Chapter 7 Study Prep Quizzes

Flows into the financial markets are equal to the sum of:

foreign lending and purchases of stock plus private saving.

In the circular flow diagram, government purchases of goods and services are financed by:

tax revenues net of transfer payments plus government borrowing from financial markets.

Wages represent:

the income earned by households from the selling of their labor.

Gross domestic product measures the:

value of final goods and services produced within the borders of a country during a given time period.

When consumers purchase imported products, this is:

subtracted from GDP.

Real per capita GDP is:

real GDP divided by the population.

Transfer payments:

represent a redistribution of funds from one individual to another individual in the economy.

The indirect ownership of physical capital used by firms by households is considered:

stock.

Investment refers to the:

addition to the economy's supply of productive physical capital.

Which of the following is NOT included in the calculation of GDP?

The Social Security check your relative receives each month

Suppose only two countries existed in the world. Country A imported $200 million worth of goods and services from Country B. Country B imported $100 million worth of goods and services from Country A. This means that net exports for:

Country A equals -$100 million.

When a household makes a loan to a firm with the firm providing interest to the household, this is known as:

a bond.

A decrease in inventories is considered:

a fall in investment spending which will lead to a drop in future sales.

Within the circular flow diagram, the value of household income, the sum of wages, dividends, interest, and rent plus transfer payments equals the sum of:

consumer spending, private saving, and the value of household tax payments.

The GDP deflator is:

equal to 100 in the base year.

Construction of new homes is considered part of:

investment spending.

Spending on inputs is __________________ and spending on investment is _______________.

not a part of GDP; part of GDP

The value added is equal to:

the value of sales minus the value of intermediate goods used by a company.

GDP can be calculated by summing:

total market value of all final goods and services within a country's borders in a given year, all factor payments within a country's borders in a given year, or the value added for all goods and services.