Economics 2301 Chapter 27

What government agency compiles the U.S. NIPA tables?

Bureau of Economic Analysis (BEA)

Net exports are

a country's exports of goods and services less its imports of goods and services.

The GDP price index is

a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year.

IF you were to determine net domestic product (NDP) through the expenditures approach, the correct measure of investment spending to use is:

net private domestic investment because it excludes depreciation.

In order to compare changes in the standard of living over a series of years, we would use:

real GDP

If inventories declined by $1 billion during 2014, then $1 billion would be

subtracted from both gross private domestic investment and gross domestic product.

Nominal GDP is

the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation

An economy's output, in essence, is also equal to its income because

the value of everything that is produced is also the value of everything sold.

Which of the following statements is true?

Real GDP is nominal GDP divided by the price index.

A small economy starts the year with $1 million in capital. During the course of the year, gross investment is $150,000 and depreciation is $50,000. How big is the economy's stock of capital at the end of the year?

$1,100,000

Suppose foreigners spend $7 billion on American exports in a given year and Americans spend $5 billion on imports from abroad in the same year. What is the amount of America's net exports?

$2 billion

Which of the following statements is true?

Gross private domestic investment less depreciation is net private domestic investment.

Use the concepts of gross investment and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. "In 1933 net private domestic investment was minus $6 billion. This means that in that particular year the economy produced no capital goods at all." This statement is ____.

Incorrect, because negative net investment does not mean the economy produced no new capital goods in that year.

Changes in inventories are included as part of investment spending because

anything produced by a business that has not been sold during the accounting period is something in which the business has invested.

Statistics derived from National Income Accounting

are useful to assess the health of an economy and formulate policies to maintain and improve that health.

Consider this statement: "Though net investment can be positive, negative, or zero, it is impossible for gross investment to be less than zero." This statement is:

correct, because depreciation on the existing capital stock is positive.

Net exports might be a negative amount if Americans

decrease their holdings of foreign currencies, borrow from foreigners, or do a little of both

Comparing market values over time has the

disadvantage that prices change over time.

Gross domestic product does not include the value of the stocks and bonds bought and sold because these sales and purchases are not

economic investment and should not be counted as production of final goods and services.

Economists include only final goods in measuring GDP for a particular year because:

if intermediate goods were counted, then multiple counting would occur.

U.S. exports and imports each affects domestic production because

imports are subtracted from U.S. GDP and exports are added.

National income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production because

it is impossible to add two different goods, say, oranges and computers.

When measuring GDP for a particular year, economists exclude the value of the used furniture bought and sold because:

it was counted in GDP in some previous year.