Exam 2 macro -quizes

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

GDP that year is $500 billion.

Answer this question based on the given information for an economy in Year 1. Dollar value of resource extraction activity = $20 billion Dollar value of production activity = $50 billion Dollar value of distribution activity = $80 billion Dollar value of final output = $110 billion Suppose the next year, the dollar value of distribution activity increased to $100 billion, but the other values remained the same. Based on this, we could conclude that from Year 1 to Year 2.

GO increased by $20 billion, while GDP was unchanged. Gross Output increased by $20 billion, increasing from $260 billion ($20 + $50 + $80 + $110) to $280 billion ($20 + $50 + $100 + $110) while GDP, the value of the final output has not changed, it is still $110.

recipes

The nation's stock of capital is the collection of human-made resources that help to produce goods and services. Those human-created resources can be divided into two broad categories that we can informally refer to as "tools" and "recipes." Spending on R&D increases the intangible stock of methods and techniques that we can use to produce output. Spending that funds the creation of new works of art, music, writing, and film increases the flow of entertainment and educational services, while spending that pays for new or improved software increases the productivity of everything from cell phones to self-driving cars.

Buying a new pair of jeans for yourself would increase

consumer nondurable goods and consequently personal consumption expenditures.(Nondurable goods are products with less than 3 years of expected life and make up 30 percent of personal consumption expenditures. Included in this category are food, clothing, and gasoline)

Which of the following is not a supply factor in economic growth?

aggregate expenditures of households, businesses, and government

Buying new furniture for your home would increase

consumer durable goods and therefore personal consumption expenditures.

Interest consists of the money households receive on

corporate bonds. certificates of deposit (CDs). savings deposits. (Interest consists of the money paid by private businesses to the suppliers of loans used to purchase capital. It also includes the interest that households receive on savings deposits, certificates of deposit (CDs), and corporate bonds.)

Real income is found by

dividing nominal income by the price index

A competitive market system

encourages growth by allowing producers to make profitable investment decisions based on market signals.

Free trade

encourages growth by promoting the rapid spread of new inventions and innovations.

Net exports are

exports less imports.

Government purchases include

federal, state, and local government expenditures.

The National Income and Product Accounts (NIPA) help economists and policymakers to

follow the long-run course of the economy to determine whether it has grown or stagnated.

The money paid by private businesses to the suppliers of loans use

interest.

Compensation of employees

is paid as wages and salaries by business and government to their employees. includes payments by employers into social insurance. includes payments into private pension, health, and welfare funds for workers.

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.

U.S. GDP growth statistics

may understate or may overstate the gains in well-being.

The fundamental invention underpinning the 1995-2010 rise in the average rate of productivity growth is the

microchip.

GDP is the

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

Net exports are negative when:

nation's imports exceed its exports.

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.

By summing the dollar value of all monetary transactions in the economy, we would

obtain a sum substantially larger than GDP.

National income accountants can avoid multiple counting by

only counting final goods.

GDP can be calculated by summing

personal consumption, investment, government purchases, and net exports.

Inflation means that

prices on average are rising, although some particular prices may be falling.

A transfers of funds from one private individual to another private individual without any production taking place is a(n)

private transfer payment

Suppose that an economy's labor productivity and total worker-hours each grew by 4 percent between Year 1 and Year 2. We could conclude that this economy's

production possibilities curve shifted outward.

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

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

Labor productivity is measured by

real output per hours of work.

The four supply factors (determinants) that relate to economic growth

relate to relaxing the physical and technical limits that constrain economic expansion.

Economies of scale refers to

the fact that large producers may be able to use more efficient technologies than smaller producers.

Over the last 250 years of modern economic growth,

the increases in wealth and living standards have given ordinary people significant time for leisure activities and the arts.

Real GDP is

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

A price index is

the price of a market basket in a given year divided by the price of an identical market basket in a reference year.

Which of the following is an intermediate good?

the purchase of baseball uniforms by a professional baseball team(Intermediate goods are goods used to produce other products or purchased for resale. Final goods are goods purchased by the end (final) users.)

Nominal GDP

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

If intermediate goods and services were included in GDP,

then GDP would be overstated.

Real GDP refers to

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

The Industrial Revolution and modern economic growth resulted in

the average human lifespan more than doubling.

The Bureau of Economic Analysis compiles the NIPA accounts. The letters NIPA represent

National Income and Product Accounts.

rent

Rents do not include the interest paid to the suppliers of loans used to purchase capital; that would go in the Interest category. Rents consist of the income received by the households and businesses that supply property resources. They include the monthly payments tenants make to landlords and the lease payments corporations pay for the use of office space.

A business buys $20,800 worth of inputs from other firms in order to produce a product. The business makes 540 units of the product and each of them sells for $68. The value added by the business to these products is

$15,920.(The value added amount from the business is $15,920. First find the amount they get for selling the product, 540 × $68 = $36,720. From that, subtract the amount they paid for the inputs, $36,720 − 20,800 = $15,920.)

