ECON211 - Ch7

Government transfer payments include all of the following except: - direct payments to veterans - wage payments to police officers - direct welfare payments to low-income households - payments to elderly from Social Security

wage payments to police officers

National income accountants subdivide corporate profits into which categories? (Select all that apply) - Interest on savings - Corporate income taxes - Undistributed corporate profits - Dividends - Rents

- Corporate income taxes - Undistributed corporate profits - Dividends

Which of the following are components of government purchases in GDP? (Select all that apply) - Expenditures for intermediate goods - Expenditures for publicly owned capital - Expenditures for goods and services that the government consumes in providing public services - Expenditures and government receipts that consist of transfer payments to households

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

Which of the following are components of the expenditure approach to measuring GDP? (Select all that apply) - Personal and Business Savings - Government Purchases - Personal Consumption Expenditures - Gross Private Domestic Investment

- Government purchases - Personal Consumption Expenditures - Gross Private Domestic Investment

Which of the following are included in compensation of employees? (Select all that apply) - Payments by employers into private pension plans for employees - Wages and salaries - Payments by employees into private pension plans - Payments by employers into social insurance for employees

- Payments by employers into private pension plans for employees - Wages and salaries - Payments by employers into social insurance for employees

According to the International Monetary Fund, which three countries had the highest GDPs? (Select all that apply) - Japan - China - United States - Canada - United Kingdom - Germany

- United States - China - Japan

Gross private domestic investment consists of: (Select all that apply) - any changes in inventories - durable goods and nondurable goods - spending on new plant and equipment during the year - newly produced housing - services

- any changes in inventories - spending on new plant and equpiment during the year - newly produced housing

For the purpose of GDP accounting, government purchases include ___ (Select all that apply) - the purchase of new military equipment - unemployment insurance payments - spending on highway construction - Social Security payments

- the purchase of new military equipment - spending on highway construction

Using the expenditure approach, which of the following most closely defines the composition of GDP? - C + I_n + G + X - C + I_n + G + X_n - C + I_g + G + M - C + I_g + G + X - M

C + I_g + G + X - M

If C represents consumption expenditure, I_g represents gross investment, I_n represents net investment, G represents government expenditure, X_n represents net exports, and X_g represents gross exports, GDP is: - C + I_g + G + X_n - C + I_g + G + X_g - C + I_g + P + X_n - C + I_n + G + X_n

C + I_g + G + X_n

Which of the following is the largest component of national income? - Corporate profits - Interest - Compensation of employees by firms - Rental income received by households and businesses

Compensation of employees by firms

True or false: The transfer of claims to existing capital goods creates new capital.

False

___ goods are included in the calculation of GDP while ___ goods are not included - Hard; soft - Durable; non-durable - Intermediate; final - Final; Intermediate

Final; intermediate

Which of the following is equal to net investment? - Gross investment minus final sales - Depreciation plus GDP - Gross investment minus depreciation - GDP minus final sales

Gross investment minus depreciation

Foreign goods or ___ purchased by consumers, firms, or the government should be subtracted from GDP because the goods were not produced in the United States

Imports

___ income consists of the money paid by private businesses to the suppliers of loans used to purchase capital

Interest

What happens to the size of the capital stock when gross investment and depreciation are equal? - It increases - It stays the same - It decreases

It stays the same

Income earned through the use of American-owned resources for services and production is called ___ income

National

___ enable economists to track the long-run course of the economy - Personal Income Accounting - National Income Accounting - Government tax policies - Personal Consumption

National Income Accounting

___ is the income received by households and businesses that supply property resources.

Rent

Which of the following is counted as gross private domestic investment? - Spending on legal services - Investing in stocks and bonds - Spending on automobiles - Residential construction

Residential construction

True or false: GDP only counts final goods and services to avoid multiple counting of goods.

True

An intermediate good is: - a good directly consumed by individuals - counted as part of GDP - a good used only in the production of other products

a good used only in the production of other products

Aggregate output is the primary measure of the economy's - annual total output of goods and services - annual total output of goods and services expressed in real terms - annual marginal output of goods and services - annual total output of goods and services adjusted for inflation

annual total output of goods and services

National income is the sum of compensation of employees, rents, interest, proprietors' income, taxes on production and imports, and: - taxes on exports - dividends - capital appreciation - corporate profits

corporate profits

Gross domestic product calculations count only final goods and services because: - it is difficult to measure the prices of intermediate goods produced - one cannot calculate the quantities of intermediate goods produced - counting all intermediate goods and services would lead to double-counting of many activities - these are the only goods and services that are purchased in an economy

counting all intermediate goods and services would lead to double-counting of many activities

