Test 1 Macroeconomics Ch 5

Which of the following items is NOT a category of personal consumption expenditures?

Residential Housing

The National Activity index

is a weighted average of 85 indicators of national economic activity.

We are least likely to be heading into a recession when the National Activity Index equals

0.81

Gross domestic product is the total market value of all

final goods and services produced in the United States by labor and property.

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in ______ GDP, and its value should be counted in ________________.

2014's; durable goods

John earns $2,000. His taxes are $250 and he spends $1,500. Therefore, his savings must be

250

The income approach to calculating GDP includes compensation of employees plus:

corporate profits and rental income

Which of the following items would be included in the GDP accounts?

$50 consultation on the phone with a psychic adviser

(Table) According to the table, what is the value of this country's net exports?

-35

(Table) According to the table, net exports of goods and services are equal to: GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2

-505.4 billion

According to the table, net domestic product for 2010 was:

13,562.1 billion

(Table) According to the table, GDP for 2010 was:

14,592.3 billion

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals:

140 100+25+25+(10-20) consumption+investment+Government+(export-import)

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit to a customer for $180. The change in GDP would be:

180

Over the past 150 years, the U.S. economy has endured a recession on average about every:

Four to five years

An economic recovery that produces too few jobs to significantly reduce the unemployment rate is known as a(n):

Jobless recovery

Macroeconomics was developed to explain

The Great Depression

Suppose the Federal Reserve Bank of Chicago's National Activity Index drops to -0.83 this month after being above +0.36 for the previous three months. This movement in the index indicates that:

The economy has probably moved into a recession

A business cycle is:

The periodic fluctuation of economic activity

When the National Activity Index is at zero, the economy is growing at___rates. Negative values imply___trends. Positive values imply that growth is__the long-term trend.

historical;slowing;faster than

A change in the leading Economic Index is supposed to reflect

how the economy will behave in the near future

Which component of GDP includes inventory changes?

investment

The value of the cars that the Ford Motor Company produces in a German plant:

is a part of German GDP.

Which phase of the business cycle occurs immediately after recovery

peak

At one time, Pittsburgh, Pennsylvania, was known for its poor air quality. Locals said that a man wearing a white shirt when he walked into the city would have a black shirt when he left it. Since that time, the city has greatly reduced its air and water pollution. As a result of cleaner air and water:

the standard of living of the citizens of Pittsburgh increased, even though the improvement in the environment was not reflected in its GDP.

During a typical economic recovery

unemployment drops

according to the circular flow model, the value of the household sector and the value of the business sector will

Always be equal

Government expenditures include ________ and ________ but NOT ________.

C) wages and salaries; the purchase of products and services; transfers

The two approaches used by government in estimating GDP are:

expenditure and income.

Last year, Marian earned $25,000, paid $2,000 in taxes, and saved $5,000. Marian's personal income is ______, disposable personal income is ______, and consumption spending is ______.

B) $25,000; $23,000; $18,000

When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?

B) GDP falls as a result of this change.

(Table) According to the table, what is this country's GDP? Personal consumption expenditures $900 Personal taxes $180 Government expenditures $300 Exports $40 Imports $75 Interest income $60 Depreciation $50 Gross private domestic investment $200

C) $1,365

Which component is the smallest part of U.S. GDP?

Net exports

Business Cycles

Vary in duration and magnitude

Which of the following statements about environmental quality and economic activity is TRUE

Wealthier countries tend to value environmental quality more than developing countries.

We are most likely to see a recession if interest rates on long-term bonds are

lower than interest rates on short term bonds

If I hire a lawn service to mow my grass, the monies I pay the service are included in the GDP, whereas if I mow my own lawn, the value of this service is not included in the GDP. This fact represents a criticism of the GDP's focus on:

market-produced goods and services.

An economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, and the monetary authorities are concerned that inflation may increase. This economy is probably in the _____________ stage of the business cycle

trough