GDP and Business Cycle

Which of the following products are not included in current U.S. GDP?

a Ford Mustang produced last year and sold this year

Which of the following factors that affect our well-being does GDP fail to adequately account for?

all of the above

Which of the following is true about underground economies?

all of the above

Included in the investment category of GDP under the expenditure approach is the purchase of parcels of land for the purposes of realizing capital gains when real estate values rise.

False

National income includes wages and salaries, interest and rent, but not corporate profits.

False

If individuals were paid for their household production, GDP would:

increase.

GDP excludes:

none of the above.

If real GDP decreased by 1% and nominal GDP increased by 2%, then output:

decreased and the price level increased.

Household income after taxes is called:

disposable personal income.

Government purchases, under the expenditure approach to GDP accounting, includes all of the following except:

welfare payments.

Refer to Exhibit 19-1. Net exports of goods and services (X-M) was approximately:

-450 billion.

Estimates of the size of the underground economy in the U.S. range from:

4 to 20 percent.

Which of the following is false?

All goods and services exchanged in the current period are included in this year's GDP.

Which of the following are not included in GDP?

All of the above are excluded from GDP.

The GDP deflator:

All of the above are true.

The total dollar value of purchases in the economy is far larger than GDP primarily because:

GDP excludes the value of intermediate goods exchanged.

Which of the following is true?

Real GDP equals nominal GDP divided by the current price level index, times one hundred.

Transfer payments are included in which category under the expenditure approach to GDP accounting?

Transfer payments are not directly included in GDP calculations.

Gross domestic product is the value of all final goods and services produced within a country during a given period of time.

True

The expenditure approach to measuring GDP involves adding up the purchases of final goods and services by market participants.

True

The expenditure method dictates that GDP is equal to C + I + G + (X - M).

True

What is the measure of the income received by owners of resources used in making final goods and services?

factor payments

Consumption is the purchase of goods and services by:

households.

If real GDP increased by 2% and nominal GDP increased by 4%, then output:

increased and the price level increased.

If real GDP increased by 2% and nominal GDP increased by 2%, then output:

increased and the price level remained unchanged.

Changes in inventories are included in which category under the expenditure approach to GDP accounting?

investment

Residential construction is generally included in which category of GDP?

investment

The purchase of a new scanner by a computer graphics business is included in which expenditure category of GDP?

investment

The most volatile GDP category under the expenditure approach is:

investment.

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

is not included in GDP, but the broker commissions involved are included in GDP.

What is the measure of the income earned by owners of resources used in making final goods and services?

national income

Declines in business inventories enter national income accounts:

negatively in the investment category.

The main difference between GDP and GNP is that GNP excludes:

net income of foreigners.

Nominal GDP is $10,000 billion in 2011, but real GDP is only $9,000. It follows that:

the GDP deflator is equal to 111.

Nominal GDP has risen faster than real GDP in the last decade because:

the price level has increased.

Which of the following is not included in GDP calculations?

the value of 500 shares of Microsoft stock sold to an investor

GDP is:

the value of all final goods and services produced domestically within a given period of time.

GDP does not directly include:

the value of intermediate goods sold during a period.

Economists usually use the term "recession" to refer to:

two or more consecutive quarters of declining real GDP.

If Jim pays $1000 to John:

we need more information in order to determine whether or how much GDP will change.

Why has nominal GDP increased historically more rapidly than real GDP in the United States?

because of inflation

Which of the following is an example of an intermediate good?

cloth sold to a suit manufacturer

The investment component of GDP includes:

construction of a new steel mill.

The largest single expenditure component of GDP is:

consumption.

Refer to Exhibit 19-1. The consumption (C) figure for the year in question is:

$6,300 billion.

Which of the following is included in GDP?

None of the above.

Government purchases, under the expenditure approach to GDP accounting, do not include:

Social Security benefit payments to retirees.

Which of the following observations concerning phases of a business cycle is incorrect?

The maximum amount of unemployment occurs exactly at the trough.

Another name for the contractionary phase of a business cycle is recession.

True

Net exports are defined as:

exports minus imports.

If nominal GDP rises from $5 billion to $6 billion, when the GDP deflator goes from 100 to 110, real GDP

rises.

If nominal GDP rose by 10 percent and the price index increased from 100 to 105 in a given year, real GDP:

rose by 5 percent.

The largest component of consumption expenditures is:

services.

Which of the following is included in the investment category under the expenditure approach to GDP accounting?

additions to business inventories

Measures of well-being include:

all of the above.

The expenditure approach to GDP accounting includes:

all of the above.

The expenditure method of measuring GDP is calculated by adding up:

all of the above.

Depreciation is:

an allowance for the replacement of capital.

All of the following are examples of producer goods except:

appliances.

Using the expenditure approach to GDP accounting, which of the following are included in the investment category?

none of the above

Which of the following is not considered part of the services category under the expenditure approach to GDP accounting?

privately owned jets

Intermediate products:

produced domestically are not directly reflected in a nation's GDP.