ECON CH. 7

The total income of households after taxes and government transfers is called: private savings. disposable income. investment. aggregate spending.

Disposable income

The equation that breaks GDP down by the four sources of aggregate spending is: GDP = C + I + G + X - IM. GDP = C - I - G - X + IM. GDP = C + I + G - X - IM. GDP = C + I + G + X + IM.

GDP = C + I + G + X - IM. private consumption + gross investment + government investment + government spending + (exports - imports)

An example of a government transfer is a(n): salary for a member of the armed forces. bequest from a deceased relative. Social Security payment. expenditure on an interstate highway.

Social Security payment.

Goods that are produced in a particular period but NOT sold in that period: are classified as intermediate goods. are finally included in depreciation when they are sold. end up in inventory and are included in investment. go into inventory and are called consumption.

end up in inventory and are included in investment.

(Table: Peanut Butter and Jelly Economy) Look at the table Peanut Butter and Jelly Economy. From 2010 to 2011 real GDP ____ by _____. increased; 12.5% decreased; 12.5% increased; 43.75% decreased; 50%

increased; 12.5%

A country's GNP: excludes factor income earned abroad by Americans. must be larger than its GDP. includes factor income earned by foreigners. is the total factor income earned by residents of a country.

is the total factor income earned by residents of a country.

A country's exports minus its imports during a period are: gross imports. net imports. gross exports. net exports.

net exports.

Investment spending is spending on: productive physical capital. productive physical capital, bonds, and shares of stock. shares of stock. bonds.

productive physical capital. (not bonds or stocks)

(Figure: Expanded Circular-Flow Model) Look at the figure Expanded Circular-Flow Model. What is GDP? $700 $1,000 $200 $1,080

$1,000

(Table: Measuring GDP) Look at the table Measuring GDP. Government purchases of goods and services are: $100 billion. $300 billion. $50 billion. $200 billion.

$300 billion.

(Table: Lemonade and Cookies) Look at the table Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2013 is the base year, real GDP in 2013 was: $425. $400. $420. $445.

$400

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be: $200. $830. $230. $630.

$630.

Which of the following transactions is included in the nation's gross domestic product? A construction company purchases lumber to build a new house. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens. A college student buys a used textbook from his roommate. A college student buys a pizza and has it delivered to her dorm room.

A college student buys a pizza and has it delivered to her dorm room.

A price index: always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year. always includes a base year. measures the cost of purchasing a market basket of output across different years. is normalized to 100 for the base year.

always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in government spending, which of the following is likely to happen? a decrease in the real GDP an increase in the unemployment rate an increase in the nominal GDP a decrease in the inflation rate

an increase in the nominal GDP

Economists frequently use GDP per capita to reflect: people who are employed. differences in living standards across countries. both people who are employed and those who are unemployed. the impact of prices on GDP.

differences in living standards across countries.

The circular-flow diagram illustrates all of the following in the U.S. economy EXCEPT: growing income inequality. flows of money. flows of goods and services. the purchase and sale of factors of production.

growing income inequality.

The dollar value of final goods and services only is counted in GDP because: if we counted the value of all goods, we would count inputs, like the value of steel in a new automobile, more than once. we can measure only the value of final goods and services, not the value of inputs. only final goods and services matter for the economy. intermediate goods reduce GDP

if we counted the value of all goods, we would count inputs, like the value of steel in a new automobile, more than once.