Econ 222 Chapter 5
The category of expenditure that accounts for the highest share of GDP in the United States is _________.
Consumption.
Which of the following will be considered a final good in the calculation of U.S. GDP?
Foot massages at spas in California and School supplies purchased by a local school board
What is the key difference between the Consumer Price Index (CPI) and the GDP deflator?
The CPI is broader in coverage than is the GDP deflator.
When government statisticians gather and analyze data on the income of various agents in the domestic economy, they are measuring GDP using the ____________.
income-based accounting method
The difference between gross private domestic investment and fixed private investment represents
inventory investment (aka changes in business inventories)
Which one of the sets of terms given below would correctly complete the following definition of GDP? "Gross Domestic Product is the ____ value of the ____ goods and services produced _____ of a country during a particular period of time."
market; final; within the borders
When current market prices are used to determine the value of each unit that is produced in an economy, the resulting aggregate is known as ____________
nominal GDP.
A country's gross national product would exceed its gross domestic product when the _________.
production of domestically-owned factors operating abroad exceeds the production of foreign-owned factors operating in the United States.
When government statisticians gather and analyze data on the value added by the firms in the domestic economy, they are measuring GDP using the ____________.
production-based accounting method
In order for comparisons of production across time to be meaningful, we must use:
real GDP.
Production-based accounting is used to estimate GDP by ____________
summing each firm's value added to the production process and computing for each firm the difference between sales revenue and the purchase of intermediate products, then summing this difference across all firms.
base line/year
where nominal GDP = real GDP (measuring in 2013 dollars, 2013 is the base year)
GDP is estimated using expenditure-based accounting by using the equation ____________.
GDP = C + I + G + X - M.
How is growth in the economy measured?
Growth in the real GDP
Which of the following are not included in GDP but probably should be?
Home Production and Transactions in the underground economy
Why is it essential to differentiate between real and nominal growth rates of GDP?
The nominal growth rate combines the effect of price changes along with changes in the production of goods and services and thus gives a less clear indication of the impact on living standards. and It is the real growth rate that is meaningful since it indicates the change in the production of goods and services, a very significant source of improved living standards.
what is meant by capital depreciation?
The reduction in the value of physical capital due to obsolescence or wear and tear.
A firm's value added refers to the dollar value of ____________.
a firm's sales revenue minus the firm's purchases of intermediate products from other firms
National income accounting is _________.
a system of accounts designed to measure aggregate economic activity in a country.
If the level of aggregate expenditure was $16.8 trillion in 2013, the level of aggregate income in the economy during 2013 was ___________.
also $16.8 trillion because of the identity between aggregate expenditure and income.
You decide to cook your own meal rather than eat in a restaurant.
decrease
