chapter 10
If a cobbler buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth of shoes to consumers, the contribution to GDP is
500
GDP deflator
A measure of the price level calculated as the ratio of nominal GDP to real GDP then multiplied by 100
Real GDP
A measure of the price level calculated as the ratio of nominal GDP to real GDP then multiplied by 100
Real GDP is measured in ___________ prices while nominal GDP is measured in ________ prices
Base year, current year
How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the US GDP accounts?
Consumption increases by $40,000, and net exports decrease by $40,000
Total expenditure
Consumption, investment, government purchases, and net exports
US GDP would exclude which of the following?
Cotton purchased by Lee Jeans
Transfer payment
Expenditures by government for which they receive no goods or services
A new car produced in 2012, but first sold in 2013, should be counted in 2013 GDP because that is when it was first sold as a final good
False
If US GDP exceeds US GNP, then foreigners produce more in the United States than US citizens produce in the rest of the world
False
If nominal GDP in 2013 exceeds nominal GDP in2012, real output must have risen
False
If the lumberyard sells $1,000 of lumber to a carpenter and the carpenter uses the lumber to build a garage that he sells for $5,000, the contribution to GDP is $6,000
False
In the United States, investment is the largest component of GDP
False
Net National product always exceeds a nations GNP because of depreciation
False
The production of an apple contributes more to GDP than the production of a gold ring because food is necessary or life itself
False
Wages are an example of a transfer payment because there is a transfer of payment from the firm to the worker
False
When the city of Chicago purchases a new school building, the investment component of GDP increases
False
Final Production
Finished products sold to end user
Intermediate production
Goods that are produced by one firm to be further processed by another firm
Gross Domestic Product
Market value of all final goods and services produced within a country in a given period of time
Recession
Period of decline in GDP
Consumption
Spending by households on goods and services, excluding new housing
Investment
Spending on capital equipment, inventories, and structures, including household purchases of new housing
Net exports
Spending on domestically produced goods by foreigners (exports) minus spending on foreign on foreign goods by domestic residents (imports)
Government Purchases
Spending on goods and services by all levels of government
Nominal GDP
The production of goods and services valued at current prices
Base year
The year from which prices are used to measure real GDP
A country with a larger GDP per person generally has a greater standard of living or quality of life than a country with a smaller GDP per person
True
A recession occurs when real GDP declines
True
Cigarettes should be valued in GDP at 5.50 per pack even though 1.00 of that price is tax because the buyers paid 5.50 per pack
True
Depreciation is the value of the wear and tear on the economy equipment and structures
True
Nominal GDP employs current prices to value output while real GDP employs constant base-year prices to value output
True
T/F For an economy as a whole, income equals expenditure because the income of the seller must be equal to the expenditure of the buyer
True
Depreciation
Value of worn-out equipment and structures
GDP would include which of the following?
consulting services
Gross Domestic product can be measured as the sum of
consumption, investment, government purchases, and net exports
The value of plant and equipment worn out in the process of manufacturing goods and services is measured by
depreciation
Gross domestic product is the sum of the market value of
final goods and services
If US GDP exceeds US GNP then
foreigners are producing more in the United States than Americans are producing in foreign countries
Which of the following would be excluded from 2013 GDP? the sale of
home built in 2012 and first sold in 2013
If your grandparents buy a new retirement home, this transaction would affect
investment
Gross national product
market value of all final goods and services produced by a nations residents residents in a given period of time
US gross domestic product (in contrast to gross national product) measures the production and income of
people and factories located within the boarders of the USA
Unemployment
percent of labor force that is out of work
If nominal GDP in 2013 exceeds nominal GDP in 2012, then the production of output must have
risen or fallen because there is not enough information to determine what happened to real output
Inflation
the rate at which prices are rising
Macroeconomics
the study of economy wide phenomena
Microeconomics
the study of how households and firms make decisions and how they interact in markets
An example of a transfer payment is
unemployment benefits
Total income
wages, rent, profit
