Chapter 7 HW

Real GDP refers to a. GDP data that have been adjusted for changes in the price level. b. GDP data that embody changes in the price level but not changes in physical output. c. GDP data that do not reflect changes in both physical output and the price level. d. the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income.

a. GDP data that have been adjusted for changes in the price level.

The largest component of total expenditures in the United States is a. consumption. b. net exports. c. government purchases. d. gross investment.

a. consumption.

Transfer payments are a. excluded when calculating GDP because they do not reflect current production. b. included when calculating GDP because they increase the spending of recipients. c. excluded when calculating GDP because they only reflect inflation. d. included when calculating GDP because they are a category of investment spending.

a. excluded when calculating GDP because they do not reflect current production.

The smallest component of aggregate spending in the United States is a. net exports. b. government purchases. c. investment. d. consumption.

a. net exports.

Consumption of fixed capital (depreciation) can be determined by a. subtracting NDP from GDP. b. subtracting net investment from GDP. c. adding taxes on production and imports to NDP. d. adding net investment to gross investment.

a. subtracting NDP from GDP.

National income measures a. the total of all sources of private income plus government revenue from taxes on production and imports. b. nominal GDP after it has been inflated or deflated for changes in the value of the dollar. c. the amount of wage, rent, interest, and profits income actually received by households. d. the after-tax income of resource suppliers.

a. the total of all sources of private income plus government revenue from taxes on production and imports.

Which of the following statements is true? a. Real GDP is nominal GDP multiplied by the price index. b. Real GDP is nominal GDP divided by the price index. c. Real GDP is nominal GDP added to the price index. d. Real GDP is nominal GDP subtracted from the price index.

b. Real GDP is nominal GDP divided by the price index.

Real GDP measures a. base year output at current exchange rates. b. current output at base year prices. c. current output at current prices. d. base year output at current prices.

b. current output at base year prices.

The value of corporate stocks and bonds traded in a given year is a. included in the calculation of gross private domestic investment. b. excluded from the calculation of GDP because they make no contribution to current production of goods and services. c. included in the calculation of net private domestic investment. d. included in the calculation of GDP because they make a contribution to the current production of goods and services.

b. excluded from the calculation of GDP because they make no contribution to current production of goods and services.

Final goods and services refers to a. goods and services that are unsold and therefore added to inventories. b. goods and services purchased by ultimate users, rather than for resale or further processing. c. goods and services whose value has been adjusted for changes in the price level. d. the excess of U.S. exports over U.S. imports.

b. goods and services purchased by ultimate users, rather than for resale or further processing.

Money spent on the purchase of a new house is included in the GDP as a part of a. personal saving. b. gross domestic private investment. c. household expenditures on durable goods. d. personal consumption expenditures.

b. gross domestic private investment.

Which of the following is not included in personal consumption expenditures? a. food purchased at supermarkets b. purchases of mutual funds by consumers c. payments for cable and Internet services to homes d. new furniture and appliances bought by homeowners

b. purchases of mutual funds by consumers

If depreciation exceeds gross investment, a. net investment is zero. b. the economy's stock of capital is shrinking. c. the economy's stock of capital is growing. d. the economy's stock of capital may be either growing or shrinking.

b. the economy's stock of capital is shrinking.

The GDP price index is a. a measure of nominal GDP adjusted for inflation. b. a measure of the price of a specified collection of goods and services compared to the average of the prices of a highly similar collection of goods and services for the last 10 years. c. a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year. d. computed for each industry sector.

c. a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year.

If real GDP falls from one period to another, we can conclude that a. nominal GDP fell. b. inflation occurred. c. none of these necessarily occurred. d. deflation occurred.

c. none of these necessarily occurred.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are a. counted as consumption spending. b. counted as government spending. c. not counted. d. counted as investment spending.

c. not counted.

Government purchases in national income accounts would include payments for a. unemployment benefits. b. Social Security checks to retirees. c. salaries for current U.S. military officers. d. public assistance for welfare recipients.

c. salaries for current U.S. military officers

Nominal GDP is a. adjusted for inflation, whereas real GDP is the market or money value of all final goods and services produced by the economy in a given year. b. determined in the market, whereas real GDP is computed by a government agency. c. the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation d. the sum of intermediate and final goods and services, whereas real GDP is only the sum of final goods and services.

c. the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation.

An economy's output, in essence, is also equal to its income because a. consumers purchase all of the goods that are produced. b. producers sell all of the goods that they produce to consumers. c. the value of everything that is produced is also the value of everything sold. d. it is required by law that this be so.

c. the value of everything that is produced is also the value of everything sold.

Which of the following is not a component of GDP in the expenditures approach? a. government purchases b. gross private domestic investment c. workers' wages and other compensation d. the difference between exports and imports

c. workers' wages and other compensation

Net exports are negative when a. depreciation exceeds domestic investment. b. the economy's stock of capital goods is declining. c. a nation's exports exceed its imports. d. a nation's imports exceed its exports.

d. a nation's imports exceed its exports.

GDP can be calculated by summing a. consumption, investment, wages, and rents. b. consumption, investment, government purchases, and imports. c. consumption, investment, government purchases, exports, and imports. d. consumption, investment, government purchases, and net exports.

d. consumption, investment, government purchases, and net exports.

In order to compare changes in the standard of living over a series of years, we would use a. marginal GDP. b. average GDP. c. nominal GDP. d. real GDP.

d. real GDP.

The value of a price index in the base year is always 100. t/f

true