Macro HW (GDP)

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years? A. $100,000 B. $800,000 C. $400,000 D. $200,000

D. $200,000

GDP Deflator Formula

Nominal GDP / Real GDP X 100

Technological knowledge:

knowledge about how the world works, that is used to produce goods and services.

Business cycles:

short-run movements in real GDP around its long-term trend.

Free rider:

someone who consumes a resource without working or contributing to the resource's upkeep.

government purchases

spending by all levels of government on final goods and services. transfers are not included in government purchases. ex. tanks, airplanes, office equipments, and roads, wages for government employees.

investments

spending is private spending on tools, plant and equipment used to produce future outputs

Institutions:

the "rules of the game" that structure economic incentives. institutions include laws and regulations but also customs, practices, organizations and social mores. institution for economic growth are 1. property rights, 2. honest government. 3. political stability 4.a dependable legal system 5. competitive and open market

2 ways of splitting GDP

1. National spending approach - add up the components of spending: Y = C + I + G + NX NX - value of exports - value of imports 2. Factor income approach - add up the income generated by producing goods and services: Y = Wages + Rent + Interest + Profit Y = W + R + Interest + P

In 2010, real GDP was $13.2 trillion and nominal GDP was $14.6 trillion. What was the GDP deflator for that year? A. 110.6 B. 192.7 C. 140 D. 90.4

A. 110.6

Which of the following is counted as part of GDP? A. A state government hires workers to repave the streets. B. Bob mows his lawn. C. The government sends a social security check to a retiree. D. Helen takes a day off to clean her house.

A. A state government hires workers to repave the streets.

For most of recorded human history, long-run economic growth was: A. almost nonexistent. B. the same as it is today. C. much higher than it has been in recent decades. D. the highest during the Dark Ages.

A. almost nonexistent.

Gross domestic product is the market value of all: A. final goods and services produced within a country in a year. B. goods and services sold within a country in a year. C. goods and services produced within a country in a year. D. final goods and services produced by a country's permanent residents, wherever located, in a year.

A. final goods and services produced within a country in a year.

Which would be most effective in ensuring sustained long-term economic growth? A. increasing technological knowledge B. increasing human capital C. increasing government control of land use D. increasing physical capital

A. increasing technological knowledge

The main reason for the influence of institutions on the wealth of nations is that good institutions: A. raise people's incentives to build wealth. B. help distribute wealth more evenly among the people. C. allow government to more easily convert private property into collective property. D. keep the economy in tight control of the government.

A. raise people's incentives to build wealth.

A country increases its technological knowledge by engaging in: A. research and development. B. investment in physical capital. C. programs that improve workers' health. D. education.

A. research and development.

One of the best explanations for why some countries are rich and others are poor is that: A. rich countries organize their factors of production more efficiently than poor countries. B. technological knowledge is more advanced in rich countries than in poor countries. C. rich countries have far greater natural resources than poor countries. D. rich countries may have simply gotten lucky and poor countries remain unlucky.

A. rich countries organize their factors of production more efficiently than poor countries.

An economy has $10 trillion in consumption, $2.5 trillion in investment, $3 trillion in government purchases, $1 trillion in exports, and $1.5 trillion in imports. What is GDP in this economy? A. $16.5 trillion B. $15 trillion C. $18 trillion D. $15.5 trillion

B. $15 trillion

If a country produced nothing but 20 smartphones and 10 Blu-ray players in 2011, priced at $100 per smartphone and $200 per Blu-ray player, its GDP in 2011 would be: A. $2,000. B. $4,000. C. $5,000. D. $1,000.

B. $4,000.

If real GDP per capita in a country was $14,000 in year 1 and $14,140 in year 2, then the economic growth rate for this country from year 1 to year 2 was: A. 2%. B. 1%. C. 3%. D. 4%.

B. 1%.

The value of a car produced and sold in 2000 and sold again to a second owner in 2008 would be included in GDP for: A. 2008 only. B. 2000 only. C. either 2000 or 2008, but not both. D. both 2000 and 2008.

B. 2000 only.

Which statement best describes the cross-country evidence on the relationship between a nation's GDP per capita and standard measures of societal well-being? A. There is no relationship between GDP per capita and measures of societal well-being. B. GDP per capita is positively related to measures of societal well-being. C. GDP per capita is negatively related to measures of societal well-being. D. The relationship between GDP per capita and societal well-being is positive at times and negative at times.

B. GDP per capita is positively related to measures of societal well-being.

The difference between a final good and an intermediate good is that: A. a final good is sold for use as a component of an intermediate good. B. an intermediate good is sold for use as a component in a final good. C. final goods are not counted as part of GDP. D. intermediate goods are of lower quality than final goods.

B. an intermediate good is sold for use as a component in a final good.

The difference between nominal GDP and real GDP is that nominal GDP: A. is measured in dollar terms, whereas real GDP is measured in terms of numbers of goods and services produced. B. measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years. C. measures a country's production of final goods and services at fixed prices, whereas real GDP measures a country's production of all final goods and services at current market prices. D. measures the total value of only final goods and services, whereas real GDP measures the value of all goods and services, both intermediate and final.

B. measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years.

The single best indicator of a recession is: A. falling prices. B. negative real GDP growth. C. increasing unemployment. D. negative nominal GDP growth.

B. negative real GDP growth.

The value of volunteer services is: A. not included in GDP and should not be because nothing tangible is produced. B. not included in GDP, but should be because a service is produced. C. included in GDP and should be because a service is produced. D. included in GDP, but should not be because nothing tangible is produced.

