of a specified collection of goods and services in a given year as compared to the value of a highly similar collection of goods and services in a reference year:

Price index

A country's exports are included in GDP when the goods and services are:

Produced within the borders of said country

____ GDP, or adjusted GDP, reflects changes in the price level.

Real

A nation's GDP:

Reflects the total market value of all final goods and services produced within an economy in a given year

What are the three categories of personal consumption expenditures?

Services Durable consumer goods Nondurable consumer goods

The national accounts keep track of:

Spending by consumers and government. Business investment. The sales of producers.

For the purposes of GDP accounting, government purchases include _____.

Spending on highway construction The purchase of new military equipment

Gross private domestic investment consists of:

Spending on new plant and equipment during the year Any changes in inventory Newly produced housing

Which of the following is not included in investment spending in the national income accounts?

The purchase of stocks and bonds

Select all of the benefits of national income accounting.

Tracks the long-run course of the economy. Enables formulation of policies to improve or safeguard the economy's health. Assesses the health of the economy.

Social Security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public _____ payments.

Transfer

According to the World Bank, which three countries had the highest GDPs?

US, China, Japan

The sale of ____ is excluded from the calculation of GDP because they contribute nothing to current production.

Used goods

The market value of a firm's output minus the value of the inputs the firm has bought from others is called:

Value added

All the final purchases of machinery, equipment, and tools by business enterprises, including construction, and changes in inventories make up gross private ____ investment.

domestic

Government ____, officially labeled "government consumption expenditures and gross investment," include all federal, state, and local government outlays on final goods.

purchases

Nominal GDP divided by price index equals:

real GDP