Econ Chapter 4
Choose the statement that is incorrect.
The business cycle is regular and predictable
Choose the correct equation.
Depreciation = Gross investment - Net investment
To make total income equal to GDP we ______ indirect taxes less subsidies and ______ depreciation.
add; add
In the figure, flow B represents ________
household purchases of goods and services
During 2012, the U.S. economy was _____
in an expansion
The graph shows the most recent U.S. business cycle. During 2012, the U.S. economy was ______.
in an expansion
This purchase of paper ______ part of GDP because the paper is ______ good.
is not; an intermediate
GDP counts only final goods and services because this
method avoids double counting of goods going through several stages of production
The income approach measures GDP by adding together compensation of employees, proprietors' income, ________.
net interest, rental income, and corporate profits
Normally in the United States the relationship between nominal and real GDP for a given year is
nominal GDP is greater than real GDP because of price increases
Which of the following transfer payments is included in GDP?
none of the above
A common definition of a recession is a period of time
of at least 6 months during which real GDP decreases
During a year, a firm's gross investment is $5,000 and net investmentnet investment is $4,000. The firm's depreciation is ______.
$1,000
Aggregate expenditure in the United States is equal to consumption expenditure plus investment ______.
. plus government expenditure plus net exports
Choose the correct statement.
To isolate the increase in production from rise in prices, we distinguish btw real GDP and nominal GDP
What is the value of U.S. GDP (income approach) in 2010?
The value of U.S. GDP (income approach) in 2010 is $14.4
In 2006, U.S. GDP using the income approach is $12.912.9 trillion and net domestic income at factor cost is $10.410.4 trillion. What is the value of indirect taxes less subsidies plus depreciation in 2006?
The value of indirect taxes less subsidies plus depreciation in 2006 is $ 2.5 trillion.
In 20132013, U.S. exports were $2602,260 billion and imports were $2 comma 7572,757 billion. What was the value of net exports?
The value of net exports in 2013 was negative 497−497 billion dollars
An example of "investment" in the national income accounts is the purchase of
a new van by a potter, who packs it with his wares and travels to art shows.
Depreciation is defined as the
decrease in the stock of capital due to wear and tear.
The difference between gross investment and net investment is
depreciation
The income approach to measuring GDP
determines the cost of production, then adjusts it to equal the market value of production.
Real GDP ______
does not include a measure of household production or underground economic activity
Real GDP ______.
does not include a measure of leisure time or environmental quality
Gross domestic product is a measure of the total value of all
final goods and services produced in an economy over a period of time.
The business cycle refers to
fluctuations in the level of real GDP around potential GDP.
GDP using the expenditure approach equals the sum of personal consumption expenditures plus
gross private investment plus government expenditure on goods and services plus net exports of goods and services.
The growth rate of real GDP contributes to an improved standard of living for all of the following reasons except ______.
more resources are devoted to household production, underground economic activity, leisure time, and improving the environment
China's growth" because as the U.S. economy shrinks, ______. China's ______ and China's real GDP decreases.
the United States imports less from China; exports decrease
Potential GDP is the
the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
GDP decreases during
the movement from peak to trough.
Which of the following purchases is included in personal consumption expenditures when determining gross domestic product?
vacation expenses for a spring trip to Fort Lauderdale
The table gives data for a hypothetical nation. Gross domestic product is
$4,079 billion.
In the circular flow diagram, aggregate expenditure includes the sum of
consumption and investment.
The expenditure approach to measuring GDP sums together ______, and the largest component is ______.
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
Which of the following are included in the income approach to calculating GDP?
rental income, depreciation, compensation of employees
Aggregate expenditure is
$120
Imports of goods and services is
$30
Real GDP in 2014 expressed in base-year prices is
$7,500
The value of the paper is counted in GDP as ______
part of the value of the textbook
Which of the following is NOT included in real GDP?
production in the home
In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where
real GDP gives an overly positive view of economic welfare