EC350: GDP - Measuring Total Production and Income

Which letter best represents the demand for factors of production in this circular flow model?

C

When a significant fraction of domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:

GDP will be much larger than GNP

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

Economic growth is important to an economy because it typically translates to:

a higher standard of living for the country's population

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

a new house

Which is the largest component of GDP?

consumption

The best measure of the income households actually have available to spend is:

disposable personal income

A period of real economic growth, where production and employment are both moving higher is known as:

expansion

In the circular flow model, who supplies factors of production in exchange for income?

households

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

Which of the following are not counted as final goods and used in the GDP calculation?

intermediate goods

Which of these is not a shortcoming of GDP as a measure of welfare

it only counts final goods and services and not intermediate goods.

Gross domestic product is best defined as the:

market value of all final goods and services produced in a country during a period of time.

Disposable personal income is equal to personal income minus:

personal tax payments

The GDP per capita is computed by dividing a country's:

real GDP by its population

The total national income actually received by a country's residents is:

smaller than the value of GDP

If Americans still worked sixty hour weeks, as they did in 1890, __________.

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher

Which of the following is included in the economist's definition of investment?

the purchase of new machines, factories, or houses

Real GDP is:

the value of goods and services evaluated at base year prices

The buying and selling of goods and services that is hidden from the government in order to avoid taxes and/or regulation is known as the:

underground economy

Which of these do we subtract from GDP to obtain national income?

Depreciation

As the value of a country's real GDP increases, the country is likely to:

Devote more resourced to pollution reduction

To calculate personal income from national income, which of the following must be done by the BEA?

add government transfer payments

An alternating period of economic contraction and economic expansion measured over time with real GDP is known as the:

business cycle

How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?

by adding the value in dollar terms of all the final goods and services produced domestically