Transfer payments are not included in GDP because they do not generate ___ - financial transactions - intermediate goods - current output - finished goods

current output

If net investment is negative, the capital stock has ___. If net investment is positive, the capital stock has ___ - increased; increased - increased; decreased - decreased; increased - decreased; decreased

decreased; increased

Consumption of fixed capital is the ___ charge made against private and publicly owned capital each year.

depreciation

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

domestic

Consumption goods, capital goods and services purchased by their ultimate users are called ___ goods - intermediate - substitute - final - investment

final

Gross private domestic investment includes: - final purchases of machinery, equipment, and tools by business enterprises, and all nondurable goods and services - final purchases of machinery, equipment, and tools by enterprises, all construction, and changes in inventories - final purchases of machinery, equipment, and tools by business enterprises, consumer durables and changes in inventories

final purchases on machinery, equipment, and tools by enterprises, all construction, and changes in inventories

The market value of all final goods and services produced within the borders of a given country during a given period of time is the definition of: - gross private domestic investment - national income - gross domestic product - gross national product

gross domestic product

Net exports is exports minus ___

imports

Taxes on production and ___ are part of national income "to account for expenditures that are diverted to the ___"

imports; government

Goods and services that are used up in the production of final goods are called ___ goods.

intermediate

The three types of gross private domestic investment include all final purchases of machinery, equipment, and tools by business enterprises; all construction; and changes in ___

inventories

Residential construction is considered a(n) ___ rather than consumption

investment

When gross investment is less than depreciation, net investment is ___ - rising - zero - negative - positive

negative

In calculating gross private domestic investment, a ___ change in ___ must be subtracted from the total investment for that particular year. - positive; inventories - negative; the balance of payments - negative; inventories - negative; demand

negative; inventories

When dealing with international trade, economists include ___ as a component of GDP. - totals imports - net exports - total exports - net imports

net exports

The difference between the income Americans earn abroad and the income they earn in the United States is called ___ ___ factor income.

net, foreign

Transfer payments are excluded from government puchases in GDP accounting because - they are difficult to measure - they are already included as part of investment - they are a reward to individuals who have been productive their entire lives - nothing is being produced in return for the payment

nothing is being produced in return for the payment

A country's exports are included in GDP when the goods and services are: - produced outside the borders of said country - available for purchase by citizens of the producing nation - produced within the borders of said country - available for purchase by citizens of all countries, including the producing nation

produced within the borders of said country

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

purchases

A nation's gross domestic product (GDP): - reflects the aggregate output of intermediate goods produced within an economy in a given year - reflects the aggregate output of final and intermediate goods produced within an economy in a given year - reflects the total market value of all final goods and services produced within an economy in a given year - reflects the total market value of all goods and services, final and intermediate, produced by a country's resource in a year

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

The sales of secondhand goods are excluded from the calculation of GDP because: - these goods do not add to the well-being of an economy - these goods do not involve the income of current year - the market value of seceondhand goods is less than the market value of new goods - secondhand sales do not contribute to current production

secondhand sales do not contribute to current production

The amount accountants add to national income to make the income approach match the outcome of the expenditure approach is called the ___ discrepancy

statistical

Depreciation of capital is ___: - the total amount of new private investment purchases - what is left over from total new private investment after use for a year - the annual amount allocated to wear and tear on private investment - the total amount of private investment purchases, whether new or previously existing

the annual amount allocated to wear and tear on private investment

In national income accounts, value added refers to: - the difference in the market value and the cost of inputs purchased from other firms - the cost of inputs at the first stage of production - the value added only by labor to the production process - the value of all the inputs used by th efinal producer

the difference in the market value and the cost of inputs purchased from other firms

The view of GDP as the sum of money spent on purchases is called - the income approach - the expenditure approach - the buying approach - the capital approach

the expenditure approach

Viewing GDP in terms of earnings derived or created by produciing something is called - the income approach - the output approach - the expenditure approach - the circular flow

the income approach

National income accountants add indirect business taxes to wages, rent, interest, and profits in order: - to keep track of expenditures that are diverted to the government - to keep trace of inclusions to the balance of payments - to keep track of deductibles from GDP calculations - to record these in the current account of the balance of payments

to keep track of expenditures that are diverted to the government

The sale of ___ is excluded from the calculation of GDP because they contribute nothing to current production. - new goods - used goods - intermediate goods

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 - total profit - multiple counting - depreciation

value added

Net private domestic investment is: - the wear and tear on private investment - the total amount of private investment purchases, whether new or previously existing - the total amount of new private investment purchases - what is left over from total new private investment after depreciation

what is left over from total new private investment after depreciation