Module 2 Chp 5

Per capita GDP is:

GDP/population

Select all that apply A final good is:

-a good directly consumed by individuals or businesses. -directly counted as part of GDP.

Consider the following price (per unit) and output data for a hypothetical economy during a recent year: The GDP for this economy is $ million.

6750

Suppose consumption is $40b, imports are $3b, exports are $8b, government spending is $14b, and investment is $20b. Given this, GDP = $_________ b.

69 billion C + I + G + (X − M) = $40 + $20 + $14 + $(3 − 8) = $69b.

True or false: Even though measuring some things that give us pleasure (like sunsets) is difficult to do, as long as the components of GDP bear some positive relation to our well-being, it serves a purpose.

True Reason: We all realize that well-being arises from both material and intangible pleasures. But the intangibles tend to be elusive. As long as the material components of our environment bear some positive relation to our well-being, they at least serve a useful purpose.

An intermediate good is:

a good used in the production of final products

The value of capital used up in the production of goods and services is called

depreciation or GDP

The distinction of imports from domestic-made goods is _____ to establish.

difficult

Measuring the many things that give us pleasure, such as beautiful sunsets and loving parents, is:

difficult to measure because they are intangible

Gross ___ product refers to output produced within a country's borders.

domestic

GDP accounts have two sides. One side focuses on the demand side (called the ________ approach) and the other side focuses on the supply side (called the _______ approach).

expenditure, income

Consumption goods and services purchased by their end consumers are called ______ goods.

final

In order to determine GDP using the expenditures approach, all spending on _____ goods and services, not intermediate goods, is added up.

final

The market value of all final goods and services produced within the borders of a given country during a given period of time is the definition of ______.

gross domestic product

Foreign goods or ______ purchased by consumers, firms, or the government should be subtracted from GDP because the goods were not produced in the United States.

imports

Goods and services purchased from international sources are:

imports

Nominal GDP measures the value of all goods and services:

in current prices

GDP can be measured using the _____ approach, which adds the items that make up national earnings on the supply side.

income

The flow of ____ is the idea that the dollar value of output will always equal the dollar value of income.

income

If GDP included unreported income, GDP would:

increase

An increase in the average level of prices of goods and services is

inflation

An increase in the average level of prices of goods and services is:

inflation

Nominal GDP is not an accurate measure of the real level of economic activity in a country because:

inflation distorts the real value of all goods and services produced

American-owned factors of production employed in other nations creates an _____ of income for U.S. households.

inflow

An example of unreported income is ______.

lawn care that is paid "off the books" Reason: "Off the books" means that the income was not reported to the tax or census authorities.

The chain-weighted price indexes employed by the U.S. Department of Commerce to compute real GDP use a _____ average of price levels in consecutive years as an inflation adjustment.

moving

The income created when GDP is produced is called:

national income

The measurement of aggregate economic activity in terms of national income and its components is called:

national income accounting

Gross domestic product less depreciation equals ______.

net domestic product

The flow of income that starts with GDP ultimately returns to the market in the form of:

new consumption, investment, and government purchases

Investment goods consist of ______.

newly produced plants, machinery, and equipment

Computing GDP using current prices gives us ______.

nominal GDP

The GDP identifies the mix of output a country has selected, which also answers the question of _______ to produce.

what

Net investment is:

what is left over from total new private investment after depreciation

Gross domestic product refers to output produced ______.

within a country's borders

Which of the following is equal to net investment?

Gross investment minus depreciation

serves as a measure of value for calculating total output of a product. (Place only one word in the blank.)

Price

What does a nation's gross domestic product (GDP) reflect?

The total market value of all final goods and services produced within an economy in a given year

True or false: Calculating national income helps us understand FOR WHOM our output was produced.

True

True or false: Prices serve as a measure of value for calculating total output.

True Reason: Once we know the price of each good, we can calculate the value of output produced.

Select all that apply Which of the following two items are added to national income to arrive at personal income?

Capital income Transfer payments

Select all that apply When describing the flow of income, GDP returns to the market in the form of which of the following? Select all that apply.

Consumption Investment Government spending

Before payments to factor owners are made, businesses must adjust their gross revenues by _____ depreciation charges.

subtracting

The flow of income illustrates that:

the dollar value of output will always equal the dollar value of income

Society's answer to the core issue of WHAT to produce is answered by ______.

GDP

Select all that apply Which of the following is added to or subtracted from national income to arrive at personal income?

Indirect business taxes Capital income Corporate profits Transfer payments

True or false: All final purchases of plant, machinery, and equipment in a given time period are included as gross investment.

True Reason: Gross investment: Total investment expenditure in a given time period.

Which approach to GDP adds up all the spending on final goods and services that has taken place throughout the year?

Expenditures approach

Consider the following price (per unit) and output data for a hypothetical economy during a recent year: The GDP for this economy is $ million.

12,050

Suppose consumption is $100b, imports are $20b, exports are $10b, government spending is $40b, and investment is $60b. Given this, GDP = $_________ b.

190 billion

The national income accounting system employed by the United States had its origins in the

1930s

If households have paid $1,400 billion in personal taxes from a personal income of $6,200 billion, then disposable income will be $

4800

Suppose foreign-owned resources within the United States produced $250 billion of output while U.S.-owned resources employed abroad produced $310 billion of output. In this case, net foreign factor income is $

60 billion

Net domestic product is ______.

(GDP) − (depreciation)

Suppose consumption is $220b, government spending is $70b, investment is $50b, and GDP is $310b. Given this, net exports = $

-30 billion

GDP per capita means:

GDP per person

The income that American-owned factors of production employed abroad earn must be _____ net domestic product to determine national income.

added to

True or false: Government purchases include only state government expenditures on final goods and services.

False

True or false: Intermediate goods are included in the calculation of GDP.

False

Depreciation is ______.

the wearing out of plant and equipment

Instead of using the prices of a single base year to compute real GDP, the U.S. Department of Commerce uses price indexes that are said to be

chain-weighted.

At present, government spending on goods and services claims roughly _____ of total U.S. output.

one-fifth

Investment currently claims about _____ of U.S. output.

one-sixth

Disposable income equals:

personal income minus personal taxes

To understand the true changes in economic activity, we must control for changes in:

price

Imports must be subtracted from GDP because they are goods and services _____ the borders of the United States.

produced outside but purchased inside

Depreciation charges _____ GDP to the level of net domestic product (NDP).

reduce

Foreign goods purchased by American consumers, firms, or governments should be _____ GDP because the goods were produced outside the United States.

subtracted from

Gross investment is ______.

the total amount of investment purchases in a given time period