econ chapters 5 and 6

The ratio of nominal GDP to real GDP multiplied by 100 is the

GDP deflator.

The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________.

GNP (Gross National Product); GDP (Gross Domestic Product)

Government policies regarding taxes and expenditures are called

fiscal policy

In the circular flow diagram, firms' payments ________ the government.

flow into and out of

In 2016 the change in business inventories is -$30 billion and GDP is $160 billion. Final sales in 2016 are

$190 billion.

If GNP is $600 billion, receipts of factor income from the rest of the world are $50 billion, and payments of factor income to the rest of the world are $30 billion, then GDP is

$580 billion.

If GNP is $625 billion, receipts of factor income from the rest of the world are $25 billion, and payments of factor income to the rest of the world are $50 billion, then GDP is

$650 billion.

The GDP deflator in year 2 is 110 using year 1 as a base year. This means that, on average, the price of goods and services is

10% higher in year 2 than in year 1.

If 20 million workers are unemployed and 180 million workers are employed, then the unemployment rate is

10%.

If nominal GDP is $18 trillion and real GDP is $3 trillion, the GDP deflator is

600.

The GDP deflator in year 4 is 120 and the GDP deflator in year 5 is 130. The rate of inflation between years 4 and 5 is

8.33%.

________ in the value of an asset over the price initially paid for it is a capital gain.

An increase

If depreciation equals zero and retained earnings equal $5 billion, then

GNP equals net national product.

Net national product is

GNP minus depreciation.

Income Mexican citizens earn in the U.S. counts in

Mexican GNP.

The demand for auto mechanics increased in the summer of 2016, but the starting wages paid to auto mechanics was still the same at the end of 2016. This is an example of a

Sticky Prices

Ami purchased 100 shares of stock for $10,000. A year later the stock is valued at $18,000. Instead of selling the stock, Ami held onto it for another year. Which of the following is true?

The $8,000 increase in the value of the stock represents an unrealized capital gain.

Which of the following is not counted in the GNP of the United States?

The profit earned by a restaurant located in the United States but owned by a Mexican company.

A transfer payment is

a cash payment made by the government to people who do not supply goods, services or labor in exchange for the payment.

Which of the following is a good or service counted in GDP?

a new tire you buy for your personal car

In a business cycle, a trough represents the end of

a recession.

In a business cycle, a peak represents the end of

an expansion.

The short-term ups and downs in the level of economic activity is known as a(n)

business cycle.

If Juanita purchases a share of stock for $20 and three years later sells it for $120, she will realize a

capital gain of $100.:

If Raoul purchases a share of stock for $40 and four years later sells it for $160, he will realize a

capital gain of $120.

Gross domestic product calculations count only final goods and services because

counting all goods and services would lead to double-counting of many activities.

GDP understates the value of output produced by an economy because it

excludes value added from the underground economy, such as tips taken "under the table."

If output is rising and unemployment is falling, the economy must be in a(n)

expansion.

Imports equal

exports - net exports.

A GDP deflator is real GDP divided by nominal GDP times 100. true/false

false

A recession is usually associated with high inflation. true/false

false

All economic activities in the economy are included in the GDP. true/false

false

As long as an item has never been sold, its value is counted in GDP for the year in which it is finally sold. true/false

false

If nominal GDP rises, then so must real GDP. true/false

false

Since services do not involve the production of physical things, they are not included in GDP calculations. true/false

false

Stock market transactions are part of GNP. true/false

false

The costs of pollution are subtracted from the value of final sales before calculating GDP. true/false

false

The income of U.S. citizens working abroad counts in U.S. GDP. true/false

false

The personal saving rate is percentage of national income that is saved. true/false

false

Total income in the economy can sometimes be greater than total spending true/false

false

In the circular flow diagram, the different payments made by ________ to ________ include wages, rent and profits.

firms; households

Fixed weight indexes

generally become less accurate the farther in time they are from the base year.

Real GDP is gross domestic product measured

in the prices of a base year.

Inflation refers to a(n) ________ in the overall ________.

increase; price level

In 2016 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2016

is $250 billion.

If the central bank increases the money supply, it is conducting

monetary policy.

Actions that impact the state of the environment, like pollution, are considered ________ activities in terms of the national income and product accounts.

nonmarket

Double counting can be avoided by

not counting the value of intermediate goods in GDP.

In the goods-and-services market, households

only demand.

Gross domestic product measured in terms of the prices of a fixed, or base, year is

real GDP.

Unemployment generally rises during ________ and falls during ________.

recession; expansion

"Final goods and services" are those that are

sold to the ultimate or final purchasers.

The government implements fiscal policy when it changes

taxes and/or spending.

The data in the national income and product accounts are compiled by

the Bureau of Economic Analysis.

Personal income is national income minus

the amount of national income not going to households.

Gross investment minus depreciation is equal to

the change in capital stock.

Microeconomics is best described as the study of

the choices made by individual households, firms, and governments.

The personal saving rate is

the percentage of disposable personal income that is saved.

Which of the following is an example of an intermediate good?

the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to

The GDP includes

the value of all final goods and services.

Which of the following is counted in the GNP of the United States?

the value of services that are produced by state and local governments in the United States

Welfare payments are an example of

transfer payments.

The period in the business cycle from a ________ to a ________ is called an expansion.

trough; peak

A recession is associated with a negative rate of growth of the economy. true or false

true

All business cycles are asymmetric--the length of an expansion is not necessarily the same as the length of a recession. true/false

true

Disposable personal income is personal income minus personal taxes. true/false

true

Fiscal policy includes changing the level of household taxes. true or false

true

The employment rate is the number of people employed divided by number of people in the labor force. true/false

true