Macroeconomics Chapter 10
A steel company sells some steel to a bicycle company for $150. The bicycle company then uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute.
$250 to GDP
In the economy of Wrexington in 2008, nominal GDP was $20 billion and the GDP deflator was 100. What was wrexington's real GDP in 2008?
20 billion
The following is an example of a final good or service
A CD player purchased as a gift
Real GDP is the yearly production of final goods and services valued at
Constant prices
Nominal GDP is calculated by using
Current prices
Example of an investment expenditure
Jack's Boat Storage buys a new boat lift
If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself, then GDP
Necessarily falls
Example of an intermediate product
The lumber produced by Boise Cascade and sold to a builder of new houses.
GDP
The market value of all final goods and services produced within a country in a given period of time
An Italian company operates a pasta restaurant in the U.S. The value of the output produced by this pasta restaurant is included in
U.S. GDP and Italian GNP
Net exports equal
exports minus imports
Goods that go into inventory and are not sold during the current period are
included in current period GDP as inventory investment
If an economy's GDP rises, then it must be the case that the economy's
income and expenditure both rise
Changes in real GDP reflect
only changes in the amounts being produced
To encourage formation of small businesses, the government could provide subsidies; the subsidies
would no be included in GDP because they are transfer payments