HW3 Chater 7 GDP
An example of final goods in national income accounts would be: New lawn mowers purchased by Cut-Rite Lawn Equipment & Supplies Flowers and pots purchased by homeowner Joe Smith Chemicals purchased by Green Grass Lawn Care Services Seedlings and saplings purchased for resale by Wendy's Garden Center
Flowers and pots purchased by homeowner Joe Smith
If intermediate goods and services were included in GDP: the GDP would be overstated. the GDP would then have to be deflated for changes in the price level. nominal GDP would exceed real GDP. the GDP would be understated.
The GDP would be overstated
GDP does not include which of the following activities? Businesses installing anti-pollution equipment Households spending to enhance security of their neighborhoods Couples remodeling their own homes Families eating out in restaurants
Couples remodeling their own homes
Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is: $1,200. $500. $2,300. $1,100.
$1,200
If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately: $3,846 billion $3,925 billion $4,108 billion $4,379 billion
$4,108 billion
Real GDP accounts for changes in product quality; nominal GDP does not. True False
False
The purchase of Walmart stock is a part of gross investment, but not of net investment. True False
False
Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that: GDP in 2010 is $450 billion. NDP in 2010 is $450 billion. GDP in 2010 is $500 billion. inventories in 2010 fell by $50 billion.
GDP in 2010 is $500 billion.
GDP measured using current prices is called: Nominal GDP Real GDP Constant GDP Deflated GDP
Nominal GDP
Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information, we: cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003. can conclude that the economy was achieving real economic growth. can conclude that real GDP was higher in 2002 than in 2003. can conclude that real GDP was lower in 2002 than in 2003.
cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.
In an economy experiencing a persistently falling price level: potential GDP will necessarily exceed actual GDP. changes in nominal GDP may either overstate or understate changes in real GDP. changes in nominal GDP understate changes in real GDP. changes in nominal GDP overstate changes in real GDP.
changes in nominal GDP understate changes in real GDP.
Real GDP measures: current output at current prices. current output at base year prices. base year output at current prices. base year output at current exchange rates.
current output at base year prices.
Final goods and services refer to: goods and services that are unsold and therefore added to inventories. goods and services whose value has been adjusted for changes in the price level. goods and services purchased by ultimate users, rather than for resale or further processing. the excess of U.S. exports over U.S. imports.
goods and services purchased by ultimate users, rather than for resale or further processing.
Government purchases include government spending on: government consumption goods and public capital goods. government consumption goods only. public capital goods only.
government consumption goods and public capital goods.
GDP excludes: the market value of unpaid work in the home. the production of services. the production of nondurable goods. positive changes in inventories.
the market value of unpaid work in the home.
All expenditures on new construction are included as investment in calculating GDP. True,False
True
GDP tends to understate economic welfare because it does not take into account increases in leisure. True False
True
