Macroeconomics Chapter 6
Using prices is an intuitive way to see a product's value
Economists use dollars as the unit for GDP in part because?
Value
Economists use the sales price of goods and services as a measure of ____________ in the calculation of GDP.
Only increases in production are true increases in the standard of living
Economists usually are more interested in increases in production than increases in prices because?
Equal only in the base year.
Real GDP and nominal GDP are: - equal in all years except the base year. - equal only in the base year. - never equal. - always equal.
Have been adjusted for inflation.
Real variables: - have been adjusted for inflation. - do not account for changes in prices. - are calculated using prices at the time of sale. - have not been adjusted for inflation.
Risen; Risen
Suppose your weekly earnings (the number on your paychecks) increase by 3 percent over the course of a year and prices in the economy rise by 2 percent. In this case, your nominal earnings have _____ and your real earnings have _____.
Business Fluctuations or Business Cycles
The short-run movements in real GDP around its long-term trend are known as?
GDP 2016 - GDP 2015/GDP 2015 * 100= GDP Growth Rate for 2016
To find the growth rate for the year 2016 by using the GDP for year 2015 and 2016 what would the equation look like?
False, they are not counted
True/False: Legal goods sold "under the table" to avoid taxes are counted in GDP
The finished goods and services produced by labor and capital located in the United States.
U.S. GDP is the market value of?
Nominal Variables
Variables, such as nominal GDP, that have not been adjusted for changes in prices, this is known as?
Goods and services which are sold to final users and then consumed or held in personal inventories.
What are finished goods and services?
Goods and services sold to firms and then bundled or processed with other goods and services for sale at a later stage.
What are intermediate goods and services?
1. National Spending Approach (Y= C+I+G+(Exports - Imports) 2. Factor Income Approach (Y= Wages + Rent + Interest + Profit)
What are the two common ways of splitting GDP?
Yearly and every quarter of the year
What are the two times GDP is calculated?
Gross Domestic Product (GDP) and Gross Domestic Product per capita
What are two statistics designed to measure the value of economic production?
Real Variable
What are variables such as real GDP, that have been adjusted for changes in prices by using the same set of prices in all time periods?
Nominal GDP
What are variables, such as nominal GDP, that have not been adjusted for changes in prices?
An economy's total output
What does GDP measure?
Market Values
What does GDP use in order to determine how much each good or service is worth?
Real GDP
What holds the price level fixed from year to year using a base year's price?
Expansion
What is a period of time when real GDP grows at a faster rate than usual?
GDP Deflator
What is a price index that can be used to measure inflation?
Paying a consultant to fix a software problem on a computer. Other examples are haircuts, transportation, entertainment, and spending on medical care.
What is an example of a service?
A sale of a used car
What is an example of a something not included in GDP?
A computer chip
What is an example of an intermediate good?
Net Exports
What is exports minus imports?
Nominal GDP
What is measured using the price level for the year that is being measured?
Buying IBM stock
What is not an example of investment?
Sales of used goods
What is not included in GDP?
Government Purchases (spending on tanks, airplanes, office equipment, roads, etc)
What is spending by all levels of government on finished goods and services not including transfers known as?
GDP Deflator= Nominal GDP/Real GDP * 100
What is the equation for GDP Deflator?
Gross National Product (GNP)
What is the market value of all finished goods and services produced by a country's residents, wherever located, in a year known as?
Gross Domestic Product
What is the market value of all finished goods and services produced within a country in a year?
Investment (Farmer buying a tractor, University builds new classrooms and labs)
What is the purchase of new capital goods; private spending on tools, plant, and equipment used to produce future output known as?
GDP= P1X1 + P2X2 + P3X3 + ... PnXn
What is the simplest calculation of GDP?
Growth in real GDP per capita
What is usually the best reflection of changing living standards?
Nonpriced Production
What occurs when valuable goods and services are produced but no explicit monetary payment is made?
Services
What provide a benefit to individuals without the production of tangible output?
National Wealth
What refers to the value of a nation's entire stock of assets?
Consumption Spending
What tends to be much more stable than investment spending?
Illegal or Underground-market transactions (Sales of crack cocaine)
What transactions are omitted from GDP?
Summing the market value of all finished goods and services
Which activity BEST describes how GDP is calculated? - summing the market value of everything produced in a country - summing the wealth of all citizens of a country - summing the market value of all finished goods and services - surveying households in a country to determine what they have purchased
A family building a new home
Which activity would be counted in the investment category of national spending? - a household purchasing stock in Apple - a child saving money in a piggy bank - a family building a new home - parents paying for their child's private high school
Using the national spending approach to GDP, paying college tuition is counted as consumption.
Which statement is TRUE? - Using the national spending approach to GDP, paying college tuition is counted as consumption. - Using the national spending approach to GDP, transfer payments are included in government purchases to avoid double counting. - Net exports are the value of imports minus the value of exports. - Using the national spending approach to GDP, purchasing stock in a company is counted as investment.
Bureau of Economic Analysis (BEA)
Who calculates GDP?
China
Who has the world's largest economy with a 2014 GDP of $17.15 trillion and a population of 1.4 billion people?
The National Bureau of Economic Research
Who is considered the most authoritative source on identifying U.S. recessions?
Because if we did, we would be double-counting
Why do we not include transfers in government purchases?
Nominal
__________ GDP always uses the price level for the year in its calculation.
Real
__________ GDP holds the price level fixed at a base year.
Business Cycles
____________ _____________ are the short-run movements in real GDP around its long-term trend.
Imports
____________ are removed from GDP because they are produced in another country.
Intermediate
____________ goods and services are used in the production of other goods and services.
Gross Domestic Product
_____________ _____________ ______________ is the market value of all final goods and services produced within a country in a year.
