Homework 3 - CH. 6 & 7

Which of the following goods are usually intermediate goods and which are usually final goods? A. Running shoes: b. Cotton fibers: c. Watches: d. Textbooks: e. Coal: f. Sunscreen lotion: g. Lumber:

A. Final good b. Intermediate good c. Final good d. Final good e. Intermediate good f. Final good g. Intermediate good

Which of the following best defines disposable income?

income received by households less personal taxes

Which of the following best defines national income?

incomes earned by U.S. resource suppliers plus taxes on production and imports

The largest component of total expenditures in the United States is

personal consumption.

In national income accounting, government purchases include

purchases by federal, state, and local governments.

The more reliable measure for comparing changes in the standard of living over a series of years is

real GDP

If nominal GDP rises,

real GDP may either rise or fall.

The business cycle depicts

short-run fluctuations in output and employment.

Macroeconomics is mostly focused on

the economy as a whole.

Nominal GDP is

the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because

the price level may change over time.

An economy's output, in essence, is also equal to its income because

the value of everything that is produced is also the value of everything sold.

Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per-unit prices of these three goods are A = $2, B = $3, and C = $1. Nominal GDP in the current year is

$115.

Refer to the accompanying data (all figures in billions of dollars). GDP is

$121.

Assume an economy that is producing only one product. Output and price data for a three-year period are shown in the table. If year 2 is chosen for the base year, in year 3 nominal GDP and real GDP, respectively, are

$180 and $120.

The table contains data for a hypothetical single-product economy. Real GDP in year 4 is

$200.

The table contains data for a hypothetical single-product economy. Nominal GDP in year 4 is

$800.

Which of the following transactions would be included in GDP?

Peter buys a newly constructed house.

Which of the following statements is true?

Real GDP is nominal GDP divided by the price index.

The GDP price index is

a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year

Net exports are negative when

a nation's imports exceed its exports.

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that

net investment is negative.

Real GDP is preferred to nominal GDP as a measure of economic performance because

nominal GDP uses current prices and thus may over or understate true changes in output.