Macro

Suppose GDP is $10 billion, consumption expenditure is $7 billion, investment is $2 billion, and government expenditure on goods and services is $2 billion. Net exports of goods and services must be

-1 billion

23) Which of the following is classified as an intermediate good? i) the purchase of a Big Mac by a college student ii) McDonald's purchase of pickles iii) a McDonald's restaurant owner's interest payment for the loan on her building.

2

5) The largest expenditure category in the United States is A) consumption expenditure. B) investment. C) government expenditure on goods and services. D) net exports of goods and services.

A

If a firm does not sell all of the goods that it produces in a given time period, then the goods

count positively in GDP as inventory investment

Because of the circular flows of expenditure and income in the economy, total ________ equals total ________ equals total ________.

expenditure; income; value of production

The purchase of a new Boeing fighter jet by Israel is classified in the U.S. GDP accounts as

export expenditure

Net exports of goods and services is equal to the value of

exports minus the value of imports

To calculate GDP it is necessary to add up the market value of all the ________ produced within a country during a year.

final goods and services produced

Investment is the expenditure done by

firms

The circular flow shows that GDP measures i. total income. ii. total expenditures. iii. price changes.

i and ii

Which of the following is included as investment in GDP? i. cars produced during the year but unsold at the end of the year ii. new capital equipment produced and purchased during the year iii. purchases of a company's stocks and bonds

i and ii

Nominal GDP can change

if either prices or the quantities of goods and services change

Gross domestic product is equal to the market value of all the final goods and services ________ in a given period of time.

produced within a country

Although imperfect, which of the following is used as a measure of the standard of living?

real GDP/population

U.S. Net exports include

sales of Hollywood movies to the rest of the world

Which of the following is NOT part of the income used in the income approach to measuring GDP?

taxes paid by persons

Investment includes A) GM's purchase of robotic machinery. B) student purchases of laptops. C) Wal-Mart's purchase of health insurance for its workers. D) the New York City Library's purchase of new books. E) wages paid to military personnel.

A

The following are all final goods EXCEPT A) flour used by the baker to make cupcakes. B) bread eaten by a family for lunch. C) pencils used by a 6th grader in class. D) Nike shoes used by a basketball player. E) a computer used by Intel to design new computer chips.

A

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP A) does not change, because the car was not produced this year. B) increases, because the car is a durable good and increases consumption. C) increases, because the car is a durable good and increases investment. D) does not change, because Jamie did not buy the car from a dealership. E) increases, because this expenditure decreases saving.

A

________ is most likely to contribute to an improvement in our living standard.

An increase in real GDP

20) Which of the following is a final good or service? A) the grilled chicken purchased by Taco Bell for use in their burritos B) a new replacement muffler installed by Midas Mufflers C) the fertilizer purchased by Royal Lawn and Landscape D) the computers purchased by Office Depot for sale to its customers E) the CPUs purchased by Dell to be used in their computers

B

21) Which of the following is a final good or service? A) tires purchased by Ford for use on one of their SUVs B) the new economics textbook you are using C) the hair gels used by a hair stylist at the local hair salon D) the butter used by a chef to make butter cream frosting E) the taco shells purchased by Taco Bell for use in their tacos

B

24) Which of the following would NOT be directly included in the U.S. GDP in 2010? A) the market value of restaurant meals sold in 2010 B) the market value of the jet fuel bought by Delta to use for its flights in 2010 C) the value of the automobiles produced in 2010 at the Toyota plant located in Georgetown, KY D) legal services provided to first time home buyers during 2010 E) the purchase of a new home in Atlanta, Georgia in 2010

B

Even though it is not a perfect measure, economists can use real GDP to i) compare how the value of the goods and services produced in China have changed over the past 10 years. ii) look at the length of recessions and expansions in the United States. iii) to compare the standard of living in China versus the standard of living in Vietnam. A) ii only. B) i, ii and iii C) i and iii D) i and ii E) ii and iii

B

If nominal GDP increases from one year to the next, then A) production must have increased. B) production could have increased, decreased, or stayed the same. C) prices must have increased. D) prices and production must both have increased. E) prices and production must both have decreased.

B

Spending on financial assets ________ counted as part of GDP ________. A) are; because the cash exchanged represents an expenditure B) are not; because their purchase is not spending on goods or services C) are; as long as their purchase produces income D) are not; because interest must be paid on them E) may be; as long as their value increases

B

The income approach to measuring GDP is based on summing A) the production of each industry. B) wages, interest, rent, and profits. C) the values of final goods, intermediate goods and services, used goods, and financial assets. D) consumption expenditure, investment, government expenditures on goods and services, and net exports of goods and services. E) consumption expenditure and wages.

