Mcgraw Hill Chapter 7: Measuring Domestic Output and National IncomeAssignment

Government transfer payments include all of the following except:

wage payments to police officers

Which of the following are part of taxes on production and imports?

License fees Business property taxes Customs duties General sales taxes Excise taxes

What is the net income of sole proprietorships, partnerships and other unincorporated businesses?

Proprietor's income

Transfer payments are not included in GDP because they do not generate ______.

current output

Gross rental income minus ____ equals net rent

depreciation

GDP reveals nothing about the way output is distributed.

true

Under the income approach to GDP, the wages, salaries, and benefits paid by businesses and government fall under the category of compensation of _________

employees, workers, labor, or laborers

The view that GDP is the sum of money spent on buying final goods and services is called the ______ approach.

expenditure, output, spending, or expenditures

The market value of all final goods and services produced within the borders of a given country during a given period of time is the definition of ______.

gross domestic product

One of the flaws of GDP is that it ______.

ignores transactions that takes place in illegal markets or nonmarkets

What creates a problem in using money to value GDP?

inflation

Income earned through the use of American-owned resources for services and production is called ______ income.

national

All the income that is earned from American-owned resources is called ______.

national income

Gross __________ income includes all income earned from American-owned resources plus government revenue from taxes on production and imports.

national or domestic

What is gross rental income minus depreciation of the rental property?

net rent

GDP may be understated because ______.

nonmarket activities are not included in GDP

The main reason to participate in the underground economy is to avoid ______.

reporting actual income and paying income taxes

Depreciation of capital is _____.

the annual amount allocated to wear and tear on private investment

______ goods are included in the calculation of GDP, while ______ goods are not included.

Final; intermediate

GDP is equal to C + Ig + _________ + Xn.

G or Government

Which of the following are components of the expenditure approach to measuring GDP?

Gross private domestic investment Personal consumption expenditures Government purchases

What are reasons that the underground economy exists?

People want to avoid taxes. People are engaged in illegal activities.

One of the shortcomings of GDP is that it doesn't reveal anything about which of the following?

The distribution of output

Gross domestic product (GDP) may be calculated as the sum of ______.

consumer spending, investment spending, government purchases of goods and services, and net exports

Retained earnings are a category of ______.

corporate profits

Gross domestic product calculations count only final goods and services because ______.

counting all intermediate goods and services would lead to double-counting of many activities

The money paid by private business to the suppliers of loans used to purchase capital or money that households receive on savings accounts is called:

interest.

Including the value of___________ goods along with the value of final goods in the calculation of GDP would amount to multiple counting of goods and distort GDP.

intermediate

The use of money as a common denominator to sum output into a meaningful measure of GDP creates a problem because ______ changes.

the value of money itself

Social Security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public ___________ payments.

transfer or assistance

The ______ sector of the economy is hard to track and therefore not included in ______.

underground; GDP

The sale of ______ goods is excluded from the calculation of GDP because they contribute nothing to current production.

used

In order to construct a reliable price index, government accountants must assign a ______ to each of several categories of goods and services.

weight

The real-world, more complex GDP price index used in the United States is called the chain-type annual ___________ price index

weights, weight, or weighted

Which of the following is not an example of a personal consumption expenditure?

A fighter jet

Select all of the benefits of national income accounting.

Assesses the health of the economy Enables formulation of policies to improve or safeguard the economy's health Tracks the long-run course of the economy

_________ _________ consists of the net income of sole proprietorships, partnerships, and other unincorporated businesses.

Blank 1: Proprietor, Proprietor's, Proprietors', or Proprietors Blank 2: income

Viewing GDP in terms of earnings derived or created by producing something is called the income _________ approach.

Blank 1: income, allocations, earnings, allocation, or earning

Income earned through the use of American-owned resources for services and production is called ________ income

Blank 1: national or domestic

Dividing nominal GDP by the price index is one way of calculating

Blank 1: real Blank 2: GDP

If C represents consumption expenditure, Ig represents gross investment, In represents net investment, G represents government expenditure, Xn represents net exports, and Xg represents gross exports, GDP is ______.

