ECON303 - Measurement

Real GDP values current production at

Base year prices

NIPA means

National Income and Product Accounts

Private disposable income is equal to

Y + NFP + TR + INT - T

In the United States, real GDP is currently calculated using

a chain-weighting scheme

The income-expenditure identity is best paraphrased as

all spending generates income

GDP and GNP may differ

because some income generated by domestic production may be received as income by foreign residents

All of the following present significant problems with measuring real GDP and the price level except A)changes in absolute price levels B)the introduction of new goods C)changes in relative price levels D)changes in the quality of goods over time

changes in absolute price levels

Changes in relative prices cause problems in measuring real GDP because

consumers substitute relatively cheaper goods for ones that have become relatively more costly

Additions to inventory are

counted as a component of investment spending

To compute a monthly consumer price index, we need

data about item prices every month

A price index can be computed by

dividing a nominal variable by its real counterpart

The introduction of new products over time implies that

in measuring real GDP, we need to account for how new products replace old ones

Value added is equal to the value of a firm's production minus

intermediate goods used in production

Inventory investment consists of

inventories of finished goods, goods in process, and raw materials.

Additions to the nation's capital stock are brought about through

investment

The GDP deflator is a broader measure of the price level than the CPI because

it covers investment

GDP may inaccurately measure the value of aggregate output because it may not properly account for

production in the underground economy and the true value of government production

The calculation of real GDP allows us to

separate consumption and investment spending

When a firm produces output

the firm's output contributes to GDP only to the extent that there is value-added

National saving minus private saving is equal to

the government surplus/government savings

Who among the following is considered to be in the labor force?

unemployed workers

The value of a producer's output minus the value of all intermediate goods used in the production of that output is called the producer's

value added

When we try to measure real GDP and the price level, if we underestimate the growth in real GDP, we will

always overestimate the rate of inflation

In the monthly labor force survey, each person in the survey reports that they are either

employed, unemployed, or not in the labor force

When there is positive inflation

growth in nominal GDP exceeds growth in real GDP

The three approaches to measuring GDP are called the

product approach, the income approach, and the expenditure approach

The base year matters for the computation of real GDP because

relative prices can change over time

In recent U.S. history

there has been little practical difference between GNP and GDP

Recently, consumption has comprised approximately

two-thirds of GDP

Suppose that the government collects $3 million in taxes, pays $2 million in social security benefits, pays $0.5 million in interest on the national debt, and pays workers $1 million to sit at their desks and work as little as possible. The government's contribution to GDP is

$1 million

Jim's Nursery produces and sells $1100 worth of flowers. Jim uses no intermediate inputs. He pays his workers $700 in wages, pays $100 in taxes and pays $200 in interest on a loan. Jim's contribution to GDP is

$1100

Acme Steel Co. produces 1000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal, which is needed to produce the steel. Acme pays $2,000 in taxes. Acme's contribution to GDP is

$15,000

Suppose we have the following information about a plumber: wages $30,000, repair sales $200,000, taxes $5,000, loan interest $15,000, plumbing materials $20,000. What is the contribution to GDP of this plumber using the product approach?

$180,000

Suppose we have the following information about a shoe manufacturer: wages $100,000, sales $500,000, taxes $50,000, loan interest $10,000, leather purchases $170,000, rubber purchases $130,000. What is the contribution of this manufacturer to GDP using the income approach?

$200,000

Here is what we know about a household: wages $25,000, unemployment insurance benefits $3,000, dividend income $4,000, income tax $5,000. What is the contribution to GDP of this household following the expenditure approach?

$28,000

We know the following about a tie manufacturer: tie sales $1,300, cotton purchases $750, wages $400, interest on business loans $100, and profits $50. What is the contribution to GDP of this producer using the income approach?

$550

Assume that in an economy with 200M inhabitants, 90M work, 4M are looking for a job, 3M receive unemployment insurance compensation, and 6M receive unemployment insurance compensation and are looking for a job. What is the unemployment rate?

10%

Suppose that GDP is equal to 1000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal

250

Suppose we have the following information about a car manufacturer: car sales $1000M, steal purchases $600M, wages $300M, interest on business loans $50M, and profits $50M. What is its contribution to GDP using the product approach?

400M

Suppose we have the following information about a furniture maker: furniture sales $100M, wood purchases $60M, wages $25M, tax on profits $5M, profits $10M. What is the contribution to GDP of this company using the product approach?

40M

We learn the following about a ski resort: ticket sales $100M, snow making expenses $70M, wages $20M, interest on business loans $5M, and profits $5M. What is the contribution to GDP using the product approach?

70M

An example of a flow would be the A)rate at which water goes down the drain B)percentage of pollutants in tap water. C)amount of water in a bathtub. D)pressure of water in a pipe.

A

In recent years, which of the following has comprised less than 5% of GDP? A) Net Exports B) Exports C) Imports D) None of the above

A

The expenditure components of GDP include all of the following except A)the sum of government spending on goods and services, transfer payments, and interest on the national debt. B)consumption. C)government spending on goods and services. D)investment.

A

The expenditure components of GDP include all of the following except A) Consumption B)net factor payments C)net exports D) investments

B