Macro Chapter 10

The consumption component of GDP includes spending on

durable goods, nondurable goods, and services.

For an economy as a whole, income must equal expenditure because

every dollar of spending by some buyer is a dollar of income for some seller.

Social Security payments are

excluded from GDP because they do not reflect the economy's production.

Net exports equal

exports minus imports which equals Y-C-I-G

Government purchases include spending on goods and services by

federal, state, and local governments.

Recently, the U.S. national income accounts have switched to calling government purchases

government consumption expenditure and gross investment.

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

gross domestic product

When economists refer to intangible items, they are referring to such things as

hair styling and dental care, and the value of such items is included in GDP.

Which of the following is included in the investment component of GDP?

households' purchases of newly constructed homes net additions to firms' inventories firms' purchases of capital equipment

In the actual economy, goods and services are purchased by

households, firms, and the government.

Gross domestic product measures

income and expenditures.

Disposable income is

the income that households and businesses have remaining after satisfying their obligations to the government.

The statistical discrepancy that regularly arises in national income accounting refers to the slight difference between

the quarterly and annual approaches to the calculation of GDP.

GDP does not reflect

value of leisure, quality of environment, and value of goods and services produced at home

In the economy of Ukzten in 2010, exports were $200, GDP was $2000, government purchases were $300, imports were $130, and investment was $400. What was Ukzten's consumption in 2010?

$1230

In the economy of Ukzten in 2010, consumption was $1000, exports were $100, government purchases were $450, imports were $150, and investment was $350. What was Ukzten's GDP in 2010?

$1750

Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did these transactions contribute to U.S. GDP for the year?

$22,000

Al's Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company, which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million worth of aluminum foil to households. The transactions just described contribute how much to GDP?

$4 million

A farmer sells $50,000 of apples to individuals who take them home to eat and $75,000 of apples to a company that uses them all to produce cider. How much of the farmer's sales will be included as apples in GDP?

$50,000

In the economy of Ukzten in 2010, consumption was $5000, exports were $100, government purchases were $900, imports were $200, and investment was $1000. What was Ukzten's GDP in 2010?

$6800

In the base year, the GDP deflator is always

100

A country's real GDP rose from 500 to 550 while its nominal GDP rose from 600 to 770. What was this country's inflation rate?

16.7%

A good is produced by a firm in 2009, added to the firm's inventory in 2010, and sold to a household in 2010. As a result, on net,

2009 GDP did not change and 2010 GDP increased.

A good is produced by a firm in 2009, added to the firm's inventory in 2010, and sold to a household in 2010. As a result, on net,

2009 GDP increased and 2010 GDP did not change.

Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells at $2 per unit. Production of good A contributes

3/4 times as much to GDP as the production of good B.

Suppose that an economy produces 40,000 units of good A which sells at $4 a unit and 20,000 units of good B which sells at $5 per unit. Production of good A contributes

8/5 times as much to GDP as the production of good B.

How is net national product (NNP) calculated?

Depreciation losses are subtracted from the total income of a nation's citizens.

GDP is not a perfect measure of well-being; for example,

GDP fails to account for the quality of the environment.

An American company operates a fast food restaurant in Paris, France. Which of the following statements is accurate?

The value of the goods and services produced by the restaurant is included in French GDP, but not in U.S. GDP.

A German citizen buys an automobile produced in the United States by a Japanese company. As a result,

U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and German GNP and GDP are unaffected.

If a U.S. citizen buys a television made in Korea by a Korean firm, then

U.S. net exports decrease and U.S. GDP is unaffected.

Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?

Why do wages differ across industries?

In the equation Y = C + I + G + NX

Y represents the economy's total expenditure.

A transfer payment is

a form of government spending that is not made in exchange for a currently produced good or service.

Which of the following is an example of a durable good?

a refrigerator

In a simple circular-flow diagram, total income and total expenditure are

always equal because every transaction has a buyer and a seller.

GDP per person tells us the income and expenditure of the

average person in the economy.

Changes in nominal GDP reflect

both changes in prices and changes in the amounts being produced.

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100.

Which of the following is an example of depreciation?

computers becoming obsolete

Household spending on education is counted in which component or subcomponent of GDP?

consumption of services

A recession is always associated with

declining real GDP

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

If a state made a previously-illegal activity, such as gambling or prostitution, legal, then, other things equal, GDP

increases.

The value of goods added to a firm's inventory in a certain year is treated as

investment, since GDP aims to measure the value of the economy's production that year.

Much of macroeconomics attempts to explain

long-run growth and short-run fluctuations in real GDP

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

nominal GDP but not real GDP

Unemployment compensation is

not part of GDP because it is a transfer payment.

Changes in real GDP reflect

only changes in the amounts being produced.

The income that households and noncorporate businesses receive is called

personal income.

Which of the following is included in the consumption component of U.S. GDP?

purchases of natural gas by U.S. households

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters.

If nominal GDP doubles and the GDP deflator doubles, then real GDP

remains constant.

Which of the following is included in the investment component of GDP?

spending on new residential construction but not spending on stocks and bonds

Which government entity computes U.S. GDP every three months?

the Department of Commerce