C + Ig + G + Xn

Which are examples of negative gross domestic by-products?

Congestion Polluted water Noise

National income accountants subdivide corporate profits into which categories?

Dividends Corporate income taxes Undistributed corporate profits

Which approach to GDP adds up all the spending on final goods and services that has taken place throughout the year?

Expenditures approach

Which of these are components of government purchases in GDP?

Expenditures for publicly owned capital Expenditures for goods and services that the government consumes in providing public services

Unlike final goods, intermediate goods are included in the calculation of GDP.

False

Because members of the underground economy do not report their full income to the Internal Revenue Service, their economic activities are not included in the calculation of __________

GDP or real GDP

National______________ accounting measures the overall performance of the economy.

Income

_________ consists of the money paid by private businesses to the suppliers of loans used to purchase capital.

Interest

What are the two ways to adjust nominal GDP to reflect price changes?

Multiply the current year's output by price of the output in the base year. Divide nominal GDP by the price index.

What do economists use to calculate GDP under the income approach?

National income

What enables economists to track the long-run course of the economy?

National income accounting

Which of the following measures the economy's overall performance?

National income accounting

As a measurement of economic output and the nation's wealth, GDP fails to account for which of the following?

Nonmarket activities Improved product quality Leisure time The underground economy

Why are transfer payments excluded from government purchases in GDP accounting?

Nothing is being produced in return for the payment.

Which of the following are included in compensation of employees?

Payments by employers into private pension plans for employees Wages and salaries Payments by employers into social insurance for employees

__________ transfer payments are excluded from GDP because they produce no output and are simply a transfer of funds from one private individual to another.

Private

What is it called when there is a transfer of funds from one private individual to another?

Private transfer payment

What are noneconomic sources of well-being that are not considered in a country's GDP?

Reduction of drug and alcohol abuse Peaceful international relations Reduction of crime

For the purposes of GDP accounting, what do government purchases include?

Spending on highway construction The purchase of new military equipment

Why are sales of secondhand goods are excluded from the calculation of GDP?

They do not contribute to current production.

GDP only counts final goods and services to avoid multiple counting of goods.

True

The term that covers all expenditures by households on goods and services is known as ____________ ____________ expenditures.

blank 1: personal or private Blank 2: consumption or consumer

Net domestic product (NDP) is equal to GDP minus _____.

depreciation

Net domestic product is gross domestic product less ______.

depreciation

The estimate of how much of the private capital equipment is being used up each year is called ___________.

depreciation

The amount of income that households have left over after paying their personal taxes is ______ income.

disposable

A country's gross domestic product (GDP) is a measure of ______ produced within an economy during a specific period of time.

dollar value of all final goods and services

Viewing GDP in terms of earnings derived or created by producing something is called the ______ approach.

income

The view that GDP is the sum of money spent on buying final goods and services is called the _________ approach.

expenditure, output, spending, or expenditures

The view of GDP as the sum of money spent on purchases is called the ______ approach.

expenditures

GDP is a perfect and complete measure of the well-being of a country.

false

In general, GDP includes unpaid work.

false

In order to determine GDP using the expenditures approach, all spending on ______ goods and services, not intermediate goods, is added up.

final

Only ______ are included in the calculation of GDP in order to avoid multiple counting of goods and services.

final goods and services

GDP can be measured using the ______ approach, which adds up all of the items that make up national earnings.

income

The amount of income that households receive, whether earned or unearned, is called ______ income.

personal

Disposable income equals:

personal income minus personal taxes.

All income received by households, whether earned or unearned, is called __________ income

personal or private

When considering national income, general sales taxes, business property taxes, license fees, and custom duties are all included in the account called taxes on ________ and imports

production

The ________ (social/opportunity) costs of negative gross domestic by-products reduce a nation's economic well-being.

social