Macro Chapter 5

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

True

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

computer by an accounting firm

The underground economy can be described as

economic activity that is hidden from the government to avoid taxes or because the activity is illegal.

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

gross national product of Mexico.

Nominal GDP will increase

if either the price level or the quantity of goods and services produced rises.

A sharp increase in the number of medical errors increases the number of lawyers hired to determine medical malpractice settlements. This will

increase GDP and decrease well-being in the economy.

If the GDP deflator is less than 100, then for that year, nominal GDP ________ real GDP.

is less than

The purchase by a household in China of a CD produced in the United States is included in U.S.

next exports

An example of an intermediate good would be

the rims on a new car.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

GDP will decrease

In the circular flow model, the value of total income for an economy ________ the value of total production.

Equals

If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018, the sale of her car contributes $3,500 to 2018 GDP.

False

Nominal GDP measures the value of all final goods and services at base-year prices.

False

Transfer payments are subtracted from national income to get to personal income.

False

If the GDP deflator is 142, by how much have prices changed since the base year?

Prices have increased by 42%.