Econ 222 Chapter 5

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The category of expenditure that accounts for the highest share of GDP in the United States is _________.

Consumption.

Which of the following will be considered a final good in the calculation of U.S.​ GDP?

Foot massages at spas in California and School supplies purchased by a local school board

What is the key difference between the Consumer Price Index​ (CPI) and the GDP​ deflator?

The CPI is broader in coverage than is the GDP deflator.

When government statisticians gather and analyze data on the income of various agents in the domestic​ economy, they are measuring GDP using the​ ____________.

income-based accounting method

The difference between gross private domestic investment and fixed private investment represents

inventory investment (aka changes in business inventories)

Which one of the sets of terms given below would correctly complete the following definition of​ GDP? "Gross Domestic Product is the​ ____ value of the​ ____ goods and services produced​ _____ of a country during a particular period of​ time."

market; final; within the borders

When current market prices are used to determine the value of each unit that is produced in an​ economy, the resulting aggregate is known as​ ____________

nominal GDP.

A country's gross national product would exceed its gross domestic product when the _________.

production of domestically-owned factors operating abroad exceeds the production of foreign-owned factors operating in the United States.

When government statisticians gather and analyze data on the value added by the firms in the domestic​ economy, they are measuring GDP using the​ ____________.

production-based accounting method

In order for comparisons of production across time to be​ meaningful, we must use:

real GDP.

​Production-based accounting is used to estimate GDP by​ ____________

summing each firm's value added to the production process and computing for each firm the difference between sales revenue and the purchase of intermediate products, then summing this difference across all firms.

base line/year

where nominal GDP = real GDP (measuring in 2013 dollars, 2013 is the base year)

GDP is estimated using​ expenditure-based accounting by using the equation​ ____________.

GDP​ = C + I + G + X - M.

How is growth in the economy measured?

Growth in the real GDP

Which of the following are not included in GDP but probably should​ be?

Home Production and Transactions in the underground economy

Why is it essential to differentiate between real and nominal growth rates of​ GDP?

The nominal growth rate combines the effect of price changes along with changes in the production of goods and services and thus gives a less clear indication of the impact on living standards. and It is the real growth rate that is meaningful since it indicates the change in the production of goods and​ services, a very significant source of improved living standards.

what is meant by capital depreciation?

The reduction in the value of physical capital due to obsolescence or wear and tear.

A​ firm's value added refers to the dollar value of​ ____________.

a firm's sales revenue minus the firm's purchases of intermediate products from other firms

National income accounting is _________.

a system of accounts designed to measure aggregate economic activity in a country.

If the level of aggregate expenditure was​ $16.8 trillion in​ 2013, the level of aggregate income in the economy during 2013 was​ ___________.

also​ $16.8 trillion because of the identity between aggregate expenditure and income.

You decide to cook your own meal rather than eat in a restaurant.

decrease


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