econ chapter 7

the GDP would be overstated.

If intermediate goods and services were included in GDP:

real GDP may either rise or fall.

If nominal GDP rises:

not counted.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

add increases in inventories or subtract decreases in inventories.

In calculating the GDP, national income accountants:

the price level may change over time.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

the price level rose by more than nominal GDP.

In the second quarter (three-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that:

Increase it

In the short run, how will an increase in C, I, G causing an increase in aggregate demand likely affect real GDP?

add exports, but subtract imports, in calculating GDP.

In the treatment of U.S. exports and imports, national income accountants:

Peter buys a newly constructed house.

Which of the following transactions would be included in GDP?

current output at base year prices.

Real GDP measures:

GDP. B. PI. C. DI. D.none of these.

Environmental pollution is accounted for in:

goods and services purchased by ultimate users, rather than for resale or further processing.

Final goods and services refer to:

the market value of unpaid work in the home.

GDP excludes:

monetary value of all final goods and services produced within the borders of a nation in a particular year.

GDP is the:

government consumption goods and public capital goods.

Government purchases include government spending on:

Government construction of new highways and dams

Gross domestic private investment, as defined in national income accounts, would include the following, except:

None of these necessarily occurred.

If real GDP falls from one period to another, we can conclude that:

GDP price index.

In determining real GDP, economists adjust the nominal GDP by using the:

Gross domestic private investment

Money spent on the purchase of a new house is included in the GDP as a part of:

only counting final goods.

National income accountants can avoid multiple counting by:

any increase in business inventories.

National income accountants define investment to include:

a nation's imports exceed its exports.

Net exports are negative when:

exports less imports.

Net exports are:

the GDP price index.

Nominal GDP is adjusted for price changes through the use of:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

Nominal GDP is:

$12 trillion

Over a five year period nominal GDP increased from $10 trillion to $15 trillion, while the GDP price index increased from 100 to 125. Approximately how much is GDP in year five, stated in terms of year-one dollars? (what is real GDP year 1 as base year)

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

Real GDP is:

GDP data that have been adjusted for changes in the price level.

Real GDP refers to:

We need more information to determine whether GDP has changed.

Suppose Smith pays $100 to Jones

GDP in 2010 is $500 billion

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:

understate economic welfare because it does not take into account increases in leisure.

The GDP tends to:

suggests that the general price level has risen.

The fact that nominal GDP has risen faster than real GDP:

quality of products and services improves.

The growth of GDP may understate changes in the economy's economic well-being over time if the:

subtracted from exports when calculating GDP because imports do not constitute production in the United States.

The value of U.S. imports is:

Excluded from the calculation of GDP because they make no contribution to current production of goods and services

The value of corporate stocks and bonds traded in a given year is:

productive but is excluded from GDP because no market transaction occurs.

Tom Atoe grows fruits and vegetables for home consumption. This activity is:

excluded when calculating GDP because they do not reflect current production.

Transfer payments are:

Goods and services produced in the underground economy.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?

The child-care services provided by stay-at-home parents.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

tax cuts increase disposable income, which leads to higher national income and additional consumer spending

Which of the following best explains why a $7 billion tax cut can lead to a $9 billion increase in consumer spending in the short run

The purchase of a new house.

Which of the following do national income accountants consider to be investment?

A haircut purchased by a father for his 12 year-old son.

Which of the following is a final good or service?

building a new factory

Which of the following is classified as investment in national income (GDP) accounting?

a household rents a condominium during a vacation

Which of the following is included in gross domestic product (GDP)? Assume the following transactions occur with in the US

The purchase of 100 shares of AT&T by a retired business executive

Which of the following is not economic investment?

Purchases of mutual funds by consumers

Which of the following is not included in personal consumption expenditures?

A fishing-company owner buys new fishing gear

Which would be considered an investment according to economists?

understated GDP.

A large underground economy results in an:

can be found by summing C + Ig + G + Xn

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

A nation's gross domestic product (GDP):

a comparison of the current price of a market basket to a fixed point of reference.

A price index is:

$1,200.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:

GDP will tend to increasingly understate the level of output through time.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:

More than they sell, and the inventory increase is added to GDP

Business inventories increase when firms produce: