Macro Ch 10

Gross domestic product can be measured as the sum of A. Consumption, investment, government purchases, and net exports B. Consumption, transfer payments, wages, and profits C. Investment, wages, profits, intermediate production D. Final goods and services, intermediate goods, transfer payments, and rent E. Net national product, gross national product, and disposable personal income

A. Consumption, investment, government purchases, and net exports

If U.S. GDP exceeds U.S. GNP, then A. Foreigners are producing more in the United States than Americans are producing in foreign countries B. Americans producing more foreign countries than foreigners are producing in the United States C. Real GDP exceeds nominal GDP D. Real GNP exceeds nominal GNP E. Intermediate production exceeds final production

A. Foreigners are producing more in the United States than Americans are producing in foreign countries

Real GDP is measured in _____ prices while nominal GDP is measured in ____ prices. A. current year; base year B. Base year; current year C. Intermediate; final D. Domestic; foreign E. Foreign; domestic

B. Base year; current year

How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the U.S. GDP accounts? A. Investment increases by $40,000, and net exports increase by $40,000 B. Consumption increases by $40,000, and net exports increase by $40,000 C. Net exports decrease by $40,000 D. Net exports increase by $40,000 E. There is no impact because this transaction does not involve domestic production

B. Consumption increases by $40,000, and net exports increase by $40,000

The value of plant and equipment worn out in the process of manufacturing goods and services is measured by A. Consumption B. Depreciation C. Net national product D. Investment E. Intermediate production

B. Depreciation

If your grandparents buy a new retirement home, this transaction would affect A. Consumption B. Investment C. Government purchases D. Net exports E. None of the above

B. Investment

U.S. gross domestic product (in contrast to gross national product) measures the production and income of A. Americans and their factories no matter where they are located in the world B. People and factories located within the borders of the United States C. The domestic service sector only D. The domestic manufacturing sector only E. None of the above

B. People and factories located within the borders of the United States

If a Conner buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth of shoes to consumers, the contribution to GDP is A. $50 B. $100 C. $500 D. $600 E. $650

C. $500

Which of the following would be excluded from 2013 GDP? The sale of A. A 2013 Honda made in Tennessee B. A haircut C. A realtor's services D. A home built in 2012 and first sold in 2013 E. All of the above should be counted in 2013 GDP

D. A home built in 2012 and first sold in 2013

GDP would include which of the following? A. Housework B. Illegal drug sales C. Intermediate sales D. Consulting services E. The value of taking a day off from work

D. Consulting services

U.S. GDP would exclude which of the following? A. Lawyer services purchased by a home buyer B. Lawn care services purchased by a homeowner C. A new bridge purchased by the state of Texas D. Cotton purchased by Lee Jeans E. The purchase of a new Mazda produced in Illinois

D. Cotton purchased by Lee Jeans

If nominal GDP in 2013 exceeds nominal GDP in 2012, then the production of output must have A. Risen B. Fallen C. Stay the same D. Risen or fallen because there is not enough information to determine what happened to real output

D. Risen or fallen because there is not enough information

Gross domestic product is the sum of the market value of the A. Intermediate goods B. Manufactured goods C. Normal goods and services D. Inferior goods and services E. Final goods and services

E. Final goods and services

An example of a transfer payment is A. Wages B. Profit C. Rent D. Government purchases E. Unemployment benefits

E. Unemployment benefits

A measure of the price level calculated as the ratio of nominal GDP to real GDP then multiplied by 100

GDP deflator

The year from which prices are used to measure real GDP

base year

Spending by households on goods and services, excluding new housing

consumption

Value of worn-out equipment and structures

depreciation

Net national product always exceeds a nation's GNP because of depreciation

false; GNP - depreciation = NNP

In the United States, investment is the largest component of GDP

false; consumption is the largest component of GDP

the production of an apple contributes more GDP than the production of a gold ring because food is necessary for life itself

false; contribution is based on market value

A new car produced in 2012, but first sold in 2013, should be counted in 2013 GDP because that is when it was first sold as a final good

false; goods are counted in the year produced

If nominal GDP in 2013 exceeds nominal GDP in 2012, real output must have risen

false; prices or real output could have risen

If the lumberyard sells $1000 of lumber to a carpenter and the carpenter uses the lumber to build a garage that he sells for $5,000, contribution to GDP is $6,000

false; the garage is the final good, valued at $5,000

When the city of Chicago purchases a new school building, the investment component of GDP increases

false; the purchase is included in government purchases

Wages are an example of a transfer payment because there is a transfer of payment from the firm to the worker

false; transfer payments are expenditures for which no good or service is received in return

Finished products sold to the end user

final production

Spending on goods and services by all levels of government

government purchases

Market value of all final goods and services produced within a country in a given period of time Measured by Bureau of Economic Analysis

gross domestic product

market value of all final goods and services produced by a nation's residents in a given period of time

gross national product

The rate at which prices are rising

inflation

Goods that are are produced by one firm to be further processed by another firm

intermediate production

Spending on capital equipment, inventories, and structures, including household purchases of new housing

investment

The study of economy-wide phenomena

macroeconomics

The study of how households and firms make decisions and how they interact in markets

microeconomics

Spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

net exports

The production of goods and services valued at current prices

nominal GDP

The production of goods and services valued at base-year prices

real GDP

Period of decline in GDP

recession

Consumption, investment, government purchases, and net exports

total expenditure

Wages, rent, and profit

total income

Expenditures by government for which they receive no goods and services

transfer payment

A country with a larger GDP per person generally has a greater standard of living or quality of life than a country with a smaller GDP per person

true

A recession occurs when real GDP declines

true

Cigarettes should be valued in GDP at $5.50 per pack even though $1.00 of that price is tax because the buyers paid $5.50 per pack

true

Depreciation is the value of the wear and tear on the economy's equipment and structures

true

For an economy as a whole, income equals expenditure because the income of the seller must be equal to the expenditure of the buyer

true

If U.S. GDP exceeds U.S. GNP, the. Foreigners produce more in the United States than U.S. citizens produce in the rest of the world

true

Nominal GDP employs current prices to value output while real GDP employs constant base-year prices to value output

true

Percent of the labor force that is out of work

unemployment