Macro Chapter 7

secondhand, black, and stock

___ market transactions are not included in measuring GDP

price index

a measure of the value of a specified collection of goods and services in a given year as compared to the value of a highly similar collection of goods and services in a reference year is called a

current product mix of goods and services

all products are assigned the same weight if they sell for the same price

savings

consumers are free to divide their income between consumption and

corporate profit categories

corporate income taxes, undistributed corporate profits, dividends

gdp = quantity*prices

express the values of products in a common unit of measurement

70

if nominal gdp is $140 and the price index is 200, then the real gdp equals:

demand; demand

in the circular flow diagram, firms ___ inputs and households ____ goods and services

price index

is normalized to 100 for the base year; always includes a base year; measures the cost of purchasing a market basket of output across different years

national account

keeps track of the sales of producers, spending by consumers and the government, and business investment

wages, rent, interest, and profits

national income accountants add indirect business taxes to ___,___, ___, and ____ in order to keep track of expenditures that are diverted to the government

+ or - from national income

net foreign factor income, consumption of fixed capital, and statistical discrepancy (expenditure approach)

adjust nominal gdp

nominal gdp divided by the price index and multiply the current year's output by price of the output in the base year

current dollars

nominal gdp measures the value of all goods and services in

investment

residual construction is considered an ____ rather than consumption

net private domestic investment

residual construction is counted as

transfer

social security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public ___ payments

personal income

the amount of income that households receive, whether earned or unearned, is called

depreciation

the estimate of how much of the capital is being used up each year is called

value added

the market value of a firm's output minus the value of the inputs the firm has bought from others is called

future investments in capital

the purpose of retained earnings is to save money for

firms

the three domestic sectors of the economy are households, government, and

value of money changes

the use of money as a common denominator to sum output into a meaningful measure of gdp creates a problem because the

100

the value of the gdp price index will be ____ for the first year

false

true or false: consumers are free to divide their income between saving and investment

true

true or false: gdp reveals nothing about the way output is distributed

zero

when gross investment and depreciation are equal, the value of the net investment is