Chapter 7: Measuring Domestic Output and National Income
The following items comprise national income:
-American salaries earned abroad -interest -compensation of employees -proprietors' income -rents -taxes on production and imports -corporate profits
A final good is
-counted as a part of GDP -a good directly consumed by individuals or buisnesses
National income accountants subdivide corporate profits into which categories?
-dividends -corporate income taxes -undistributed corporate profits
Which of the following are two ways to adjust nominal GDP to reflect price changes?
-dividing nominal GDP by the price index of the current year -multiplying the current year's output by price of the output in the base year
Select all of the benefits of national income accounting
-enables formulation of policies to improve or safeguard the economy's health -tracks the long-run course of the economy -assesses the health of the economy
Which of the following are components of government purchases in GDP?
-expenditures for publicly owned capital -expenditures for goods and services that the government consumes in providing public services
Which of the following are part of taxes on production and imports?
-general sales taxes -excise taxes -custom duties -business property taxes -license fees
As a measurement of economic output and the nation's wealth, GDP fails to account for:
-improved product quality -non-market activities -the underground market -lesiure time
A price index:
-measures the cost of purchasing a market basket of output across different years -always includes a base year -is normalized to 100 for the base year
What are the three categories of personal consumption expenditures?
-services -durable consumer goods -non-durable consumer goods
Private domestic investment includes:
-spending on new plant and equipment -construction of new housing -any increase in inventories
HIGHEST GDP'S (countries)
-united states -china -japan
The transfer of claims to existing capital goods creates new capital
FALSE
By ignoring the value of lesiure time, how does national income affect our well being?
It understates our well-being
In national income accounts, value added refers to:
The difference in the market value of a firm's output and the value of inputs purchased from other firms
Consumption of fixed capital is the __________________ charge made againist private and publicly owned capital each year.
depreciation
The estimate of how much of the capital is being used up each year is called
depreciation
The amount of income that households have left over after paying their personal taxes is:
disposable income
The after-tax profits that are distributed to stockholders are called ______________
dividends
All final purchases of machinery, equipment, and tools by business, enterprises, including construction, and changes in inventories make up gross private __________ investment.
domestic
The view of GDP as the sum of money spent on buying it is called the aggregate ____________________ approach
expenditure
The three domestic sectors of the economy are households, government, and ___________
firms
Net exports is equal to exports minus ____________
imports
National ____________ accounting measures the overall performance of the economy.
income
_____________ consists of the money paid by private buisness to the suppliers of loans used to purchase capital.
interest
Goods and services that are used up in the production of final goods are called _____________ goods.
intermediate
Economists compare the _________________ value of the total output in various years, rather than ___________ volumes of prodcution .
market, actual
Income earned through the use of American-owned resources for services and production is called:
national income
When gross investment is less than depreciation, net investment is _____________.
negative
in calculating gross private domestic investment a _____________ change in _____________ must be subtracted from total investment for that particular year.
negative, inventories
When dealing with international trade, economists include ______________ as a component of GDP.
net exports
The difference between the income Americans earn abroad and the income they earn in the United States is called ________ ____________ factor income.
net foreign
Transfer payments are not included in GDP because the generate +_________________
no output
The amount of income that households receive, whether earner or unearned, is called _________ income.
personal
The term that covers all expenditures by households is ________________ ____________________ expenditures.
personal consumption
The price of a market basket of goods in a specific year divided by the price of the same market basket of goods in the base year multiplied by 100 is called a:
price index
Imports must be subtracted from GDP because they are goods and services ___________ the borders of the United States.
produced outside
A country's exports are included in GDP when the goods and services are:
produced within the borders of said country
Government ____________, officially labeled "government consumption expenditures and gross investment," include all federal, state, and local government outlays on final goods.
purchases
undistributed corporate profits are called _____________ _________________.
retained earnings
Consumers are free to divide their income between consumption and ___________________.
savings
The __________ costs of negative gross domestic by-products reduce a nation's _____________ well-being
social, economic
After calculating national income, which of the following is added to national income to obtain GDP?
statistical discepancy and consumption of fixed capital
Viewing GDP in terms of earnings derived or created by producing something is called:
the income approach
GDP only counts final goods and services to avoid multiple counting of goods
true
Government transfer payments include all of the following except
wage payments to police officers (includes payments to elderly for social security, welfare, and payments to veterans)
The real-world, more complex GDP price index used in the United States is called the chain-type annual ____________ price index.
weights
When gross investment and depreciation are equal, the value of net investment is:
zero
The dollar 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:
GDP, Gross Domestic Product
___________ market transactions are not included in measuring GDP as they just involve swapping bits of paper.
Stock
GDP reveals nothing about the way output is distributed
TRUE
In general, GDP does not include the value of unpaid work.
True
The primary measure of the economy's performance is its annual total output of goods and services, which is called its:
aggregate output
Wages, salaries and benefits paid by businesses and government to their workers are called employee _______________.
compensation
Which of the following is the largest component of national income?
compensation of employees by firms
Secondhand sales are excluded from the calculation of GDP because they
contribute nothing to current production