Test 2 Assignment 5
In the equation GDP = C+I+G+X-M the G is
local, state, and federal government expenditure on goods and services but does not include transfer payments
An example of a price floor is a
minimum wage
Depreciation is subtracted from gross domestic product to determine directly
net domestic product
Personal consumption expenditures does not include
new housing
This causes reported GDP to increase when total production is unchanged
legalization of things, or household to market production
Pollution is a by-product of some production processes, so on this count real GDP as measured
tends to overstate economic welfare
A price floor
A result in a surplus if the floor price is higher than the equilibrium price
Consumer surplus for a single exchange is defined as the demand price minus the supply price
False
Income taxes are
Indirect taxes
Components of income approach to measuring U.S. GDP include:
Interest earned on savings deposits Income earned by businesses that export goods profits made by businesses, NOT investments
GDP expenditure includes
Inventory Industry cars Home But NOT a different company's stock
Gross domestic product is the total _______ produced within a country in a given time period
Market value of all final goods and services
Expenditure approach GDP uses
Personal consumption expenditures net exports of goods and services gross private domestic investment, But NOT net interest
A price floor
Results in a surplus if the floor price is higher than the equilibrium price
Recession begins at the peak and expansion begins at the trough
True
The government sets a price floor for corn which is above the equilibrium price of corn, as a result
a deadweight loss will be created
The use of purchasing power parity prices
accounts for differences in the prices of the same goods in different countries when measuring real GDP
If Nike, an American corporation, produces sneakers in Thailand this would
add to Thailand's GDP but not to US GDP
The underground economy exists to
avoid taxes production of illegal goods avoidance of government reg's
The largest component of national income is
compensation of employees
Deadweight or welfare loss is the decrease in _________ from producing an inefficient amount of product
consumer surplus and producer surplus
Goods that are pruduced this year, stored in inventories and then sold to consumers next year
count in this year's GDP
The difference between gross investment and net investment is
depreciation
Economics distinguish real GDP from nominal GDP to
determine whether real production has changed
Net exports of goods and services equal the
exports of goods and services minus the imports of goods and services
The business cycle refers to
fluctuations in the level of real GDP around potential GDP
Governments often intervene in agricultural markets by
granting subsidies
Net investment equals
gross investment minus depreciation
The two methods of measuring GDP are
income approach and expenditure approach
In the national income accounts the purchase of a new house counts as
investment
Purchase of corporate stock
is not included in consumption expenditure
Real GDP can be criticized as measure of economic welfare because
it doesn't take account of the degradation of environmental quality. it does not include the value of products produced in the household it does not include leisure time available to a society.
When using the income approach of GDP, the largest share is generally
labor income
The productivity growth slowdown refers to the
period during the 70s and for some years afterwards
In the Expenditure approach to GDP the largest component is
personal consumption expenditures
The largest component of GDP in the Expenditure approach is
personal consumption expenditures
Real GDP does not included
production in the home
Depreciation is defined as
the decrease in the stock of capital due to wear and tear
Producer surplus for a single exchange is
the exchange price minus the supply price
Potential GDP is
the maximum amount of GDP that can be produced ceteris paribus assuming all resources
GDP declines during
the movement from peak to trough
Real GDP decreases during
the movement from peak to trough
When calculating GDP underground economic activity is
the part of the economy purposely hidden
Potential GDP is
the value of production when all the nation's resources are fully employed
Intermediate goods are excluded from GDP because
their inclusion would involve double counting
In the computation of GDP, social security payments count as
transfer payments and are not included in GDP