Econ Chapter #4 Study guide
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
Decrease; capital
Real GDP per person is real GDP _____.
Divided by population
The phases of the business cycle are _______. The turning points of the business cycle are _______.
expansion and recession; peak and trough
Potential GDP per person ______.
grows at a steady pace but not at a constant pace
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
Imports of goods and services are items that _____ in the United States _____ the rest of the world.
households, firms, and governments; buy from
An expansion is a period during which _____.
real GDP is increasing
Real GDP is calculated by _______.
summing together the value of the year's production using the prices of the reference base year
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
National product is _______.
the value of goods and services produced anywhere in the world by the residents of a nation
Aggregate income in an economy in 2017 is $995 billion. Saving is $20 billion and imports are $25 billion. What is aggregate expenditure in the economy in 2017?
$995 billion
Why does GDP equal aggregate income and also equal aggregate expenditure? GDP equals aggregate income and also equals aggregate expenditure because _______. A. labor produces final goods and all purchases in the economy are purchases of final goods B. firms pay out as incomes (aggregate income) everything they receive from the sale of their output (aggregate expenditure) Your answer is correct.C. the Department of Commerce has defined GDP in such a way that it can be calculated by either summing total income or by summing total expenditures D. aggregate income measures profit as net profit and aggregate expenditure measures investment as net investment
B
Net investments equal
Gross investment - Depreciation
The total amount spent _____ is called gross investment.
both buying new capital and replacing old capital
Net exports increase when ______.
exports increase by more than imports increase
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
Domestic product is _______.
production within a country
Real GDP might be an unreliable indicator of the standard of living because ______.
the standard of living depends on many factors, some of which are not part of real GDP
The amount by which _____ is called net investment.
value of capital increases