Econ 102: Chapter 6

In any year, real GDP

might be greater or less than potential GDP

Based on the data in the above table, gross domestic product equals

$2,465.

The above table shows some national income accounting data for a nation. In this nation, gross domestic product is equal to ________ billion.

$2,800

Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced.

I and III

________ refers to a period when the ________ decreases.

Productivity growth slowdown; growth rate of output per person

When calculating the compensation of employees part of GDP

Social Security contributions must be included.

All of the following are components of the expenditure approach to measuring GDP EXCEPT

a Senator from Iowa being paid the monthly salary.

According to the BEA, in the second quarter of 2012 state and local government spending on goods and services changed by -1.4 percent. Using the expenditure approach, this change leads to

a decrease in government expenditure on goods and services.

In the above figure, a recession begins at point ________ and an expansion begins at point ________.

a; b

Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that

an expansion occurred after January 2011.

An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.

both I and II

Reported GDP increases when, in fact, total production is unchanged when I. there is a shift from household production to market production. II. a previously illegal activity is legalized.

both I and II

Purchasing power parity prices are used to construct GDP data that

can be used to make more valid comparisons between one country and another.

The largest component of national income is

compensation of employees

Transfer payments are not part of government expenditure on goods and services because transfer payments

do not represent the purchase of a final good or service

The times during which real GDP increases are referred to as

expansions.

To measure GDP using the expenditure approach you must collect data on

exports.

Real GDP

fluctuates around potential GDP.

The business cycle refers to

fluctuations in the level of real GDP around potential GDP

The maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation is called

potential GDP.

Potential GDP is

the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

A business cycle is

the pattern of short-run upward and downward movements in total output.

GDP can be computed as the sum of

the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.

In the computation of GDP, Social Security payments count as

transfer payments and are not included in GDP.

In the national income accounts, government expenditure on goods and services exclude

transfer payments.

What term is used to describe the lowest point of a business cycle?

trough

Real GDP measures the

value of total production linked to prices of a single year