Econ 102 Test 2

Real GDP is

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

Intermediate goods are excluded from GDP because

their inclusion would involve double counting.

In the computation of GDP, Social Security payments count as

transfer payments and are not included in GDP.

Which of the following items is NOT part of government expenditure on goods and services in the GDP accounts?

Social Security expenditures

Which of the following items is not a component of the expenditure approach to measuring U.S. GDP?

Social Security payments made by the government

All of the following are components of the expenditure approach to measuring GDP EXCEPT

a Senator from Iowa being paid the monthly salary.

A common definition of a recession is a time with

a decrease in real GDP for two or more successive quarters.

in the above figure, the distance between points S and T represents

a recession.

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.

In the above figure, the distance between points T and U represents

an expansion

In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies ________.

are $0.5 million

A U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.

both I and II

Reported GDP increases when, in fact, total production is unchanged when I. there is a shift from household production to market production. II. a previously illegal activity is legalized.

both I and II

Which of the following are examples of the gross private domestic investment component of GDP? I. the purchase of production machinery by IBM II. an increase in the finished goods inventory at Intel

both I and II

Goods that are produced this year, stored in inventories, and then sold to consumers next year

count in this year's GDP.

15) Suppose Mail Boxes Etc. buys a new copier for its store for $1000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, ________ has occurred.

depreciation

Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were ________.

$100 million

Using the data in the table above, as calculated by the income approach, gross domestic product equals

$2,400.

Based on the data in the above table, as calculated by the expenditure approach, gross domestic product equals

$2,465.

Using the data in the above table, gross domestic product as calculated by the income approach equals ________.

$2,925

The above table shows some (but not all) national income accounting data for a hypothetical country. According to these data, as calculated by the expenditure approach, the value of GDP is ________ billion.

$2100

Which of the following is CORRECT?

Aggregate income, aggregate expenditure and GDP are all equal.

Which of the following statements about the comparison between GDP in China and in the United States is CORRECT?

China's GDP per person is higher using purchasing power parity prices rather than the exchange rate when valuing China's GDP in dollars.

Which of the following expenditures is for an intermediate good?

General Motors buys new tires to put on the cars it's building.

The calculation of the final goods and services sold in an economy would NOT include

General Motors' purchases of tires for new automobiles.

If Ford sells 200 Explorers for a total of $400,000 to Germany, while the United States imports 100 BMWs for a total of $500,000 from Germany

U.S. GDP decreases because net exports are negative.

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.

Which of the following would lead GDP to overstate economic welfare?

electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution

GDP is defined as the market value of all ________ in a given time period

final goods and services produced in a country

The business cycle refers to

fluctuations in the level of real GDP around potential GDP.

Net investment equals

gross investment - depreciation.

In the above figure, flow B represents ________.

household purchases of goods and services

The circular flow diagram indicates that

households sell the services of factors of production to firms.

f Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexico's GDP ________ and U.S. GDP ________.

increases; does not change

The presence of ________ creates a difference in the value between the market price and the factor cost of a product.

indirect taxes and subsidies

Two reasons why valuing goods at their market prices is different than valuing them at their factor costs include

indirect taxes and subsidies.

In the national income accounts, the purchase of a new house counts as

investment.

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

market value of all final goods and services

The sum of compensation to employees, rental income, corporate profits, net interest, and proprietors' income is

net domestic income at factor cost.

In 2013, Ozzie purchased a 2010 Ford Escort from his neighbor for his son, purchased a 2009 "one owner" Camry from Larchmont Toyota for his wife, bought a 2013 new Ford for himself, and sold his 2002 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2013?

only the purchase of the Ford

A new 2015 Honda Civic produced in 2015 and purchased in 2016 is

part of GDP in 2015.

Gross private domestic investment is all purchases of newly produced business capital goods and buildings

plus the change in business inventories plus residential construction.

in the above figure, which point represents a situation with significant shortages of labor, capital, and other resources?

point F

In the above figure, which point represents the under use of resources?

point G

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.

The circular flow shows that the household sector earns its income by

selling factors of production

Potential GDP is

the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

The circular flow diagram shows that

the total amount of income generated by the economy equals the total purchases of final goods and services.

Real GDP measures the

value of total production linked to prices of a single year.