econ 202 chapter 8 review
GDP deflator =
(Nominal GDP/Real GDP) x 100
GDP deflator =
(nominal GDP/real GDP) x 100
According to most economists, is it a serious shortcoming of GDP that it does not count household production or production in the underground economy? A. Most economists would answer "no" because these types of production do not affect the most important use of the GDP measure, which is to measure changes in total production over short periods of time. B. Most economists would answer "yes" because these types of production are likely to be a large component of the economy (or a large percentage of measured GDP), especially in countries like the United States. C. Most economists would answer "no" because the purpose of measuring GDP is to see how the economy performs over fairly long periods of a decade or more. D. Most economists would answer "yes" because these types of production are likely to change significantly from one year to the next.
A
Which of the following would be included in the gross national product (GNP) of the United States? A. Production from a U.S. firm that operates in Mexico. B. Production from a Canadian firm that operates in Montana. C. Production from an Hungarian citizen who works in Denver, CO. D. All of the above are included in the GNP of the U.S.
A
How does real GDP deal with the problem inflation causes with nominal GDP?
A. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced. B. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. C. Real GDP separates price changes from quantity changes. All of the above
All of the following are correct except: A. Gross domestic income is GDP calculated as the sum of income payments to households. B. Gross domestic income = Wages + Interest + Profits + Rent C. Gross domestic income does not include health insurance benefits received by the employees. D. Gross domestic income includes sales tax, depreciation and other items.
C
Household production and the underground economy A. are not considered important and, therefore, are not included when calculating GDP. B. are an increasingly large fraction of economic activity in the United States. C. are not accounted for in the Bureau of Economic Analysis' estimates of GDP. D. are fully accounted for in the Bureau of Economic Analysis' estimates of GDP.
C
If the GDP deflator in 2012 has a value of 98.0, then A. the inflation rate in 2012 is 2 percent. B. prices have increased 9.8 percent between the base year and 2012. C. prices have decreased 2 percent between the base year and 2012. D. the inflation rate in 2012 is -2 percent.
C
GDP expression =
C (largest component) + I + G + NX
What are the four major components of expenditures in GDP? What is the equation that represents GDP?
Consumption, Investment, Government Purchases, and Net Exports Y = C + I + G + NX
If Americans still worked 60-hour weeks, as they did in 1890, A. both GDP and the well-being of the typical person would be much higher than they are. B. GDP would be lower than it is, but the well-being of the typical person would be higher. C. both GDP and the well-being of the typical person would be lower than they are. D. GDP would be much higher than it is, but the well-being of the typical person would not necessarily be higher.
D
In the U.S., gross domestic product and gross national product are close in value. Under what circumstances would GNP be much larger than GDP? A. Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. B. Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. C. Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. D. All of the above would push GNP above GDP.
D.
National income =
GDP - depreciation
Which of the following is considered to be a problem in using GDP as a measure of national well-being?
GDP is not adjusted for changed in crime and other social problems
Between 2015 and 2016, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
Net exports will increase GDP by $16 billion
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities.
Gross domestic product understates the total production of final goods and services because of the omission of
household production
The 2 types of production that are omitted form the BEA's measurement of GDP
household production underground economy
If a large amount of production within a country takes place at foreign owned facilities, then it is likely that the country's GDP will be (larger/smaller) than GNP
larger
personal income =
national income - retained corporate earnings + government transfer payments and interest on government bonds
nominal GDP vs. real GDP
nominal - the value of final goods and services evaluated at current-year prices real - the value of final goods and services evaluated at base-year prices
disposable personal income =
personal income - personal taxes
Suppose the amount the federal government collects in personal income taxes increases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income?
remain the same; remain the same; decrease
Real GDP per capita is often used as a measure of general well-being. While increases in real GDP often do lead to increases in the well-being of the population, why is real GDP not a perfect measure of well-being?
the costs of pollution are not included GPD does not include crime rates or income distribution the value of leisure is not included
What is Gross Domestic Product (GDP)
the market value of all final goods and serviced produced in a country during a period of time, typically one year
Definition of inflation rate
the percentage increase in the price level from one year to the next
Definition of macroeconomics
the study of the economy as a whole, including inflation, unemployment, and economic growth
The Gross National Product (GNP) of the United States is equal to
the value of final goods and services produced by U.S. factors of production
GDP per capita (i.e. GDP divided by population) does not reflect
the value of leisure pollution and other negative effects of production crime and other social problems the distribution of income
Which component of gross domestic income is the largest? profits, rent, wages, or interest
wages
What are the four categories of income?
wages, interest, rent, and profit
Indicate whether you agree or disagree with the following statement: "In years when people buy many shares of stock, investment will be high and, therefore, so will gross domestic product (GDP)."
Disagree: Investment as a component of GDP refers to the purchase of physical and human capital and inventory, not stock purchases.