B

The purchase of 500 shares of Honda stock by the California State Employees' Pension fund A) is counted as consumption expenditure. B) is not counted as part of GDP. C) is counted as investment in the GDP accounts. D) is counted as part of export expenditure in the GDP accounts because Honda is a foreign firm. E) Is counted as part of import expenditure in the GDP accounts because Honda is a foreign firm.

B

59) Production by Honda, a Japanese firm, in the United States is included in ________ GDP and production by Nike Corporation, a U.S. firm, in Vietnam is included in ________ GDP.

B) U.S.; Vietnamese

To calculate GDP it is necessary to

B) use the market price to place a dollar value on each good produced.

12) The value of used goods ________ counted as part of GDP ________. A) are; as long as they are classified as consumption goods B) are; as long as they are classified as investment goods C) are not; because they were counted during the period when they were counted as new goods D) are not; because most fall in value and would cause a decrease in the value of GDP E) may be; as long as their value has risen

C

13) If the purchase of used goods was to be incorporated into measuring GDP using the expenditure approach, then A) we also will have to account for spending on financial assets. B) it will be very difficult to assign a fair market value to a used good. C) we will be counting the value of the used goods both at the time of their production and at the time of their re-sale. D) we will have to account for the natural depreciation that a used good experiences. E) consumption spending would need to be adjusted for depreciation.

C

22) A restaurant buys fish to offer as a daily menu special. The purchase of the fish by the restaurant is A) a consumption expenditure. B) an investment. C) an intermediate good. D) an example of government expenditures on goods and services. E) part of net exports if the fish was caught beyond the U.S. border.

C

3) The expenditure approach to measuring GDP is done by using data on only A) consumption expenditure. B) consumption expenditure and investment. C) consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services. D) consumption expenditure, investment, and government expenditures. E) wages, rent, interest, and profit.

C

6) If consumption was 70 percent of GDP and investment and government expenditure were both 18 percent each, then we see that A) GDP can be over 100 percent because it is "gross" rather than "net." B) the error is due to rounding. C) exports must be less than imports. D) exports must be more than imports. E) we must subtract depreciation from investment so that the components of GDP do not exceed 100 percent.

C

9) Based on the data in the table above, what does GDP equal? A) $10,200 billion B) $10,400 billion C) $10,000 billion D) $9,800 billion E) $8,900 billion

C

An increase in nominal GDP could result from an increase in i. production. ii. prices. iii. subsidies. A) i only B) ii only C) i and ii D) i and iii E) i, ii, and iii

C

Nominal GDP increases A) only if total production increases. B) only if prices increase. C) if either prices and/or total production increase. D) only if the productivity of resources increase. E) only if depreciation decreases.

C

Real GDP can increase if the i. quantities of goods and services produced decrease and prices fall by a smaller percentage. ii. quantities of goods and services produced decrease and prices fall by a larger percentage. iii. quantities of goods and services produced decrease and prices do not change. iv. quantities of goods and services produced increase. A) i only B) iii only C) iv only D) i and iii E) i, ii, and iii

C

Total Expenditure =

C + I + G + NX

14) When calculating GDP, purchases of used goods are A) included at the original price. B) included by taking the original price and subtracting the (current) used price. C) included at the (current) used price. D) not included. E) included at the original price minus any depreciation

D

4) In comparing the magnitudes of the components of GDP according to the expenditure approach, we see that in the United States A) government expenditure on goods and services is the largest category. B) investment is the largest category. C) investment is much larger than government expenditure on goods and services. D) investment is less than government expenditure on goods and services. E) investment, government expenditure on goods and services, and consumption expenditure are all about the same size.

D

7) In recent years, which of the following has been negative? A) consumption expenditure B) investment C) government expenditure on goods and services D) net exports of goods and services E) wages

D

In the United States, between 1961 and 2011, there has been i) a consistent , non-changing growth rate of potential GDP per person. ii) an increase in the standard of living based on real GDP per person. iii) fluctuations in real GDP per person around potential GDP per person. A) ii only B) i, ii and iii C) i and ii only D) ii and iii E) i only

D

When the value of nominal GDP increases from one year to the next, we know that one or two things must have happened during that time: A) The nation produced fewer goods and services and/or prices fell for goods and services. B) Consumption expenditure increased and/or corporate profits increased. C) Investment increased and/or payments to employees increased. D) The nation produced more goods and services and/or prices rose for goods and services. E) The value of real GDP must have increased and/or the price level must have decreased.

D

Which of the following statement is correct? A) If nominal GDP increases, then real GDP must increase. B) If nominal GDP decreases, then real GDP must increase. C) If real GDP decreases, then nominal GDP must decrease. D) Nominal and real GDP can change either in the same direction or the opposite direction. E) If nominal GDP does not change, then real GDP cannot change.

