econ 9
Net domestic product at factor cost
(wage income) + (Interest, rent, and profit )
The figure shows the flows of expenditure and income on Lotus Island. In 2016, R was $5 billion; W was $39 billion; U was $15 billion; J was $20 billion; and Z was $7 billion. Calculate total exenditure and total income.
81 81
The figure shows the flows of expenditure and income in an economy. In 2013, U was $1.0 trillion, V was $1.5 trillion, W was $6.0 trillion, J was $1.0 trillion, and Z was $ 1 trillion. Calculate total income, net taxes, and GDP.
9 1.5 9
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services.
A is a final good that is consumption expenditure, B is a final good that is government expenditure, C is a final good that is investment, and D is an intermediate good.
Chained-dollar real GDP is the measure of real GDP calculated by the _____.
Bureau of Economic Analysis
Calculate: U.S. GNP national income
C + I + G + X + M C= consumption I= investment G= government X= exports M= income D= depreciation C + I + G + X + M - D + (Statistical discrepancy)
______ changed because retail sales increased. ______ changed because business inventories increased.
Consumption expenditure; Investment
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
GDP Expenditure Approach
G= govt expenditure I= investment C= consumption X= exports M= imports GDP = C + I + G + (X-M)
Which of the following is an example of consumption expenditure?
Rachel buying a TV.
Which of the following is an example of an intermediate good or service?
Samsung buys compressors for manufacturing refrigerators.
Which of the following is an example of government expenditure on goods and services?
The White House buying internet services.
GDP Income Approach
Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income
How can GDP increase by 0.7 percent if consumption expenditure increased at a 2.2 percent rate?
U is government expenditure on goods and services and J is investment
When using the income approach to measure GDP at market prices, in addition to summing all factor incomes it is necessary to ______.
add indirect taxes less subsidies to convert aggregate income from factor cost to market prices
The expenditure approach to measuring U.S. GDP equals ______.
all expenditure on final goods and services produced in the United States in a given time period
The economy is in ______ because ______ between 2016 and 2017.
an expansion; real GDP is increasing
Explain why the NBER reported that the 2008 recession began before real GDP had fallen for two successive quarters. The NBER Committee _______.
based its decision on peaks in the data on real personal income, real manufacturing, wholesale and retail sales, industrial production, and employment, which all peaked between November 2007 and June 2008
The standard of living can be easily compared ______.
between China and Russia or between Canada and the United States, because household production, the underground economy, leisure hours, and the environment are similar in each pair
Net taxes are taxes paid minus _____.
cash benefits received from governments
The fall in net exports ______.
decreases GDP
The statement that total sales by businesses fell by 0.6 percent means that GDP ______ because ______.
did not change by 0.6 percent; GDP measures production of all final goods and services and "total sales by businesses" includes final and intermediate goods and services
Based on this information, differences in real GDP per person ______ correctly rank the standard of living in these countries because ______.
do; when other factors that influence the standard of living are similar the differences in real GDP per person are small, but when these other factors are not similar, the differences are huge
The standard of living cannot be easily compared in ______ and ______ because ______.
either China or Russia; either Canada or the United States; in each pair household production, the underground economy, leisure hours, and the environment are different
Statistical discrepancy
expenditure - income
What are the two approaches to measuring GDP described in the news clip? Why is one of these measures of the contribution of WhatsApp to GDP wrong?
expenditure approach and the income approach $30 million because when Facebook pays its workers, it incurs a loss of $30 million
Gross domestic product is the market value of all the ______ in a given time period.
final goods and services produced by all firms located in the United States
GDP is a poor measure of economic well-being because it _______.
includes only production that is traded in markets
Saving equals ______.
income minus consumption expenditure minus net taxes
The following statements about the business cycle are correct except ______.
it is a regular predictable cycle in real GDP around potential GDP
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
Real GDP per person is not an accurate measure of the standard of living because it ______.
omits the goods and services that people produce for themselves
A ______ is a final good and ______ is an intermediate good.
tank of gasoline bought by you; jet fuel bought by Southwest Airlines
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
It is possible for GDP to increase by only 0.7 percent when consumption expenditure grew at a 2.2 percent rate because _______.
the sum of investment and net exports shrank
To accurately assess the relative standard of living in these countries, we need additional information about _____.
the value of household production, the underground economy, leisure, and environment differences
Which of the following countries is facing a recession?
Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012.
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
Imports of goods and services are items that _____ in the United States _____ the rest of the world.
households, firms, and governments; buy from
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
