Macroeconomics chapter 19

Which of the following are examples of nonmarket services?

Cutting your own hair Changing the oil in your car yourself

Zander buys $1,000 in U.S. Treasury bonds and spends $1,200 on new tires, which are produced domestically, for his car. How much is added to the U.S. GDP because of this?

$1,200

Calculate the GDP for a country that in one year sells 10,000 speedboats for $40,000 each and 5,000 race cars for $90,000 each, and nothing else. A speedboat engine contributes $9,000 to the total price, and a race car engine is worth $12,000.

( 10,000 x $40,000) + (5,000 x $90,000) = $850 million

Which of the following products would count towards GDP?

**Correct Bicycle handlebars sold to consumers as a customization item. A new bicycle sold by a bike shop. **incorrect Bicycle handlebars sold to a bike manufacturer A used bicycle sold at a garage sale

Identify which of the following transactions would be included in measuring DGP

**Correct: Pfizer builds a new factory to manufacture a new drug Mike goes to his physician to get a physical **Incorrect In an attempt to help restore the economy, the government issues stimulus check to eligible adults. Emma agrees to perform tax accounting services in exchange for computer repair work during recession. A company purchases silicone foam padding to be used in production of headband face shields. Shawn purchases stocks in several pharmaceutical companies

The real GDP of Country A grew by only 1% from 2011 to 2013, while the real GDP of Country B grew by 5% during that same time span. Based on the data, what can we say definitely about the two countries?

**correct: -Country B will eventually have a higher real GDP than Country A if the economy of each country continues to grow this way. **incorrect: -Country A has a high real GDP. -Country B has a very high quality of life. -Country A has a modestly high quality of life. -Country A's economy has been in a period of contraction.

What might a decrease in sales of new cars indicate about the state of the economy?

*correct: -The economy is weak. -GDP is going to decrease in the near future. *incorrect: -The economy is strong. -GDP rose in the recent past.

Identify each good as either intermediate or final.

*intermediate: -tires used by a car manufacturer -lenses bought by a camera manufacturer *final: -tires bought by a driver for her personal vehicle -a memory card bought by a photographer

Which of the following are examples of investment?

*investments: -a photojournalist buys a new camera -a professional painter buys new brushes -a mechanic buys a new wrench *not investments: -your neighbor buys a new tv -your friend buys a new set of golf clubs

For each output, apply the appropriate label.

*not included in GDP: -a microprocessor chip sold to a computer manufacturer -a smartphone manufactured overseas and sold locally *included in GDP: -landscaping on a residence -a computer sold to a retail consumer

Although there were 34 recessions during the time period of (1), there has been a (2) trend in the number of (3) over time. The most recent recession, the (4) lasted almost (5) years and was particularly deep and lengthy.

1 1988-2017 2downward 3 recessions 4 Great Recession 5 two

Although nominal GDP rises by (1), real GDP (2) by 1 % when the (3) rate is (4).

1 4% 2 rises 3 inflation 4 3%

Canadas GDP (1) that Canadians have the tenth-best standard of living. A nation's (2) is a better standard of living indicator, because it measures (3). Using this measure, it looks like Canada has a better standard of living than all but one other nation

1 does not indicate 2 per capita GDP 3 average income

Activities such as selling (1), babysitting services paid in cash to a 14-year-old, and (2) tips unreported by a waitress are (3) measured and are (4) in GDP.

1 illegal narcotics 2 cash 3 not easily 4 not included

The most natural interpretation of "better off" is that citizens of country B have a higher (1). It is possible that the citizens of country B spend more time (2). It is also possible that they live in a (3). GDP (4) measure the quality-of-life indicators that would explain this

1 quality of life 2 in leisure activities 3 cleaner environment 4 does not

While gross domestic product (GDP) is important, it is not always the best indicator of standard living. IN 2019, China had a GDP close to (1) times higher than (2), however, this does not account for population differences between the two countries. In order to compare the standard of living, it is best to user GDP per (3), which divides GDP by the population. When doing this it becomes apparent that the residents of Japan have an average (4) times more income than the average citizen in China.

1 three 2 Japan 3 capita 4 four

Goods created within the borders the United States contribute to the (1) of the United States, (2) the company that makes them is foreign-owned. The output of an American company operating in another country contributes to the (3) of the United States.

1-GDP 2-even if 3-GNP

GDP is the best measure of a nation's economic activity. However, GDP does not take into account many factors that affect quality of life, like the amount of people's (1) or the cleanliness of the 920. GDP only measures a country's economic (3).

1-leisure time 2-environment 3-output

Correctly classify each situation that GDP cannot measure. 1-You repair your own pants when your rip them. 2-Country A has a very high GDP, but the average person works 60 hours a week. 3-Unregulated industries pollute the air. 4-A restaurant server takes home $75 in unreported tips each night.

