Chapter 8 Quiz
In a simple economy with only businesses and households, suppose that the sum total of all the goods and services produced during the relevant periodlong dash—pairs of shoes, candy bars, digital devices, etc. all summed togetherlong dash—is 470470 trillion units. The total dollar value of this flow of output is $1414 trillion. The total amount of factors of productionlong dash—labor, land, capital, entrepreneurship, all summed togetherlong dash—is 0.90.9 billion units. What is the flow of incomelong dash—that is, the sum of wages, rents, interest, and profits? The flow of incomelong dash—the sum of wages, rents, interest and profitslong dash—is
$14 trillion
The addition to gross domestic product is
$7705
Using the expenditures approach to national income accounting, which of the following would be counted as investment spendinginvestment spending?
A person in California buys a new house.
Which of the following is a true statement about comparing world incomes?
Adjusting world incomes for purchasing power gives a more accurate view than using market foreign exchange rates.
Which of the following equations is correct?
All of the above equations are correct.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year.
The expenditure approach to tabulating GDP
adds up the total amount spent on newly produced domestic goods and services during the year.
Gross Domestic Product
all of the above
Total income can be viewed as the sum of
all of the above
If nominal GDP increases, it is possible that
any of the above might have happened.
Real GDP is computed by adjusting nominal GDP for
changes in the price level.
To derive GDP using the expenditure approach, which of the following components are added togehter?
consumption expenditures, gross private domestic investment, government expenditures, and net exports
Suppose social security contributions rise by $1 billion while social security benefits also rise by $1 billion. Further, personal income taxes fall by $500 million. As a result,
disposable income should increase while personal income and national income are unchanged.
GDP counts intermediate goods because to not do so would result in GDP being undervalued.
false
In the circular flow of income
households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.
All of the following transactions are excluded from the measure of GDP except
paying your dentist to have your teeth cleaned.
Per capita real GDP measures the amount of real GDP
per person
The income households actually receive before they pay personal income taxes is:
personal income
Which of the following is the definition of disposable personal income (DPI)?
personal income after personal income taxes have been paid
The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called
purchasing power parity.
When comparing per capita GDP across countries, GDP should be adjusted for
purchasing power parity.
When GDP is corrected to reflect constant dollars, this price-corrected GDP is called
real GDP.
Using the expenditures approach to national income accounting, which of the following would be counted as consumption?
residents of New York city buy food every week.
Which of the following is the definition of personal income (DPI)?
the amount of income that households receive before paying taxes.
If real GDP increases in any year, we know that
the output of goods and services produced this year has increased.
Gross output is
the total market value of all goods and services produced during a year by factors of production located within a nation's borders, including all forms of business-to-business expenditures and thereby double counting business spending across all stages of production.
The simple circular flow model shows that
total income received by households must be equal to the dollar value of all goods and services produced.
For a business, profit is a cost of production.
true
The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is known as purchasing power parity.
true
The dollar value of total output is always equal to total income.
true
In the table to the right, what is the total dollar amount that is added to the nation's gross domestic product (GDP)? Why? The total dollar amount that is added to the nation's GDP is
$0.46 because this amount equals the total value added in production.
According to the circular flow of income and output, which of the following is not true?
Goods, services and money all flow in one direction since money pays for the goods and services.