Services
_____________ provide a benefit to the consumer without a tangible output.
Final
______________ goods and services are used by the end consumer.
Recession
A ___________ is a significant, widespread decline in real GDP and employment
Domestic Product
A measure of a country's production is its gross: - daily output - total output - daily production - domestic product
Real GDP, real income, employment, industrial production, and wholesale-retail sales
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in?
Recession
A significant, widespread decline in real income and employment is known as?
Income, employment, sales, and other measures of the health of an economy.
Although a decline in real GDP is the single best indicator of a recession, declines will usually also be observed in?
$14
Based on the transactions that take place in the scenario that follows, how much should be added to U.S. GDP for 2017? Scenario: At 11:50 p.m. on December 31, 2016, you ordered a $2 soda in a restaurant. Your waiter brought it to you at 11:55 p.m. You did not drink it until 12:05 a.m. At 12:10 a.m., you ordered a $14 plate of nachos, which arrived at 12:20 a.m. You paid your bill at 12:30 a.m. on January 1, 2017, and you did not leave a tip. You are a permanent U.S. resident and the restaurant is located in the United States and owned by a permanent U.S. resident.
$50,000
Based on the transactions that take place in the scenario that follows, how much would be added to U.S. GDP for 2017? Scenario: In October 2016, you preordered a Chevy Volt for $50,000. It was manufactured in the United States in January 2017 and delivered to you in February 2017. You traded it in for $41,000 in March 2017. You are a permanent U.S. resident located in the United States, and the dealership is located in the United States and owned by permanent U.S. residents.
$220
Based on the transactions that take place in the scenario that follows, how much would be added to U.S. GDP for 2017? Scenario: On October 1, 2017, you win an eBay auction for an antique desk for $1,000. eBay charges a 2 percent commission on the sale, and you have to pay $200 to have it shipped. Both you and the seller are located in the United States and are permanent residents of the United States.
Business Cycles
Business fluctuations are also called:
Increases by $250 billion
Ceteris paribus, if government purchases increase by $50 billion and consumption increases by $200 billion, then GDP:
Does not involve a market transaction
Child care conducted in the home is not included in GDP because it:
Does not involve a market transaction.
Cleaning your own home is not included in GDP because it:
Private
Consumption spending only includes ___________ spending on final goods and services.
GDP per capita
GDP divided by the population is known as?
Imperfect but useful.
GDP figures are: - imperfect but useful. - perfect and useful. - imperfect and useless. - perfect but useless.
Capita
GDP per __________ is a measure of how well off the average person is within a country.
Standard of Living
GDP per capita is a rough measure of a country's?
Finished goods and services produced by a country's permanent residents, wherever located, in a year.
Gross national product (GNP) is the market value of all:
GDP per capita= GDP/Population
How do you calculate GDP per capita?
Both nominal and real GDP.
If 2010 is chosen as the base year, then the product (2010 prices × 2010 quantities) is equal to: - nominal GDP only. - neither nominal nor real GDP. - both nominal and real GDP. - real GDP only.
8.94 percent. [($1,645 − $1,510) ÷ $1,510] × 100 = ($135 ÷ $1,510) × 100 = 8.94 percent.
If GDP for a certain economy is $1,510 billion at the end of year 4 and $1,645 billion at the end of year 5, the economy's growth rate between the two years is:
Net exports will be positive.
If a nation sells more finished goods and services abroad than it buys from other nations: - Y will be less than C + I + G. - net exports will be positive. - net exports will be negative. - imports will exceed exports.
Real GDP Growth
If pressed to choose a single indicator of current economic performance, most economists would choose?
Real GDP, that is, real GDP calculated using the same prices in all years
If we want to compare GDP over time, we should always compare?
Is a poor measure.
In regard to distribution of income, GDP: - tends to overestimate the equality of the distribution of income. - per capita is reasonably accurate and can be used in analysis, as all employees' compensation grows together. - is highly accurate and useful in analysis. - is a poor measure.
Y=Nominal GDP (the market value all finished goods and services) C=The market value of consumption goods and services I=The market value of investment goods, also called capital goods G=The market value of government purchases NX=Net exports, defined as the market value of exports minus the market value of imports
In the National Spending Approach to GDP what do the variables Y, C, I, G, and NX represent?
Added to U.S. GDP
Nissan has decided to open a factory in Missouri in an effort to avoid tariffs. The cars produced in that plant are:
Inflation (changes in prices)
Nominal Variables have not been adjusted for?
Consumption (Spending on cars, healthcare, etc)
Private spending on finished goods and services is known as?
Almost a month after the quarter is over
The estimate of quarterly GDP is not ready for release until?
An improvement in well-being that is not reflected in GDP.
The growth in leisure time in the United States over the past four decades is: - a reduction in well-being that is reflected in GDP. - a reduction in well-being that is not reflected in GDP. - an improvement in well-being that is reflected in GDP. - an improvement in well-being that is not reflected in GDP.
GNP
The market value of all finished goods and services produced by a country's permanent residents, wherever located, in a year is the definition of:
GDP (Gross Domestic Product)
The market value of all finished goods and services produced within a country in a year is: - BEA - CPI - GNP - GDP
U.S. GNP only.
The market value of the output produced in another country by a permanent U.S. resident would be included in: - neither U.S. GDP nor U.S. GNP. - both U.S. GDP and U.S. GNP. - U.S. GDP only. - U.S. GNP only.
1. Biases Over Time 2. Biases Across Nations
The omissions of nonpriced production introduces two biases into GDP statistics which are?
Goods and Services
The output of the economy includes what two things?
Business Fluctuations
The short-run movements in real GDP around its long-term trend are called:
