Chapter 8 macro
Which of the following is a true statement about the impact of World War II on the U.S. economy?
Increased production of tanks, ships, planes, and munitions accounted for most of the increase in GDP.
Which of the following is true about the government purchases component of U.S. GDP last year?
Purchases by state and local governments are greater than purchases by the federal government.
Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?
Real GDP
When a significant fraction of domestic production is done by firms owned by foreigners, a country's difference between GDP and GNP is as follows:
GDP will be much larger than GNP.
How are intermediate goods treated in the calculation of GDP?
Their value is not counted separately, but included as part of the value of the final good for which they are an input.
Which of the following would not be included in the expenditure category called investment expenditures?
a purchase of shares of preferred stock
The flow of funds from ___________ into the financial system makes it possible for government and firms to borrow.
households
Personal income is defined as
national income less retained earnings plus transfer payments and plus interest on government bonds.
If real GDP increases we know for sure that
output has risen
The drawback to calculating real GDP using base-year prices is that
relative prices change over time and these are not reflected in base-year prices, and this distorts GDP.
Total income in the economy equals the sum of wages, interest, _________ and ________.
rent; profit
The total national income actually received by a country's residents is
smaller than the value of GDP.
Real GDP is
the value of goods and services evaluated at base year prices.
Which of the following is true about the consumption component of U.S. GDP last year?
Consumer spending on services was greater than the sum of spending on durable and nondurable goods.
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production of goods and services has risen.
Suppose that the base year is 2000 and we want to calculate real GDP for 2009. Which procedure would you use?
Multiply the quantities in 2009 by the prices in 2000, and add up the results.
To calculate personal income from national income, which of the following must be done by the BEA?
add government transfer payments
If we add up the value of every final good and service produced in the economy, we must get a total that is exactly equal to the value of
all of the income in the economy.
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
by adding the value in dollar terms of all of the final goods and services produced domestically
When a consumer purchases a new computer, how is that purchase counted in GDP?
by counting only the value of the computer and ignoring the value of the components
Which of the following would be considered a factor of production?
capital natural resources entrepreneurship
Investment spending includes spending on
changes in business inventories
Which is the largest component of GDP?
consumption
Growth in the economy is almost always measured as
growth in real GDP
In the circular-flow diagram, who supplies factors of production in exchange for income?
households
Assuming that the United States is the domestic economy, ________ are goods and services produced by ________ and purchased by ________.
imports; foreign countries; the United States
Which of the following are not considered of "final goods," as used in the definition of GDP?
intermediate goods
In many developing countries, the informal sector is ________ because taxes are ________ and government regulations are ___________.
large; high; extensive
In an economy with rising prices, compared to the base year,
nominal GDP is larger than real GDP in years after the base year.
Using the year 2000 as the base year, and assuming that prices during the 1990s were lower on average than prices in 2000, we can conclude that
nominal GDP was lower than real GDP in the 1990s.
Disposable personal income is defined as
personal income less personal taxes
Over time, prices may change relative to each other. To allow for this, the Bureau of Economic Analysis calculates
real GDP and the price deflator using chain weights.
Nominal GDP
the production of goods and services valued at current prices
Which of the following is included in the economist's definition of investment?
the purchase of new machines, factories, or houses
How would most economists respond to the following comment: Not counting household production or production in the underground economy is a serious shortcoming of GDP.
Most economists would answer "no" because these types of production do not affect the most important use of the GDP measure, which is to see how the economy is performing over short periods of time.
Which of the following is counted in the gross private domestic investment category used by the Bureau of Economic Analysis when measuring GDP?
business fixed investment residential investment changes in business inventories
Which of the following do we subtract from GNP to obtain NNP?
depreciation
The best measure of the income households actually have available to spend is
disposable personal income.
Gross domestic product in the economy is measured by the
dollar value of all final goods and services produced in the economy.
When accounting for exports and imports in GDP, which of the following is correct?
Exports are added to the other categories of expenditures.
Real GDP
GDP adjusted for inflation
What happens if we measure GDP by adding up the value of every good and service produced in the economy?
GDP is overestimated because of double counting.
National income is equal to
GDP minus depreciation
Which of the following accurately describes an effect of hurricane Katrina on GDP?
GDP would increase reflecting the costs of cleanup.