Chapter 8 economics
GDP is not a perfect measure of well-being because
GDP is not adjusted for pollution.
When a significant fraction of the domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:
GDP will be much larger than GNP
In the circular flow model, who supplies factors of production in exchange for income?
Households
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production of goods and services has risen.
Which of the following are not counted as final goods and used in the GDP calculation?
Intermediate goods
The purchase of tires from Bridgestone tire company by an automobile manufacturer.
Is not the purchase of a final good
Which of these is not a shortcoming of GDP as a measure of welfare?
It only counts final goods and services and not intermediate goods.
When there is a sharp decrease in the crime rate, the measured level of GDP
may increase or decrease .
Disposable personal income is equal to personal income minus:
personal tax payments
The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.
households
The GDP per capita is computed by dividing a country's:
real GDP by its population
The total national income actually received by a country's residents is:
smaller than the value of GDP
If Americans still worked sixty hour weeks, as they did in 1890, __________.
the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher
Real GDP is:
the value of goods and services evaluated at base year prices
Which is the largest component of GDP?
Consumption
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities.
Which equation represents the relationship between GDP and the four major expenditure components?
Y= C+ I+ G+ NX
An example of business fixed investment spending is
a purchase of a computer by an accounting firm.
Which of the following would not be included in the expenditure category called investment expenditures?
a purchase of shares of preferred stock
Gross domestic product is best defined as the:
market value of all final goods and services produced in a country during a period of time
If real GDP in 2018 (using 2009 prices) is lower than nominal GDP of 2017, then
prices in 2018 are lower than prices in 2017.
Real GDP is GDP in a given year
valued in the prices of the base year
What are the four major components of expenditures in GDP?
Consumption, Investment, Government Purchases, and Net Exports
Economic growth is important to an economy because it typically translates to:
a higher standard of living for the country's population.
To calculate personal income from national income, which of the following must be done by the BEA?
Add government transfer payments
When the number of people working outside the home decreases, the measured level of GDP
decreases
Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?
Real GDP
As the value of a country's real GDP increases, the country is likely to:
devote more resources to pollution reduction
The best measure of the income households actually have available to spend is:
disposable personal income
The sum of the value added of every firm involved in producing all final goods and services ________ gross domestic product.
equals
A period of real economic growth, where production and employment are both moving higher is known as:
expansion.
Inventories are part of investment and therefore included in GDP because
firms produce goods, however sometimes the goods may be unsold at the time GDP is computed.
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
By adding the value in dollar terms of all the final goods and services produced domestically.
Which of these do we subtract from GDP to obtain national income?
Depreciation
Which of the following is included in the economist's definition of investment?
The purchase of new machines, factories, or houses
An alternating period of economic contraction and economic expansion measured over time with real GDP is known as the:
business cycle.
Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.
8 percent
Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?
A new house
"In years when people buy few shares of stock, investment will be low and, therefore, so will gross domestic product... (GDP)."
Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases.
Assuming that inflation has occurred over time, what is the relationship between nominal GDP... and real GDP... in each of the following situations?
a. In years after the base year, nominal GDP is greater than real GDP. b. In the base year, nominal GDP is equal to real GDP. c. In years prior to the base year, nominal GDP is less than real GDP.
In 2018, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2018 and unsold cars and trucks were valued at $900,000 on December 31, 2018. What is Kendall Ford's total investment spending in 2018?
$522,000
