econ chapter 7

$1,200.

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:

GDP will tend to increasingly understate the level of output through time.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:

the GDP would be overstated.

If intermediate goods and services were included in GDP:

real GDP may either rise or fall.

If nominal GDP rises:

None of these necessarily occurred.

If real GDP falls from one period to another, we can conclude that:

not counted.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

add increases in inventories or subtract decreases in inventories.

In calculating the GDP, national income accountants:

the price level may change over time.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

GDP price index.

In determining real GDP, economists adjust the nominal GDP by using the:

the price level rose by more than nominal GDP.

In the second quarter (three-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that:

Increase it

In the short run, how will an increase in C, I, G causing an increase in aggregate demand likely affect real GDP?

add exports, but subtract imports, in calculating GDP.

In the treatment of U.S. exports and imports, national income accountants:

Gross domestic private investment

Money spent on the purchase of a new house is included in the GDP as a part of:

only counting final goods.

National income accountants can avoid multiple counting by:

any increase in business inventories.

National income accountants define investment to include:

a nation's imports exceed its exports.

Net exports are negative when:

exports less imports.

Net exports are:

the GDP price index.

Nominal GDP is adjusted for price changes through the use of:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

Nominal GDP is:

$12 trillion

Over a five year period nominal GDP increased from $10 trillion to $15 trillion, while the GDP price index increased from 100 to 125. Approximately how much is GDP in year five, stated in terms of year-one dollars? (what is real GDP year 1 as base year)

Purchases of mutual funds by consumers

Which of the following is not included in personal consumption expenditures?

Peter buys a newly constructed house.

Which of the following transactions would be included in GDP?

A fishing-company owner buys new fishing gear

Which would be considered an investment according to economists?

understated GDP.

A large underground economy results in an:

can be found by summing C + Ig + G + Xn

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

A nation's gross domestic product (GDP):

a comparison of the current price of a market basket to a fixed point of reference.

A price index is:

More than they sell, and the inventory increase is added to GDP

Business inventories increase when firms produce:

Government construction of new highways and dams

Gross domestic private investment, as defined in national income accounts, would include the following, except:

GDP. B. PI. C. DI. D.none of these.

Environmental pollution is accounted for in:

goods and services purchased by ultimate users, rather than for resale or further processing.

Final goods and services refer to:

the market value of unpaid work in the home.

GDP excludes:

monetary value of all final goods and services produced within the borders of a nation in a particular year.

GDP is the:

government consumption goods and public capital goods.

Government purchases include government spending on:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

Real GDP is:

current output at base year prices.

Real GDP measures:

GDP data that have been adjusted for changes in the price level.

Real GDP refers to:

We need more information to determine whether GDP has changed.

Suppose Smith pays $100 to Jones

GDP in 2010 is $500 billion

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:

understate economic welfare because it does not take into account increases in leisure.

The GDP tends to:

suggests that the general price level has risen.

The fact that nominal GDP has risen faster than real GDP:

quality of products and services improves.

The growth of GDP may understate changes in the economy's economic well-being over time if the:

subtracted from exports when calculating GDP because imports do not constitute production in the United States.

The value of U.S. imports is:

Excluded from the calculation of GDP because they make no contribution to current production of goods and services

The value of corporate stocks and bonds traded in a given year is:

The purchase of 100 shares of AT&T by a retired business executive

Which of the following is not economic investment?

productive but is excluded from GDP because no market transaction occurs.

Tom Atoe grows fruits and vegetables for home consumption. This activity is:

excluded when calculating GDP because they do not reflect current production.

Transfer payments are:

Goods and services produced in the underground economy.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?

The child-care services provided by stay-at-home parents.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

tax cuts increase disposable income, which leads to higher national income and additional consumer spending

Which of the following best explains why a $7 billion tax cut can lead to a $9 billion increase in consumer spending in the short run

The purchase of a new house.

Which of the following do national income accountants consider to be investment?

A haircut purchased by a father for his 12 year-old son.

Which of the following is a final good or service?

building a new factory

Which of the following is classified as investment in national income (GDP) accounting?

a household rents a condominium during a vacation

Which of the following is included in gross domestic product (GDP)? Assume the following transactions occur with in the US