Macro Ch 5

Last year in Candamica, consumption expenditure was $20 billion, interest, rent, and profit were $2.5 billion, government expenditure on goods and services was $7 billion, net exports of goods and services was $5 billion, and investment was $2 billion. Hence total expenditure was

$34 billion

Gross Domestic Product is equal to the market value of all the final goods and services_____in a given period of time

produced within in a country

Although imperfect, which of the following is used as a measure of the standard of living?

real GDP divided by person

The relationship between real GDP and potential GDP over the business cycle can be best summarized by which of the following

real GDP fluctuates around potential GDP

A recession conventionally is defined as a decrease in

real GDP that lasts for at least six months

U.S. net exports include

sales of Hollywood movies to the rest of the world

Which of the following is a final good or service?

a new replacement muffler installed by Midas Mufflers

Real GDP measures the value of goods and services produced in a given year valued using

base year prices

Total expenditure equals total income

because firms pay out everything they receive as income to the factors of production

Goods and services such as environmental quality, leisure time, and household production are not included in GDP because they are not

bought in markets

Consumption expenditure includes spending

by households

When calculating GDP, purchases of used goods are

not included

If you make dinner for yourself

only the market value of ingredients that you purchased this year is added to GDP

Nominal GDP measures the value of goods and services produced in a given year valued using

prices of the same year

The income approach to measuring GDP is based on summing

wages, interest, rent, and profits