D

8) In 2009 in the United States, consumption expenditure was $9,996 billion, investment was $1,559 billion, government expenditures on goods and services were $2,927 billion, and total exports were $1,492 billion. GDP equaled A) $12,641 billion. B) $10,120 billion. C) $11,488 billion. D) $14, 415 billion. E) some amount, but there is not enough information given to calculate GDP.

E

In 2011, U.S. GDP was A) $15 trillion using the expenditure approach. B) $15 trillion using the income approach. C) $15 trillion using the expenditure approach and $14 trillion using the income approach. D) $16 trillion using the income approach and $14 trillion using the expenditure approach. E) both A and B are correct.

E

Which of the following would be included in Germany's GNP? A) the production of BMWs (made by a German-based company) in South Carolina B) the production of Michelin tires made in Germany by a French company and then sold directly to French consumers C) the production of BMWs in Germany D) the production of Michelin tires made in France by a French company and then sold to BMW in Germany for use in BMW cars E) Answers A and C are correct.

E

Real GDP is the value of final goods and services produced in a year

EXPRESSED IN THE PRICES OF A BASE YEAR

In the circular flow, how are the "value of production", "income", and "expenditures" related?

Expenditures on GDP equals the value of production which equal income

A measure of a country's production is its

GDP

The total production within an economy is measured as

GDP

GDP stands for...

Gross Domestic Product

Which of the following is directly included in the U.S. GDP for 2013? i. a 2013 Cadillac Escalade produced and sold as a new car in the United States in 2031 ii. tires produced in the United States, purchased by General Motors, and installed on a new Cadillac Escalade sold in 2013 iii. General Motors cars produced in Canada because General Motors is an American corporation

I

Which of the following expenditure components of GDP can be negative or positive?

Nets exports of goods and services

GDP =

Y = C + I + G + NX

In calculating GDP, we must

add the market value of exports and subtract the market value of exports

Measuring total production by valuing items at their market value allows us to

add together the value of different goods that have different prices.

Government expenditures on goods and services include i) the New York City Library's purchase of new books ii) Washington D.C.'s purchase of gas for its city buses iii) California's payment of wages to prison guards.

all

In a circular flow diagram, which of the following is true? i) the value of production = income ii) the value of production = expenditure iii) expenditure = income

all

When calculating real GDP, the reference base year

allows us to calculate the value of the goods and services in terms of prices of that base year.

GDP is

an imperfect measure of the standard of living

How are final goods and services valued when measuring nominal GDP?

at current market prices

If nominal GDP increases this year, then real GDP

could increase, decrease, or not change

Real GDP measures the value of goods and services produced in a given year valued using

base year prices

Total expenditure equals total income

because firms pay out everything they receive as income to the factors of production

Consumption expenditure includes spending

by households

In calculating GDP, economists

can measure either total expenditure or total income

Economists define investment to include purchases of

capital goods and inventories

According to the expenditure approach to measuring GDP, in the United States, the largest component of GDP i

consumer expenditure

Expenditures on U.S. produced steaks, shoes, and doctor visits are most likely classified as

consumption expenditure

The expenditure approach to measuring GDP is based on summing

consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.

GDP is equal to the ________ value of all the final goods and services produced within a country in a given period of time.

market

Which of the following is NOT included in the income approach to calculating GDP?

net exports of goods and services

18) Which of the following is classified as a final good or service? i. tires bought by GM to put on new Tahoes ii. mustard bought by Subway to put on its sub sandwiches iii. your purchase of online access to the Wall Street Journal

only 3

If you make dinner for yourself, what would be included in the GDP?

only the market value of the ingreidients

Total expenditure in the United States is equal to consumption expenditure plus investment

plus government expenditure on goods and services plus exports of goods and services minus imports of goods and services.

If real GDP is greater than nominal GDP for a particular year then,

prices must have fallen between the current year and base yeasr

Nominal GDP measures the value of goods and services produced in a given year valued using

prices of the same year

When measuring GDP

the expenditure on goods and services by all levels of government are included

The difference between nominal GDP and real GDP is

the prices used in their calculations.

Investment is defined as the purchase of

the purchase of new capital goods and additions to inventories.

Investment is defined as

the purchase of new capital goods by firms

Last year U.S. net exports of goods and services was negative. This fact means that last year

the value of U.S. exports was less than the value of U.S. imports.

33) In measuring GDP, which of the following is included?

the value of increase in business inventories

In order to measure gross domestic product, we can follow

two approaches: the expenditure approach and the income approach.

Expenditures in GDP do not include ________.

used goods or financial assets

Nominal GDP is GDP

using current market values

Net exports of goods and service are defined as the

value of exports minus the value of imports

According to the income approach to measuring GDP, the largest income category is

wages

Which of the following is NOT included in the expenditure approach to calculating GDP?

wages

Consumption goods and services include

washing machines and tickets to football games