HW 5

Real GDP is GDP in a given year

valued in the prices of the base year.

http://imgur.com/a/cTfV2

2014

The output of Mexican citizens who work in Texas would be included in the

gross national product of Mexico.

Gross domestic product understates the total production of final goods and services because of the omission of

household production.

http://imgur.com/a/E8HVX

$6,400

http://imgur.com/a/BWv8j

100

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

125.

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?

2.7%

(T/F) If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.

False

(T/F) Residential investment includes spending by firms on office buildings.

False

(T/F) Transfer payments are subtracted from national income to get to personal income.

False

(T/F) Developing countries with large informal sectors tend to have firms that invest less in capital equipment.

True

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm.

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy.

During a business cycle expansion, total production ________ and total employment ________.

increases; increases

Which of the following is not directly counted in GDP?

intermediate goods

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

net exports

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that

the price level in 2016 was less than the price level in the base year.

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that

the value of output in 2015 was around $17.3 trillion. total income in 2015 was around $17.3 trillion. total spending in 2015 was around $17.3 trillion. all of the above are true.

Which of the following are not considered part of government purchases?

welfare benefits