Chapter 2: The Data of Macroeconomics

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are -$1,910, then government purchases are

$2,977

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was

$6.50

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent

7.4

Gross National Product (GNP) Formula

GDP + Factor Payments from Abroad - Factor Payment to Abroad

National Income Formula

NNP - Statistical Discrepancy

GDP deflator

reflects what is happening to the overall level of prices in the economy

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is

the CPI

An increase in the price of imported goods will show up in

the CPI but not in the GDP deflator

An example of an imputed value in the GDP is the

housing services enjoyed by homeowners

Which of the following is a flow variable?

income

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP

measures changes in the quantity of goods and services produced by holding prices constant

National income

measures how much everyone in the economy has earned

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad

minus; plus

Stock

quantity measured at a given point in time

Flow

quantity measured per unit of time

GDP deflator allows separation of GDP into two parts:

quantity measures (real GDP) and price measures (GDP deflator)

PCE deflator

ratio of nominal consumer spending to real consumer spending

GDP deflator formula

(Nominal GDP/Real GDP) x 100

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is

1.25

Examples of flow variables

GDP, number of people losing their jobs, amount of investment in an economy, the government deficit

Net National Product

GNP - Depreciation

Nominal GDP formula

Real GDP x GDP deflator

national income accounts identity (in an open economy)

Y = C + I + G + NX

When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______

decrease; increase

In the circular flow model, the flow of dollars from firms to households is paid _____ and the flow of dollars from households to firms is paid _____

a wages for profits; for goods and services

Six parts of national income

compensation of employees, corporate profits, proprietor's income, net interest, rental income, taxes on production and imports

In the national income accounts, the purchase of durables, nondurables, and services by households are classified as

consumption

All of the following are measures of GDP except

expenditures of all businesses in the economy

An estimate of the number of unemployed workers in the economy can be obtained from

from the household survey, but not from the establishment survey

The market value of all final goods and services produced within an economy in a given period of time is called

gross domestic product

When bread is baked but put away for later sale, this is called

investment in inventory

When a firm sells a product out of inventory, GDP

is not changed

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would

leave GDP unchanged

real GDP

value of all final goods and services measured at a constant price level using a base year

nominal GDP

value of all final goods and services measured at current price levels

Examples of stock variables

wealth, number of people unemployed, amount of capital in an economy, the government debt

If the number of employed increases while the number of unemployed does not change, the unemployment rate

will decrease