Chapter 7 ECON

The fact that nominal GDP has risen faster than real GDP

suggests that the general price level has risen.

Personal consumption expenditures include expenditures for new houses.

False

The value of a sale of a share of stock is considered to be an investment in national income accounting.

False

(Last Word) The U.S. government agency responsible for compiling the national income accounts is the

Commerce Department's Bureau of Economic Analysis (BEA).

In a typical year, which of the following measures of aggregate output and income is likely to be the smallest?

Disposable income.

In determining real GDP, economists adjust the nominal GDP by using the

GDP price index.

If there are no statistical discrepancies, NDP (net domestic product) is

NI minus net foreign factor income.

What is the difference between national income and personal income?

National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned.

If real GDP rises and the GDP price index has increased

Nominal GDP has increased

(Last Word) Which of the following is a source of data for the consumption component of the U.S. GDP?

The Census Bureau's Retail Trade Survey.

Gross private domestic investment can be divided into replacement investment and net investment.

True

In the treatment of U.S. exports and imports, national income accountants

add exports, but subtract imports,in calculating GDP.

Which of the following best defines national income?

all incomes earned by U.S. resource suppliers for their current contributions to production

National income accountants define investment to include

any increase in business inventories

The largest component of national income is

compensation of employees.

In national income accounting, the consumption category of expenditures includes purchases of

consumer durable goods, consumer nondurable goods, and services.

GDP can be calculated by summing

consumption, investment, government purchases, and net exports.

Real GDP measures

current output at base year prices.

Transfer payments are

excluded when calculating GDP because they do not reflect current production.

Net exports are

exports less imports.

When an economy's production capacity is expanding

gross domestic investment exceeds depreciation.

If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals

gross domestic product.

Which of the following best defines disposable income?

income received by households less personal taxes

"Corporate profits" in the national income accounts consists of the following, except

interest

Refer to the diagram. The base year used in determining the price indices for this economy

is 2000.

If real disposable income fell during a particular year, we can conclude that

none of these necessarily occurred.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are

not counted.

In national income accounting, government purchases include

purchases by Federal, state, and local governments.

If nominal GDP rises

real GDP may either rise or fall.

If depreciation exceeds gross investment

the economy's stock of capital is shrinking.

Real GDP is

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

In 1933, net private domestic investment was a minus $6.0 billion. This means that

the production of 1933's GDP used up more capital goods than were produced in that year.

Which of the following is not economic investment?

the purchase of 100 shares of AT&T by a retired business executive

Nominal GDP is

the sum of all monetary transactions involving final goods and services that occur in the economy in a year

National income measures

the total of all sources of private income plus government revenue from taxes on production and imports.

The value added in an industry includes the wages earned by workers in the industry

true

An economy is enlarging its stock of capital goods

when gross investment exceeds replacement investment.