The Macroeconomic Perspective
Which phase of the business cycle occurs immediately before a trough?
recession
The contractionary phase of the business cycle is characterized
reduced output and increased unemployment
GDP can be found either by adding up all of the __________ or all of the __________ in the economy.
spending; income
disposable personal income can be either ______________ or ______________
spent; saved
An example of an intermediate product is
the purchase of tires by Ford to put on Ford Explorers, the purchase of wood by a home construction firm, the purchase of leather by a shoe manufacturer
T/F "Jobless recovery" was a recent phenomenon during the recession of 2001 because the early rate of employment increase was well below average for past recoveries.
true
T/F Fixed investments include all spending on capital goods as well as on residential construction
true
Business Cycles
vary in duration and intensity
T/F The distinction between whether a good is durable or non-durable is clear and easy to apply
False
Expenditure Method
GDP = C + I + G + (X-M)
How does GDP treat sales of corporate stock from one stockholder to another?
GDP does not include corporate stock
The total market value of all final goods and services produced by resources in the United States is called
Gross Domestic Product
How does GDP treat the sales of used goods?
Used goods are not included in the GDP because GDP only includes goods produced in that period
Included in the investment category under the expenditure approach to GDP accounting is/are
additions to inventory, machines and tools, newly constructed residential housing
What is an example of a final good?
bacon purchased at a grocery store
Alternating increases and decreases in economic activity are known as
business cycles
Following the expenditure method, GDP = C + I + G + X
false
T/F A recession is always followed by a depression
false
T/F Macroeconomics studies economic activity from the level of one individual or firm
false
In the circular flow model,
households supply both labor and non-labor resources
We can be certain that net exports fall if
exports fall and imports rise
If the United States imported $1.5 billion worth of goods and services and sold $2.9 billion worth of goods and services outside its border, net exports would be equal
$1.4 billion
personal consumption expenditures: $900 personal taxes: $180 government expenditures: $300 exports: $40 imports: $75 interest income: $60 depreication: $50 gross investment : $200 what is the country's GDP?
$1365
If personal consumption = $100, investment = $25, government purchases = $25, imports = $20, and exports = $10, then gdp =
$140
personal consumption expenditures: $900 personal taxes: $180 government expenditures: $300 exports: $40 imports: $75 interest income: $60 depreication: $50 gross investment : $200 what is the country's net exports?
-$35
Why does GDP only measure the final value of goods and services?
Because other goods like intermediate goods are used to produce final goods
Which organization dates business cycles?
National Bureau of Economic Research
Which category of consumption spending tends to be the most unstable over the business cycle?
durable consumer goods
A business cycle reflects changes in economic activity, particularly GDP. The stages of a business cycle are
expansion, peak, contraction, trough
The event that stimulated the U.S. government's commitment to tracking the economy's health through a national income accounting system was the
Great Depression
Nominal GDP differs from real GDP in that
Nominal GDP is measured in current year prices, while real GDP is measured in base year prices.
Why does GDP only measure the value of goods and services produced within a country?
So it can quantify the goods and services produced by a country
What is GDP?
The market value of the final goods and services produced in a country in a given period
An example of something that would not be included in the calculated GDP
a construction firm's purchase of lumber to build a four-bedroom home
Which of the following would be included in the GDP calculations?
a hamburger purchase by a hungry restaurant patient
Disposable income is
a measure of the income households have to spend after paying taxes
Gross domestic product is a measure of
an economy's total output
The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the
circular flow model
Net Exports
exports minus imports
GDP is calculated including
final products but not intermediate products
Investment includes
fixed investment plus additions to business inventories
French perfume that is purchased in the United States is accounted for in which expenditure category of U.S. GDP?
net exports
Total spending in an economy is the sum of
personal consumption + gross private investment + government + net exports
_________ are over 70% of GDP, while ____________ are nearly 11% of GDP
personal consumption expenditures; gross private domestic investments
The nation's GDP is equal to
the total market value of all final goods and services produced by resources in the United States
Which of the following is not considered a factor payment?
transfer payments
Which of the following is not included in government purchases?
transfer payments
T/F If we counted the value of intermediate goods as well as the full value of the final products in GDP, we would be double counting
true
T/F In boom periods, expenditures on consumer durables often increase more than expenditures on non-durables
true
T/F Macroeconomics focuses on issues such as economic growth, the output of the entire economy and inflation rates
true
T/F Personal consumption expenditures are goods and services purchased by residents of the United States
true
In the income approach to measuring GDP, factor payments include
wages and salaries for the use of labor services, rent for land, interest payments for the use of capital goods, rent for land, profits for entrepreneurs