ECO210: Chapter 6 (GDP)

A bottle of French wine bought within the United states:

Adds to France's GDP Exports of new production count toward the home country's GDP.

The only goods used to make other goods that are still considered finished goods are:

Capital goods that help make the finished product but aren't part of it.

T or F: Goods or services that are not bought/sold within a market can still count toward GDP.

False GDP is the market value of all finished goods and services produced within a country during a given year.

T or F: When I buy eggs to make at home, these are considered intermediate goods.

False In this case, they are not an intermediate good because they are for my consumption. I'm not buying them to make a meal to sell. The fact that I'm not selling a good that used these eggs is why it isn't an intermediate good. It is a finished good here.

Gross Domestic Product is the market value (measured in dollars) of all ______ goods and ______ produced within a country in a year.

Finished, services

T or F: A finished good is one that will not be sold again as part of another good.

True

T or F: The eggs, flour, and butter used by a baker to make a cake are not counted as part of GDP, but the cake sold by the baker is.

True

T or F: Real GDP can increase only if we produce more goods/services or better goods and services.

True This is because price changes for identical goods are removed from the calculation of Real GDP.

If nominal GDP increases but an economy is producing the same quantity of goods and services, we know __________ is the reason for the increase. Because price increases can cause nominal GDP to rise, economists developed a way of removing this impact through _______ GDP. This is nominal GDP adjusted for price changes over time.

Inflation, real

What are the flour, eggs, and butter used by a bakery considered?

Intermediate Goods These are intermediate goods because they are used to create another good. Intermediate goods are not counted toward GDP since their value will be included as part of the cost of the final goods. No one typically tries to sell a finished good for less than the cost of what it took to make it.

Which of the following measures the average standard of living in a country?

Real Per Capita GDP