EC202 Week 1

The expenditure approach measures GDP by adding

consumption expenditure, gross private domestic investment, net exports of goods and services, and government expenditure on goods and services.

In the circular flow diagram, aggregate expenditure includes

consumption expenditure, investment, government expenditure, and net exports

Which of the following statements is true? A) Real GDP fluctuates around potential GDP. B) Potential GDP fluctuates around real GDP. C) Potential GDP is the same as real GDP. D) When all of the economy's resources are fully employed, the value of production is called real GDP.

A

A ton of coal purchased by your local utility to burn to make electricity would be best described as A) an intermediate good. B) a financial asset. C) a used good. D) a final product.

C

Which of the following is a final good? A) the memory chips in your new smart phone B) a share of IBM stock C) flour purchased at the store to bake cookies at home D) flour used by the bakery to bake cookies

C

The use of purchasing power parity prices

accounts for differences in the prices of the same goods in different countries when measuring real GDP.

If Nike, an American corporation, produces sneakers in Thailand this would

add to Thailand's GDP but not to U.S. GDP

Nominal GDP is the value of final goods and services

at the prices of that year.

The difference between gross investment and net investment is

depreciation

Gross domestic product can be calculated

either by valuing the nation's output of goods and services or by valuing the income generated in the production process

In the circular flow of income

households demand goods and services that are supplied by firms, while supplying factors that are demanded by firms.

Gross domestic product is the total ________ produced within a country in a given time period.

market value of all final goods and services

Because pollution reduces economic welfare, on this count real GDP as measured

overstates economic welfare.

The maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation is called

potential GDP.

According to the BEA in the second quarter of 2011 nominal GDP was $15 trillion and in the second quarter of 2012 nominal GDP was $15.6 trillion. Based solely on this information, from the second quarter of 2011, to the second quarter of 2012

read GDP may have increased, decreased, or stayed the same.

Real GDP is

the value of all the nation's farms, factories, shops, and offices measured in the prices of a single year.