Chapter 10

In the actual economy, households

divide their income among spending, taxes, and saving.

GDP includes the value of all

final goods and services produced within a country using primarily market prices to measure the value of goods and services.

Gasoline is considered a final good if it is sold by a

gasoline station to a motorist in Los Angeles.

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

gross domestic product

The underground economy

includes otherwise legal transactions that go unreported or unrecorded.

U.S. GDP

includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries.

For an economy as a whole,

the market value of production must equal expenditure.

Estimates of the values of which of the following non-market goods or services are included in GDP?

the rental value of owner-occupied homes but not unpaid housework.

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption?

the second but not the first

The percentage change in the price level from one period to another is called

the value of leisure. All of the above are correct.

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.

In a simple circular-flow diagram, firms use the money they get from a sale to

a. pay wages to workers. b. pay rent to landlords. c. pay profit to the firms' owners. d. All of the above are correct.

Expenditures on a nation's domestic production

are equal to its domestic production.

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing.

GDP

is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

measuring them is so difficult.

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100.

Consumption consists of spending by households on goods and services, with the exception of

purchases of new houses.