B. not included in GDP, but should be because a service is produced.

Which of the following has the greatest potential for solving free-rider problems? A. the rule of law B. property rights C. an honest government D. a stable political system

B. property rights

According to the national spending approach, which of the following is counted in investment? A. A college graduate buys a new car after graduation. B. A retiree buys newly issued U.S. government bonds C. A restaurant buys a new wood-fired oven for baking pizzas. D. A student pays for tuition at a university.

C. A restaurant buys a new wood-fired oven for baking pizzas.

What is a result of a high level of government corruption? A. Government officials have a low standard of living. B. The form of government tends toward Communism. C. There are few entrepreneurs. D. Politicians hold little power over the market.

C. There are few entrepreneurs. corrupt governs officials will harass entrepreneurs, creating excessive rules and regulations that force entrepreneurs to pay them to stop making troubles. an entrepreneur is - a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Which of the following would be included in GDP for the United States? A. a U.S. professor taking a year off to teach at the London School of Economics B. Jane's purchase of a used car after her old car is destroyed in an accident C. Toyota, a Japanese car company, producing cars in the United States D. a tire manufacturer making and selling tires to Ford to be used in their new cars

C. Toyota, a Japanese car company, producing cars in the United States

Which is NOT an institution that leads to sustained long-term economic growth? A. a stable political system B. a dependable legal system C. a more equal income distribution D. an honest government

C. a more equal income distribution

Wealthier nations tend to have: A. lower life expectancy rates. B. fewer opportunities for leisure and entertainment. C. better educational opportunities. D. lower infant survival rates.

C. better educational opportunities.

When industries are limited by the size of the domestic market, opening trade to the world markets will likely lead to _____ and _____ real GDP per capita in the domestic country. A. economies of scale; decrease B. diseconomies of scale; increase C. economies of scale; increase D. diseconomies of scale; decrease

C. economies of scale; increase

Which of the following defines the "rules of the game" that structure economic incentives? A. technical knowledge B. factors of production C. institutions D. economic laws

C. institutions

Factors of production that contribute to growth in per capita GDP include: A. institutions. B. organization of resources. C. physical capital, skilled labor, and technological know-how. D. proximal and ultimate factors of production.

C. physical capital, skilled labor, and technological know-how.

Over the past 200 years, economic growth in the United States has been: A. among the slowest in the world. B. volatile. C. slow and consistent. D. the fastest in the world.

C. slow and consistent.

GDP in the United States was $14,119 billion in 2009, and grew to $14,660.4 billion in 2010. This represents an annual growth rate of: A. $541.4 billion. B. 3.7%. C. 1.04%. D. 3.8%.

D. 3.8%.

A business that pays for its workers to attend a technical college is increasing its: A. organizational skills. B. physical capital. C. technical knowledge. D. human capital.

D. human capital.

GDP: A. is a measure of national wealth. B. is usually higher than national wealth. C. measures the stock of assets, while national wealth measures production in a year. D. measures production in a year, while national wealth measures a stock of assets.

D. measures production in a year, while national wealth measures a stock of assets.

The United States and Western European countries began to experience accelerated economic growth during which century? A. seventeenth B. sixteenth C. twelfth D. nineteenth

D. nineteenth

When economists speak of "long-run economic growth," they mean increasing the: A. real GDP of a country. B. geographic size of a country. C. population of a country. D. per capita real GDP of a country.

D. per capita real GDP of a country.

One measure of student output is number of completed math problems produced. Using pen and paper only, a student can complete 50 math problems in 2 hours. Using pen, paper, and a calculator, the same student can complete 100 math problems in 2 hours. (The student is already familiar with, and knows how to use, the calculator.) This scenario illustrates the use of which factor of production? A. technological knowledge B. human capital C. both human capital and technological knowledge D. physical capital

D. physical capital

what does GDP not count

Does not count underground economy (ex. black market, counterfeit shit, sale of crack or coccaine) Does not count non - price production (ex. when someone mows the law, IF a lawn care firm mows the lawn economic output increases so that counts, Does not count leisure (gdp does not rise when work is not done)

How is economic growth measured?

Economic growth is measured as the growth rate of real GDP per capita.

GDP per capita:

GDP divided by population.

market values

GDP uses market values to determine how much each good or service is worth and then sums the total.

GDP growth rate formula

GDP2013 - GDP2012 / GDP2012 X 100 = GDP growth rate for 2013

Recession:

a significant, widespread decline in real GDP and employment.

Final goods

and services are sold to final users and then consumed or held in personal inventories.

Intermediate goods

are sold to firms and then bundled or processed with other goods or services for sale at a later stage.

economies of scale

are the advantages of large scale production that reduce average cost of quantity increases. (ex. indian shirt manufacturers can't take advance of economies of scale because they prohibited the factories from exceeding about $200,000)

Economies of scale:

the advantages of large-scale production that reduce average cost as quantity increases.

economic growth means

the growth rate of real per capita GDP

Gross National Produce (GNP):

the market value of all final goods and services produced by a country's permanent residents, wherever located, within a year.

Gross Domestic Product (GDP):

the market value of all final goods and services produced within a country in a year.

Human capital:

the productive knowledge and skills that workers acquire through education, training, and experience.

Physical capital:

the stock of tools including machines, structures, and equipment.

Real variables:

variables such as GDP that have been adjusted for changes in prices by using the same set of prices in all time periods.

Nominal variables:

variables such as GDP that have not been adjusted for changes in price.