Macro Exam 1-set 1

Which of the following is not directly counted in GDP?

intermediate goods

The purchase of a new house is included in

investment expenditures.

Which of the following would be directly counted in GDP in 2012?

kitchen cabinets purchased from Home Depot in 2012 to be installed in a house built in 1997

Gross national product, GNP, of the United States is the market value of all final goods and services

produced by citizens of the United States anywhere in the world.

Suppose that nominal GDP in 2011 was less than real GDP in 2011. Given this information, we know for certain that

the price level in 2011 was less than the price level in the base year.

In the United States, households were saving about ________ of their income in the mid 1980s, and by 2005, saving ________.

10 percent; dropped to about 1 percent.

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is

5% higher in year 2 than in year 1.

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

8 percent

Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?

Real GDP grows by 2.3% in the second quarter.

Which of the following transactions represents the purchase of a final good?

Your father buys a new John Deere riding lawn mower.

Which of the following goods is directly counted in GDP?

a 12-inch Subway sandwich purchased by a student

An example of business fixed investment spending is

a purchase of a computer by an accounting firm.

In May 2009, Ford Motor Company's sales were down 20 percent from a year earlier. These events were caused by

an economic recession.

The GDP deflator is a measure of the

average level of prices of final goods and services in the economy.

Macroeconomics, as opposed to microeconomics, includes the study of what determines the

average price levels of goods and services in the economy.

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

buys U.S. government bonds.

Which of the following is not a durable good?

clothing

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

computer by an accounting firm.

The purchase of a new automobile is included in

consumption expenditures on durable goods.

What is the largest component of spending in the United States?

consumption spending

To calculate GDP by the expenditure method, one must add

consumption spending, investment spending, government spending and net exports.

The best measure of the income households actually have available to spend is

disposable personal income.

Macroeconomics seeks to understand

economic growth, business cycles, and inflation.

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of

employment in the economy.

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

equals

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

gross national product of Mexico.

Which of the following is not an example of a transfer payment?

health insurance payments to an army private

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

household production.

In the United States since the mid-1980s, consumption as a percentage of GDP has

increased

Legalizing all forms of illegal activities

increases GDP and reduces the size of the underground economy.

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

increases; increases

Disposable personal income equals personal income

minus personal tax payments.

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

net exports.

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

net exports.

Presently, GDP is ________ to compensate for the costs of environmental damage.

not adjusted

In May 2009, the U.S. auto industry experienced a 34 percent decline in sales compared to May 2008. The automobile industry was experiencing the effects of

the business cycle.

(Value added) = (the market price of the firm's product) -

the price of intermediate goods.

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

the underground economy.

Which of the following is included in both the U.S. GDP and U.S. GNP?

the value of all cars produced by General Motors in the United States

Suppose, in 2012, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2012?

the value of the services of the real estate agent

The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that

total spending in 2010 was around $14.6 trillion, the value of output in 2010 was around $14.6 trillion, total income in 2010 was around $14.6 trillion.

Nominal GDP is GDP in a given year

valued in the prices of that year.

Real GDP is GDP in a given year

valued in the prices of the base year.

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.