Econ Chapter 7 JCCC

Year Units of Output Price Per Unit 1 20 $4 2 25 4 3 30 6 Assume an economy that is producing only one product. Output and price data for a three-year period are shown in the table. If year 2 is chosen as the base year, the price index for year 1 is

100

If nominal GDP in some year is $280 and real GDP is $160, then the GDP price index for that year is

175

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is

300

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010, the real GDP rose by approximately

44%

Year Units of Output Price Per Unit 1 3 $3 2 4 4 3 6 5 4 7 7 5 8 8 Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are shown in the table. The price index for year 1 is

60

Which of the following is a final good or service?

A haircut purchased by a father for his son.

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the

Bureau of Economic Analysis

The largest component of national income is

Compensation of employees

When local police and fire departments buy new cars for their operations, these are counted as part of

G.

In national income accounting, the consumption category of expenditures includes purchases of

automobiles for personal use but not houses.

Transfer payments are

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

When an economy's production capacity is expanding,

gross domestic investments exceeds depreciation.

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000, real GDP

increase by $60 billion

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock

increased by 65 billion.

In 2012, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November 2012. The bicycle was sold to E.Z. Ryder in March 2013. This bicycle is counted as

investment in 2012 and as a negative investment in 2013

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.

GDP is the

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

The system that measures the economy's overall performance is formally known as

national income accounting

The smallest component of aggregate spending in the United States is

net exports

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that

net investment is negative.

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

not counted.

National income accountants can avoid multiple counting by

only calculating final goods.

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

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

Refer to the diagram. The base year used in determining the price indices for this economy

some year before 2000

Suppose that inventories were $80 billion in 2015 and $70 billion in 2016. In 2016, national income accountants would

subtract $10 billion from other elements of investment in calculating total investment

The total volume of business sales in our economy is several times larger than GDP because

the GDP excludes intermediate transactions

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

the child-care services provided by a stay at home parent.

value added refers to

the difference between the value of a firm's output and the value of the inputs it has purchased from others.

If depreciation exceeds gross investment,

the economy's stock of capital is shrinking.

In 1933, net private domestic investment was a minus $6.0 billion. This means that

the production of 1933's GDP used up more capital goods than were produced in that year.

Nominal GDP is

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

An economy is enlarging its stock of capital goods

when gross investment exceeds replacement investment

Government Purchases $15 Consumption 90 Gross Investment 20 Consumption of Fixed Capital 5 Exports 8 Imports 12 Refer to the accompanying data (all figures in billions of dollars). NDP (net domestic product) is

$116. NDP = GDP- Depreciation

Government Purchases $15 Consumption 90 Gross Investment 20 Consumption of Fixed Capital 5 Exports 8 Imports 12 Refer to the accompanying data (all figures in billions of dollars). GDP is

$121 (add everything but consumption of fixed capital and subtract imports-exports)

Year Units of Output Price of Bagel Per Unit Price Index (Year 1 = 100) 1 10 $10 100 2 12 20 200 3 15 30 300 4 20 40 400 The table contains data for a hypothetical single-product economy. Real GDP in year 3 is

$150

ersonal Taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 U.S. Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 U.S. Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor Income 10 Statistical Discrepancy 0 DI is

$274 (wages+ profits+ interest+ taxes)

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2,460), and government purchases ($470). What is GDP in this economy?

$3,237 billion

Proprietors' Income $20 Compensation of Employees 300 Consumption of Fixed Capital 15 Gross Investment 80 Rents 10 Interest 20 Exports 30 Imports 50 Corporate Profits 25 Taxes on Production and Imports 5 Net Foreign Factor Income 0 Statistical Discrepancy 0 Refer to the accompanying data. All figures are in billions of dollars. National income is

$380

Personal Taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 U.S. Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 U.S. Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor Income 10 Statistical Discrepancy 0 Refer to the accompanying data (all figures in billions of dollars). NI is

$402 (add all income)

Personal Taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 U.S. Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 U.S. Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor Income 10 Statistical Discrepancy 0 GDP is

$417 (gov purchases + gross private investments+ imports+ exports+ personal consumption expenditures)

Year Units of Output Price of Bagel Per Unit Price Index (Year 1 = 100) 1 10 $10 100 2 12 20 200 3 15 30 300 4 20 40 400 The table contains data for a hypothetical single-product economy. Nominal GDP in year 3 is

$450

Gross Investment $18 National Income 100 Net Exports 2 Personal Income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 Refer to the accompanying data (all figures in billions of dollars). Consumption of fixed capital is

$5

Personal Consumption Expenditures $400 Government Purchases 128 Gross Private Domestic Investment 88 Net Exports 7 Net Foreign Factor Income 0 Consumption of Fixed Capital 43 Taxes on Production and Imports 50 Compensation of Employees 369 Rents 12 Interest 15 Proprietors' Income 52 Corporate Income Taxes 36 Dividends 24 Undistributed Corporate Profits 22 Statistical Discrepancy 0 Refer to the accompanying national income data for the economy. All figures are in billions of dollars. The gross domestic product for this economy is

$623

Alejandro Scoobertini owns a store specializing in soccer jerseys. In 2016, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro's store in 2016?

$70,000

Real GDP refers to

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

Suppose the total monetary value of all final goods and services produced in a particular country in 2015 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that

GDP in 2015 is $500 billion.

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

GDP price index

If intermediate goods and services were included in GDP,

GDP would be overstated.

Refer to the diagram. Which of the following statements is correct?

Nominal GDP must be deflated in each year since 2000 to determine real GDP

Which of the following transactions would be included in GDP?

Peter buys a newly constructed house.

Which of the following is included in the expenditures approach to GDP?

Spending on meals by consumers at restaurants

Which of the following is not economic investment?

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

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

The purchase of a new house.

Suppose Smith pays $100 to Jones

We need more information to determine whether GDP has changed.

Which of the following is a private transfer payment?

a check for $250 sent by parents to a daughter at college

National income accountants define investment to include

any increase in business inventories

Real GDP measures

current output at base year prices

In national income accounting, the consumption category of expenditures includes purchases of

consumer durable goods, consumer nondurbale goods and services.

The largest component of total expenditures in the United States is

consumption

In an economy, the value of inventories was $75 billion in 2016 and $63 billion in 2017. In calculating total investment for 2017, national income accountants would

decreasae by $12 billion