ECO 202 Quiz 10

Which of the following identities defines GDP using the product approach?

GDP = Business production + Household and institution production + Government production

Net national product is defined as

GDP minus depreciation

Which one of the following is NOT a sector in the Bureau of Economic Analysis' system of national accounts?

the service sector

The three methods for calculating GDP are

the spending approach, the income approach, and the product approach.

Consumer durable goods are those goods that are expected to last longer than

three years

A motor vehicle manufactured in the United States but sold in Europe would represent an addition to the gross domestic product of the United States.

true

In an open economy as measured in the system of national accounts, savings is equal to investment plus net exports.

true

In the traditional macro model investment is assumed to be done by the business sector.

true

Net national product is defined as GDP minus depreciation.

true

Taking the number 72 and dividing by an annual growth rate will give you approximately the number of years it will take for an amount to double if it grows at that constant rate.

true

The contribution of governments and non-profit institutions towards GDP is often calculated by imputation.

true

The foreign sector does not contribute to the gross domestic product using the product approach.

true

The identity used to represent the economy in the traditional macro model is Y = C + I + G + NX.

true

The three methods for calculating GDP are referred to as the income approach, the spending approach, and the product approach.

true

In the "traditional macroeconomic model" investment is assumed to be done by which sector?

Business sector

Suppose that an economy is growing at a real rate of 6% per year. About how long will it take for this economy to double in size?

12 years

Suppose that an economy is growing at a real rate of 3% per year. About how long will it take for this economy to double in size?

24 years

According to the text, what is the difference between a closed economy and an open economy?

A closed economy has no foreign sector while an open economy includes a foreign sector.

Which one of the following statements is FALSE?

A constant dollar approach to calculating real GDP yields a unique estimate of the growth rate.

Suppose that a small economy produces only one good. In Year 1 the economy's GDP is $500 and the price (per unit) of the good is $10. In Year 2 the economy's GDP is $600 but the price of the good is $12. Using the constant dollar method, what is the real GDP growth rate for this economy from Year 1 to Year 2?

0

Suppose nominal GDP in an economy is $11 trillion and real GDP is $10 trillion. What would be the implicit price deflator?

110

What is the main problem of a price index based on constant weights?

It fails to account for the potential for substitution as prices change.

Using the spending approach, which one of the following economic agents is responsible for the largest component of the gross domestic product of the United States?

Private households and institutions

What are the sectors used in the Bureau of Economic Analysis' system of national accounts?

The household and institutions, business, government, and foreign sectors

A nonprofit hospital in Chicago would be classified into which sector in the Bureau of Economic Analysis' system of national accounts?

The households and institutions sector

Which one of the following would, in principle, be counted in an estimate of the gross domestic product of the United States?

The value of a new CD you buy from a store.

The identity used to represent the economy in the traditional macro model is

Y = C + I + G + NX.

Using the product approach, which one of the following economic agents is the largest contributor to the gross domestic product of the United States?

businesses

The implicit price deflator is obtained by

dividing nominal GDP by real GDP.

A motor vehicle manufactured in Europe but sold in the United States would represent an addition to the gross domestic product of the United States.

false

A potential problem with price indices is that they tend to understate inflation for periods after the base year because they don't consider that prices tend to rise at different rates for different income groups.

false

Net national product is defined as GDP minus net exports

false

Suppose nominal GDP in an economy is $6 trillion and real GDP is $3 trillion. The implicit price deflator would be 30.

false

The U.S. Census Bureau is the government agency in charge of compiling the national accounts of the United States.

false