Macroeconomics EXAM 1 (ch.3,4,&5)

Aggregate expenditure include all of the following EXCEPT

Purchases of intermediate goods

If the supply of spring water decreases and at the same time the demand for spring water increases, the equilibrium price _____ and the equilibrium quantity ____

Rises; Might increase, decrease, or stay the same

Which of the following is NOT part of GDP

Social security payments made to the elderly

You observe that the price of a good rises and the quantity decreases. These observations can be the result of the

Supply curve shifting leftward

GDP equals

a. smaller than national income b. aggregate income c. the value of the aggregate production in a country during a given time period

An increase in the price of jet fuel will ____ air flights and the equilibrium quantity of air flights will ___

decrease the supply of; decrease

GDP equals net domestic product plus

depreciation

In the national income accounts, government purchases of goods and services refer to those purchases made by

All levels of government

All of the following household expenditures are included in consumption expenditure EXCEPT

Purchase of corporate stock

Let C represent consumption expenditure, S saving, I gross private domestic investment, G government purchases of goods and services, and NX net exports of goods and serices. Then GDP equals

C+I+G+NX

The CPI

Compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period

The largest component of national income is

Compensation of employees

Paying higher prices means that our

Cost of living has increased

Goods that are produced this year, stored in inventories, and then sold to consumers next year

Count in this year's GDP

The equilibrium price will fall and the equilibrium quantity might increase, decrease, or stay the same when the

Demand for a good decreases and the supply of it increases

Gross domestic product minus net domestic product equals

Depreciation

The difference between gross investment and net investment is

Depreciation

Economists distinguish real from nominal GDP to

Determine whether real production has changed

Personal consumption expenditures include

Expenditures by households on goods and services produced in the US and the rest of the world

To measure GDP using the expenditure approach you must collect data on

Exports

Depreciation equals

Gross investment minus net investment

When we produce during our working time is ___ as part of GDP and the enjoyment we gain from our leisure time is ___ as part of GDP

Included; not included

The approach to GDP that sums compensation of employees, rental income, corporate profits, net interest, proprietors income, depreciation, and indirect taxes and subtracts subsidies is the

Income approach

All of the following are indirect taxes EXCEPT

Income taxes

If the GDP deflator for 2004 is 125, nominal GDP

Is greater than real GDP in 2004

Gross domestic product is the total ______ produced within a country in a given time period

Market value of all final goods and services

When the GDP deflator increases from 120 to 126 in one year...

Money is losing its value

Which of the following is NOT part of the expenditure approach to measuring GDP?

Net Interest

Depreciation is subtracted from gross domestic product to determine directly

Net domestic product

Because pollution reduces economic welfare, real GDP

Overstates economic welfare

In the expenditure approach to GDP, the largest component is

Personal consumption expenditures

To calculate real GDP, the GDP deflator can be used to adjust nominal GDP for changes in

The general price level

The chain-weighted output index method of calculating real GDP compares

The quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of outputs

In the national income accounts, government purchases of goods and services exclude

Transfer payments

In the computation of GDP, social security payments count as

Transfer payments and are not included in GDP

Real GDP measures the

Value of the total production linked to prices of a single year.

Which of the following is a component of the incomes approach to GDP?

Wages and salaries

An indirect tax is a tax paid by consumers

When they purchase goods and services

If good growing conditions increase the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought

increases and the price might rise, fall or not change

If this years price level exceeds last years

the inflation rate between these years has been positive

If both demand and supply increase, what will be the effect on the equalibrium price and quantity?

the quantity will increase but the price could either rise, fall, or remain the same