chapter 8
Gross Domestic Product
All of the above
Total income can be viewed as the sum of
All of the above
Which of the following equations is correct?
All of the above equations are correct.
The flow of gross domestic product during a given interval must always be equivalent to the flow of gross domestic income within that same period because
Both (a) and (b) are correct
Which of the following statements is correct?
GDP excludes nonmarket production and is not a measure of a nation's overall welfare
Which of the following statements is not true about the use of GDP as a measure of national welfare?
GDP is a useful measure of national welfare since it excludes nonmarket transactions
According to the circular flow of income and output, which of the following is not true?
Goods, services and money all flow in one direction since money pays for the goods and services
___________________ is the total market value of final goods and services produced in an economy during a one-year period by factors of production within the nation's borders. It represents the dollar value of the flow of final production over a one-year period.
Gross domestic product
The expenditure approach to tabulating GDP
adds up the total amount spent on newly produced domestic goods and services during the year
If a household purchases a new car and a new refrigerator, this would be classified as spending on
consumer durables
In product markets,
consumer goods and services flow to households and money flows to businesses
The biggest component of GDP using the expenditure approach is ____________ and the biggest component of GDP using the income approach is _____________.
consumer expenditures; wages
To derive GDP using the expenditure approach, which of the following components are added together?
consumption expenditures, gross private domestic investment, government expenditures, and net exports
A woman who makes a living charging for investment advice on her Internet Web site marries one of her clients, to whom she now provides advice at no charge. As a result of this, GDP ____________.
decreases
In measuring GDP, we must __________________ (1) purely financial transactions, such as the buying and selling of securities; (2) government transfer payments and private transfer payments; and (3) the transfer of secondhand goods.
exclude
The manufacturer purchases a chip in June
excluded in gdp
Then the manufacturer uses it as a component in a computer in August
excluded in gdp
In the circular flow model of income and output, households sell ______________ services to businesses that pay for those services. The receipt of payments is total ____________. Businesses sell goods and services to households that pay for them. The dollar value of total output is equal to the total monetary value of all ______________ goods and services produced. The dollar value of final output must always equal total income. The variable that adjusts to make this so is known as ______________.
factor; income; final; profit
GDP counts intermediate goods because to not do so would result in GDP being undervalued.
false
Many other transactions are excluded from measured _______________, among them household services rendered by homemakers, underground economy transactions, and illegal economic activities, even though many of these result in the production of final goods and services.
gdp
In the circular flow of income
households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms
A marketing arm of the company receives fee income during the current year when a buyer of one of its computers elects to use the computer manufacturer as her Internet service provider.
included in gdp
A retail outlet of the company sells a computer manufactured during the current year.
included in gdp
Finally, the company sells the computer to a customer in November.
included in gdp
To get an accurate measure of GDP using the income approach, we must also add ___________________ and ______________ to those total factor payments.
indirect business taxes; depreciation
GDP is a useful measure for tracking changes in the __________________ of overall economic activity over time, but it is not a measure of the well-being of a nation's residents because it fails to account for nonmarket transactions, the amount and quality of leisure time, environmental or safety issues, labor market discrimination, and other factors that influence general welfare.
market value
All of the following transactions are excluded from the measure of GDP except
paying your dentist to have your teeth cleaned
The largest component of GDP by far is
personal consumption expenditures
A company that had been selling used firearms illegally finally gets around to obtaining an operating license and performing background checks as specified by law prior to each gun sale. As a result of this, GDP __________________.
remains unchanged
A tennis player wins two top professional tournaments as an unpaid amateur, meaning the tournament sponsor does not have to pay out his share of prize money. As a result of this, GDP ______________.
remains unchanged
Total income equals the dollar value of total output because
spending by one group represents income to the other group
Gross domestic product is defined as
the total market value of all final goods and services produced in an economy during a year
For a business, profit is a cost of production.
true
Gross domestic income (GDI) is identical to gross domestic product (GDP).
true
The dollar value of total output is always equal to total income.
true
Total income is the annual cost of producing the entire output of final goods and services.
true
To avoid double counting, we look only at final goods and services produced or, equivalently, at _______________.
value added
To derive GDP using the income approach, we add up all factor payments, including ______________, ____________, _____________, and _________.
wages; profit; interest; rent
Which of the following equations is used to calculate gross domestic income (GDI)?
wages + interest + rent + profit + indirect business taxes + depreciation = GDI