Suppose that GDP was $280 billion in Year 1 and that all other components of expenditures remained the same in Year 2 except that business inventories fell by $18 billion. GDP in Year 2 is

$262 billion.(If inventories decreased by $18 billion, it means that the economy sold $18 billion more of output than it produced that year. It did so by selling goods produced in prior years—goods already counted as GDP in those years. Unless corrected, expenditures will overstate GDP. So, we consider the $18 billion decline in inventories as "negative investment" and subtract it from total investment that year, reducing GDP by $18 billion.)

Suppose that GDP was $300 billion in year 1 and that all other categories of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is

$310 billion. To find GDP for year 2 if business inventories increase add the amount of the increase to $300 billion. If business inventories decrease, subtract the amount of the decrease. In this case, $300 billion + $10 billion = $310 billion

A business buys $1,000 worth of inputs from other firms in order to produce a product. The business makes 500 units of the product and each of them sells for $3. The value added by the business to these products is

$500.(The value added amount from the business is $500. First, find the amount they get for selling the product, 500 × $3 = $1,500. From that, subtract the amount they paid for the inputs, $1,500 − 1,000 = $500)

National income accountants define consumer durable goods as products that have an expected life of

3 years or more.

What percentage of the U.S. adult population has a college or postcollege education (as of 2020)?

38 percent

if Fred's annual real income rises by 8 percent each year, his annual real income will double in about

8-9 years

gross private domestic investment

Gross private domestic investment, Ig, includes the following items: All final purchases of machinery, equipment, and tools used by business enterprises. Residential construction. Expenditures on the research and development (R&D) of new productive technologies. Money spent on the creation of new works of art, music, writing, film, and software. Changes in inventories.

gpd

Hide question 7 feedback Gross domestic product (GDP) is defined as the dollar value of all final goods and services produced within a country's borders during a specific period of time, typically a year or a quarter. Regardless of whether the goods and services are sold or not, the BEA only considers how much was produced,

intermediate goods

Intermediate goods are goods used to produce other products or purchased for resale. Final goods are goods purchased by the end (final) users.

Which Scottish inventor perfected an efficient steam engine, and thus is credited with starting the Industrial Revolution?

James Watt

Why is the labor of carpenters who repair their own homes not included in GDP?

The BEA only receives data on economic transactions in which output or resources are traded for money.

Purchasing a two-year-old, secondhand laptop contributes nothing to this year's GDP.

True

includes payments into private pension, health, and welfare funds for workers.

adds the monetary values of each final good or service produced.

Which of the following is a final good?

a pair of theater tickets

Veterans' payments are excluded from GDP calculations because they are

a public transfer payment.(Public transfer payments are the Social Security payments, welfare payments, and veterans' payments that the government makes directly to households. Because the recipients contribute nothing to current production in return, including such payments in GDP would overstate the year's output.)

Economic growth can be portrayed as

an outward shift of the production possibilities curve.

Expenditures on the research and development (R&D) of new productive technologies

are included in Ig.

Rapid asset price increases

are sometimes referred to as financial bubbles

Critics of economic growth

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Inflation affects

both the level of real income and the distribution of income.

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

bureau of economic analysis

A nation's gross domestic product (GDP)

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

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are

capital goods and durable consumer goods.

Final goods and services refers to

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

When an economy's production capacity is expanding

gross domestic investment exceeds depreciation.

There are several ways to measure aggregate output. The one favored by the Bureau of Economic Analysis is

gross domestic product.

The income amount used for "Rents" in the national accounts is net rent, so it is

gross rental income minus depreciation of the rental property.

In the period following the Great Recession, the creation of new Internet apps has

had little measured effect on GDP or productivity but may create a lot of consumer satisfaction.

The one demand factor (determinant) that relates to economic growth

if met, ensures there will be no unplanned increases in inventories. b) requires increases in total spending to realize the output gains. c) is one of six factors that directly affect the rate and quality of economic growth.

Gross domestic product (GDP) measures and reports output

in dollar amounts.

The income approach to national income accounting lists "Rents" as one of the components. All of the following statements about "rents" are correct except

rents include the interest paid to the suppliers of loans used to purchase capital.

One reason growth is a widely held economic goal is

rising real wages and income provide more opportunities to individuals and families. the economy is better able to meet people's wants and resolve socioeconomic problems. new programs can be undertaken without impairing existing levels of consumption, investment, or public goods production.

Innovations such as computers and the Internet led to business cycle variations because

significant innovations occur irregularly and unexpectedly.

U.S. GDP growth statistics may understate the gain in well-being,

since products have greatly improved over time.

Human-made resources that are referred to as "recipes" includes

spending on new writing that increases the flow of entertainment and education.

Value added can be determined by

subtracting the purchase of intermediate products from the value of the sales of final producucts

Transfer payments are not included in government purchases because

such payments generate no production.

Labor productivity is defined as

total output ÷ hours of work.

GDP tends to

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

The four supply factors (determinants) that relate to economic growth

will increase the potential size of an economy's GDP.