ECON Final
In the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income? A. Every penny spent on a good or service must end up as someone's income. B. Domestic expenditures on imports generally equal foreign expenditures on U.S. exports. C. Taxes on the production of goods and services are determined according to individual income. D. People tend to spend all of their income on goods and services.
A. Every penny spent on a good or service must end up as someone's income.
Question content area Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? A. In years after the base year, nominal GDP is (greater/Less) than real GDP. B. In the base year, nominal GDP is (equal/not equal) to real GDP. C. In years prior to the base year, nominal GDP is (less/more) than real GDP.
A. Greater B. Equal C. Less
What are the four categories of income? A. Wages, Interest, Rent, and Profit. B. Consumption, Investment, Government Purchases, and Net Exports. C. Labor, Capital, Natural Resources, and Entrepreneurship. D. Wages, Salaries, Interest, and Dividends.
A. Wages, Interest, Rent, and Profit.
Which equation represents the relationship between GDP and the four major expenditure components? A. Y=C+I+G+NX B. Y=C(I+G+NX) C. Y=(C+I)-(G+NX)
A. Y=C+I+G+NX
Aggregate expenditure, or the total amount of spending in the economy, equals A. consumption spending plus planned investment spending plus government purchases plus net exports. Your answer is correct. B. household spending on durable goods plus household spending on nondurable goods. C. total spending by households plus total spending by businesses. D. household spending on durable goods plus business investment spending.
A. consumption spending plus planned investment spending plus government purchases plus net exports.
In calculating GDP, which levels of government spending are included in government purchases? A. spending by federal, state, and local governments B. spending by governments only on national security, social welfare, and other national programs C. spending by the federal government and some state governments, but not local governments D. spending by the federal government only
A. spending by federal, state, and local governments
Gross Domestic Product (GDP) is: A. the market value of all final goods and services produced in a country during a period of time. B. the amount of income generated from wages, rents, and profits in a country during a period of time. C. the value of all expenditures made by households and firms in a country during a period of time. D. the quantity of all final goods and services produced in a country during a period of time.
A. the market value of all final goods and services produced in a country during a period of time.
Using purchasing power parity exchange rates, which country has the largest GDP and which country has the second largest GDP? ________ has the largest GDP and ________ has the second largest GDP. A. China; Russia B. China; United States C. United States; China D. United States; Russia
B. China; United States
What are the four major components of expenditures in GDP? A. Consumption, Intermediate Goods, Government Purchases, and New Expenditures B. Consumption, Investment, Government Purchases, and Net Exports C. Consumption, Intermediate Goods, Goods and Services, and Net Exports D. Consumption, Investment, Government Purchases, and Non-Durable Expenditures
B. Consumption, Investment, Government Purchases, and Net Exports
An article in the Wall Street Journal referred to "gross domestic product—the value of all goods and services produced in the U.S." Briefly explain whether you agree with this definition of GDP. A. Agree, because GDP is used to measure an economy's total productivity, which includes all the goods and services produced in an economy. B. Disagree, because GDP measures the value of all final goods and services produced in an economy, not all the goods and services produced. C. Uncertain, since the article should have referenced a more specific period of time to measure GDP, such as every three months. D. Disagree, because GDP doesn't include the value of services when measuring an economy's total productivity.
B. Disagree, because GDP measures the value of all final goods and services produced in an economy, not all the goods and services produced.
GDP is an imperfect measure of economic well-being because it fails to measure what types of production? A. Foreign production and the government sector. B. Household production and the underground economy. C. Business investment and foreign production. D. Household production and foreign production
B. Household production and the underground economy.
What is the key idea in the aggregate expenditure macroeconomic model? A. in any particular year, the inflation rate is determined only by the level of aggregate expenditure. B. in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure. C. long-run economic growth is determined by the level of aggregate expenditure. D. in any particular year, the level of potential real GDP is determined by the level of aggregate expenditure.
B. in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure.
Which of the following is included in the economist's definition of investment? A. the purchase of a rare coin or a deposit in a savings account B. the purchase of new machines, factories, or houses C. the purchase of a share of stock D. All of the above.
B. the purchase of new machines, factories, or houses
Of the eight largest economies, which country has the most equal distribution of income and which country has the most unequal distribution of income? ________ has the most equal distribution of income and ________ has the most unequal distribution of income. A. China; Indonesia B. China; Russia C. Germany; Brazil D. Germany; Russia
C. Germany; Brazil
As of 2021, 19 European countries had adopted the euro as their common currency. These countries are called the eurozone. According to an article, "The eurozone's gross domestic product contracted by 0.7% in the three months through December from the previous quarter, resulting in an annual decline of 6.8% for the bloc in 2020, the EU's statistics agency said on Tuesday." Is it a change in nominal GDP or real GDP? A. Nominal GDP, because it uses current prices to place a value on the economy's production of goods and services. B. Real GDP, because it does a better job of determining how much the prices of goods and services have changed in an economy. C. Real GDP, because it shows how the economy's overall production of goods and services changes over time. D. Nominal GDP, because it does a better job of separating the economy's production of goods from services.
C. Real GDP, because it shows how the economy's overall production of goods and services changes over time.
Of the eight largest economies in terms of GDP using purchasing power parity exchange rates, which country has the highest GDP per capita and which country has the lowest. ________ has the highest GDP per capita and ________ has the lowest GDP per capita. A. Germany; India B. Germany; Brazil C. United States; India D. United States; Brazil
C. United States; India
Why does inflation make nominal GDPLOADING... a poor measure of the increase in total production from one year to the next? A. Nominal GDP separates increases in GDP as a result of price changes from increases in GDP as a result of quantity changes. B. GDP is a measure of production in quantity terms. C. When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities. D. All of the above E. A and B only
C. When nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities.
How does real GDPLOADING... 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 separates price changes from quantity changes. C. Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. D. All of the above. E. A and C only.
D. All of the above
Even if GDP included these types of production, why would it still be an imperfect measure of economic well-being? A. GDP is not adjusted for pollution and it does not account for unequal income distribution. B. GDP is not adjusted for crime or other social problems. C. The value of leisure is not included in GDP. D. All of the above. E. A and C only.
D. All of the above.
What is the difference between gross domestic product (GDP) and gross domestic income (GDI)? A. GDP assumes that the more goods and services people have, the better off they are, whereas GDI assumes the more income people have, the better off they are. B. GDI focuses on measuring the economy's output from the production side, mainly relying on spending data, whereas GDP measures output from the income side. C. GDP is used to measure total production in an economy, whereas GDI is used to measure an economy's well-being. D. GDP focuses on measuring the economy's output from the production side, mainly relying on spending data, whereas GDI measures output from the income side.
D. GDP focuses on measuring the economy's output from the production side, mainly relying on spending data, whereas GDI measures output from the income side.
How does the size of a country's GDP affect the quality of life of the country's people? A. There is an inverse relationship between GDP and quality of life. B. When GDP is high, production from the underground economy, and therefore the crime rate, is high. C. Generally, the more goods and services people have, the worse off they are. D. Generally, the more goods and services people have, the better off they are.
D. Generally, the more goods and services people have, the better off they are.
What index measures the degree of inequality in the distribution of family income in a country? A. Distribution index B. Income index C. Equality index D. Gini index
D. Gini Index
Gross Domestic Product (GDP) is:
The market value of all final goods and services produced in a country during a period of time.