1-non-market good 2-leisure time 3-quality of environment 4-underground economy

Apply the appropriate label to each situation. 1-Your neighbors grow and eat their own vegetables from their private garden. 2-Your mom made a sweater for you for your birthday. 3-The neighborhood kids sell lemonade when it is hot outside. 4-Your child is paid $40 to walk your friends' dog while they are on vacation.

1-non-market good 2-non-market good 3-underground economy 4-underground economy

Low GDP is not necessarily an indicator of an economy in poor health. For one thing, a (1) country may have a low GDP but a high (2). For another thing, an economy with a low GDP but a strong (3) is healthier than an economy with a comparable GDP that is stagnant or declining.

1-small 2-per capita GDP 3-real GDP growth rate

Calculate the annual percentage change in price level for the year 2017. round up to the nearest two decimals.

108-106/106 x 100= 1.89

Calculate the real GDP of the united States for the year 2017. Use 2012 as the base period and round to the nearest whole number

19,485.4/108 x 100= $18,042 billion dollars

Which of the following by definition directly adds to a country's GDP

Increased commercial travel

Which of the following by definition directly adds to a country's GPD ( gross domestic product)?

Increased commercial travel

How do intermediate goods factor into the calculation of GDP?

Intermediate goods do not factor into GDP; only final goods are counted

You can figure out how much the economy has grown over the years by simply looking at nominal GDP. T/F

False

Which three countries would you expect to have the highest standard of living?

Highest- united states Second highest- canada Third highest- germany

Which of the following statements are true about the underground economy?

correct: -It is possible for the underground economy to have an effect on the legitimate economy. -It is not possible to accurately measure the size of the underground economy. incorrect: -All underground economic activity is harmful to society. -All of the goods and services traded in the underground economy are illegal.

What data do economists use to calculate the real GDP of a nation?

correct: market values, price level incorrect: income tax rate, unemployment rate

Which of the following statements are good assessments of the value of GDP as an economic statistic?

** correct GDP is correlated with many measures of human welfare. Nominal GDP cannot indicate whether the economy is getting stronger or weaker. **incorrect GDP accurately captures all economic activity. GDP does not account for goods being imported rather than locally produced

How do non-market good cause inaccuracies in measuring the productivity of a nation?

An economy with many nonmarket good may have its output underrated.

According to the table, Canada has the tenth- highest GDP among the countries with the largest economies in the world. Does this mean Canada has the tenth-best standard of living? Fill in the blanks to complete the passage.

Canadas GDP (does not indicate) that canadians have the tenth-best standards of living. A nation's (per capita GDP) is a better standard-of-living indicatior, because it measures (average income). Using this memasure, it looks like canada has a better standard of living than all but one other nation.

A service-based economy is less likely to be a source of prosperity than a goods-based economy. T/F

False

Assuming all of the activities of the underground economy are measured and included in GDP, identify which of the following statements would be true regarding their effect on GDP

GDP will increase

Match the user of GDP data to the appropriate situation

Measuring long-term economic growth - Leia examines real per capita GDP over a ten-year period to determine whether the economy of a particular country is in decline or on the rise Measuring living standards -Lupe examines the real per capita GDP of seven nations to determine which country might have the wealthiest citizens. Measuring business Cycles - Brad looks at real per capita GDP to determine what impact the recent recession has had on economic activity.

Classify each concept as microeconomic or macroeconomic

Macro: The unemployment rate of a nation The median income of a small state Micro: The hiring decisions of a company. The financial decisions of a family.

Which questions explore microeconomic topics and which explore macroeconomic topics

Macro: What effect did the interest rate have on inflation? What effect did falling homeevalues have on unemployment Micro: why did billi buy a new house? Why did Company C increase its advertising budget?

Match the component of GDP national income accounting to the correct expenditure

Net exports: Almonds are grown to sell over seas. Investment: A farmer buys a new tractor. A family of three purchases a newly built home Consumption: Jennifer buys toothpaste David buys a new ford truck Government spending: Lonnie the police officer cashes her paycheck at the end of the week.

Do recessions always prevent a long-term increase in a nation's real GDP?

No; a nation will normally also have periods of economic expansion that balance out recessions.

The Graph below shows real per capita GDP in six nations from 1950 to 2018. Which of the following countries experienced persistent growth from 1980 to 2018

Persistent growth: Poland Turkey Mexico India Non experience persistent growth Nicaragua Liberia

The graph below shows real GDP in six nat6ions from 1950-2018. Place the following countries in order from consumer expenditure, starting with the country that most likely has the highest consumer expenditure

Poland, turkey, mexico, india, nicaragua, liberia

Underground economies are smallest in countries with strong economies

True