Module 2 Chp 5
Per capita GDP is:
GDP/population
Select all that apply A final good is:
-a good directly consumed by individuals or businesses. -directly counted as part of GDP.
Consider the following price (per unit) and output data for a hypothetical economy during a recent year: The GDP for this economy is $ million.
6750
Suppose consumption is $40b, imports are $3b, exports are $8b, government spending is $14b, and investment is $20b. Given this, GDP = $_________ b.
69 billion C + I + G + (X − M) = $40 + $20 + $14 + $(3 − 8) = $69b.
True or false: Even though measuring some things that give us pleasure (like sunsets) is difficult to do, as long as the components of GDP bear some positive relation to our well-being, it serves a purpose.
True Reason: We all realize that well-being arises from both material and intangible pleasures. But the intangibles tend to be elusive. As long as the material components of our environment bear some positive relation to our well-being, they at least serve a useful purpose.
An intermediate good is:
a good used in the production of final products
The value of capital used up in the production of goods and services is called
depreciation or GDP
The distinction of imports from domestic-made goods is _____ to establish.
difficult
Measuring the many things that give us pleasure, such as beautiful sunsets and loving parents, is:
difficult to measure because they are intangible
Gross ___ product refers to output produced within a country's borders.
domestic
GDP accounts have two sides. One side focuses on the demand side (called the ________ approach) and the other side focuses on the supply side (called the _______ approach).
expenditure, income
Consumption goods and services purchased by their end consumers are called ______ goods.
final
In order to determine GDP using the expenditures approach, all spending on _____ goods and services, not intermediate goods, is added up.
final
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
Foreign goods or ______ purchased by consumers, firms, or the government should be subtracted from GDP because the goods were not produced in the United States.
imports
Goods and services purchased from international sources are:
imports
Nominal GDP measures the value of all goods and services:
in current prices
GDP can be measured using the _____ approach, which adds the items that make up national earnings on the supply side.
income
The flow of ____ is the idea that the dollar value of output will always equal the dollar value of income.
income
If GDP included unreported income, GDP would:
increase
An increase in the average level of prices of goods and services is
inflation
An increase in the average level of prices of goods and services is:
inflation
Nominal GDP is not an accurate measure of the real level of economic activity in a country because:
inflation distorts the real value of all goods and services produced
American-owned factors of production employed in other nations creates an _____ of income for U.S. households.
inflow
An example of unreported income is ______.
lawn care that is paid "off the books" Reason: "Off the books" means that the income was not reported to the tax or census authorities.
The chain-weighted price indexes employed by the U.S. Department of Commerce to compute real GDP use a _____ average of price levels in consecutive years as an inflation adjustment.
moving
The income created when GDP is produced is called:
national income
The measurement of aggregate economic activity in terms of national income and its components is called:
national income accounting
Gross domestic product less depreciation equals ______.
net domestic product
The flow of income that starts with GDP ultimately returns to the market in the form of:
new consumption, investment, and government purchases
Investment goods consist of ______.
newly produced plants, machinery, and equipment
Computing GDP using current prices gives us ______.
nominal GDP
The GDP identifies the mix of output a country has selected, which also answers the question of _______ to produce.
what
Net investment is:
what is left over from total new private investment after depreciation
Gross domestic product refers to output produced ______.
within a country's borders
Which of the following is equal to net investment?
Gross investment minus depreciation
serves as a measure of value for calculating total output of a product. (Place only one word in the blank.)
Price
What does a nation's gross domestic product (GDP) reflect?
The total market value of all final goods and services produced within an economy in a given year
True or false: Calculating national income helps us understand FOR WHOM our output was produced.
True
True or false: Prices serve as a measure of value for calculating total output.
True Reason: Once we know the price of each good, we can calculate the value of output produced.
Select all that apply Which of the following two items are added to national income to arrive at personal income?
Capital income Transfer payments
Select all that apply When describing the flow of income, GDP returns to the market in the form of which of the following? Select all that apply.
Consumption Investment Government spending
Before payments to factor owners are made, businesses must adjust their gross revenues by _____ depreciation charges.
subtracting
The flow of income illustrates that:
the dollar value of output will always equal the dollar value of income
Society's answer to the core issue of WHAT to produce is answered by ______.
GDP
Select all that apply Which of the following is added to or subtracted from national income to arrive at personal income?
Indirect business taxes Capital income Corporate profits Transfer payments
True or false: All final purchases of plant, machinery, and equipment in a given time period are included as gross investment.
True Reason: Gross investment: Total investment expenditure in a given time period.
Which approach to GDP adds up all the spending on final goods and services that has taken place throughout the year?
Expenditures approach
Consider the following price (per unit) and output data for a hypothetical economy during a recent year: The GDP for this economy is $ million.
12,050
Suppose consumption is $100b, imports are $20b, exports are $10b, government spending is $40b, and investment is $60b. Given this, GDP = $_________ b.
190 billion
The national income accounting system employed by the United States had its origins in the
1930s
If households have paid $1,400 billion in personal taxes from a personal income of $6,200 billion, then disposable income will be $
4800
Suppose foreign-owned resources within the United States produced $250 billion of output while U.S.-owned resources employed abroad produced $310 billion of output. In this case, net foreign factor income is $
60 billion
Net domestic product is ______.
(GDP) − (depreciation)
Suppose consumption is $220b, government spending is $70b, investment is $50b, and GDP is $310b. Given this, net exports = $
-30 billion
GDP per capita means:
GDP per person
The income that American-owned factors of production employed abroad earn must be _____ net domestic product to determine national income.
added to
True or false: Government purchases include only state government expenditures on final goods and services.
False
True or false: Intermediate goods are included in the calculation of GDP.
False
Depreciation is ______.
the wearing out of plant and equipment
Instead of using the prices of a single base year to compute real GDP, the U.S. Department of Commerce uses price indexes that are said to be
chain-weighted.
At present, government spending on goods and services claims roughly _____ of total U.S. output.
one-fifth
Investment currently claims about _____ of U.S. output.
one-sixth
Disposable income equals:
personal income minus personal taxes
To understand the true changes in economic activity, we must control for changes in:
price
Imports must be subtracted from GDP because they are goods and services _____ the borders of the United States.
produced outside but purchased inside
Depreciation charges _____ GDP to the level of net domestic product (NDP).
reduce
Foreign goods purchased by American consumers, firms, or governments should be _____ GDP because the goods were produced outside the United States.
subtracted from
Gross investment is ______.
the total amount of investment purchases in a given time period