The Macroeconomic Perspective

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Which phase of the business cycle occurs immediately before a trough?

recession

The contractionary phase of the business cycle is characterized

reduced output and increased unemployment

GDP can be found either by adding up all of the __________ or all of the __________ in the economy.

spending; income

disposable personal income can be either ______________ or ______________

spent; saved

An example of an intermediate product is

the purchase of tires by Ford to put on Ford Explorers, the purchase of wood by a home construction firm, the purchase of leather by a shoe manufacturer

T/F "Jobless recovery" was a recent phenomenon during the recession of 2001 because the early rate of employment increase was well below average for past recoveries.

true

T/F Fixed investments include all spending on capital goods as well as on residential construction

true

Business Cycles

vary in duration and intensity

T/F The distinction between whether a good is durable or non-durable is clear and easy to apply

False

Expenditure Method

GDP = C + I + G + (X-M)

How does GDP treat sales of corporate stock from one stockholder to another?

GDP does not include corporate stock

The total market value of all final goods and services produced by resources in the United States is called

Gross Domestic Product

How does GDP treat the sales of used goods?

Used goods are not included in the GDP because GDP only includes goods produced in that period

Included in the investment category under the expenditure approach to GDP accounting is/are

additions to inventory, machines and tools, newly constructed residential housing

What is an example of a final good?

bacon purchased at a grocery store

Alternating increases and decreases in economic activity are known as

business cycles

Following the expenditure method, GDP = C + I + G + X

false

T/F A recession is always followed by a depression

false

T/F Macroeconomics studies economic activity from the level of one individual or firm

false

In the circular flow model,

households supply both labor and non-labor resources

We can be certain that net exports fall if

exports fall and imports rise

If the United States imported $1.5 billion worth of goods and services and sold $2.9 billion worth of goods and services outside its border, net exports would be equal

$1.4 billion

personal consumption expenditures: $900 personal taxes: $180 government expenditures: $300 exports: $40 imports: $75 interest income: $60 depreication: $50 gross investment : $200 what is the country's GDP?

$1365

If personal consumption = $100, investment = $25, government purchases = $25, imports = $20, and exports = $10, then gdp =

$140

personal consumption expenditures: $900 personal taxes: $180 government expenditures: $300 exports: $40 imports: $75 interest income: $60 depreication: $50 gross investment : $200 what is the country's net exports?

-$35

Why does GDP only measure the final value of goods and services?

Because other goods like intermediate goods are used to produce final goods

Which organization dates business cycles?

National Bureau of Economic Research

Which category of consumption spending tends to be the most unstable over the business cycle?

durable consumer goods

A business cycle reflects changes in economic activity, particularly GDP. The stages of a business cycle are

expansion, peak, contraction, trough

The event that stimulated the U.S. government's commitment to tracking the economy's health through a national income accounting system was the

Great Depression

Nominal GDP differs from real GDP in that

Nominal GDP is measured in current year prices, while real GDP is measured in base year prices.

Why does GDP only measure the value of goods and services produced within a country?

So it can quantify the goods and services produced by a country

What is GDP?

The market value of the final goods and services produced in a country in a given period

An example of something that would not be included in the calculated GDP

a construction firm's purchase of lumber to build a four-bedroom home

Which of the following would be included in the GDP calculations?

a hamburger purchase by a hungry restaurant patient

Disposable income is

a measure of the income households have to spend after paying taxes

Gross domestic product is a measure of

an economy's total output

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the

circular flow model

Net Exports

exports minus imports

GDP is calculated including

final products but not intermediate products

Investment includes

fixed investment plus additions to business inventories

French perfume that is purchased in the United States is accounted for in which expenditure category of U.S. GDP?

net exports

Total spending in an economy is the sum of

personal consumption + gross private investment + government + net exports

_________ are over 70% of GDP, while ____________ are nearly 11% of GDP

personal consumption expenditures; gross private domestic investments

The nation's GDP is equal to

the total market value of all final goods and services produced by resources in the United States

Which of the following is not considered a factor payment?

transfer payments

Which of the following is not included in government purchases?

transfer payments

T/F If we counted the value of intermediate goods as well as the full value of the final products in GDP, we would be double counting

true

T/F In boom periods, expenditures on consumer durables often increase more than expenditures on non-durables

true

T/F Macroeconomics focuses on issues such as economic growth, the output of the entire economy and inflation rates

true

T/F Personal consumption expenditures are goods and services purchased by residents of the United States

true

In the income approach to measuring GDP, factor payments include

wages and salaries for the use of labor services, rent for land, interest payments for the use of capital goods, rent for land, profits for entrepreneurs


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