Ch. 10 2013 H

CIGXM? Sharon gets a new video camera made in the United States.

Consumption

To find Inflation Rate use

GDP Deflator

CIGXM? Van buys a new set of tools to use in his plumbing business.

Investment

The sale of the old Victorian house to the Jackson family (does/does not) affect GDP because GDP only includes (past/current) production of goods and services.

Does Not Current

I/E Athleticus, a U.S. shoe company, produces a pair of sneakers at a plant in Vietnam on March 11, 2017. Athleticus imports the pair of sneakers into the United States on May 29, 2017.

Excluded from GDP

I/E Rotato, a U.S. tire company, produces a set of tires at a plant in Michigan on September 25, 2017. It sells the set of tires to Speedmaster for use in the production of a two-door coupe that will be made in the United States in 2017. (Note: Focus exclusively on whether production of the set of tires increases GDP directly, and ignore the effect of production of the two-door coupe on GDP.)

Excluded from GDP

I/E You chop down a cherry tree on your property in California and make a dining room table in 2017. A similar table sells for $800 in a local furniture store.

Excluded from GDP In theory, the market value of the cherry table should be included in GDP, but because estimating the value of do-it-yourself activities is difficult, such items are generally excluded when the Bureau of Economic Analysis calculates the value of U.S. GDP.

CIGXM? Paolo's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China.

Export (X)

T/F Transfer payments are accounted for in the consumption component of GDP.

False

T/F If GDP included goods that are resold, it would be a more accurate measure of economic well-being.

False- If GDP included goods that are resold, it would be a more accurate measure of economic well-being.

CIGXM? The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore.

Government Purchases

CIGXM? Paolo buys a sweater made in Guatemala

Import (M) and Consumption when Paolo buys a sweater made in Guatemala, the value of the sweater is added to the exports category for Guatemala and the imports category for the United States. Furthermore, because the sweater is bought in the United States, it is also included in the consumption category, as mentioned previously.

I/E Chocolate Express, a Swiss chocolate company, produces a chocolate bar at a plant in Illinois on December 14, 2017. An elementary school student buys the chocolate bar on December 24.

Included in GDP

I/E Zippycar, a U.S. automobile company, produces a convertible at a manufacturing plant in Minneapolis on January 6, 2017. It sells the car at a dealership in Miami on February 2, 2017.

Included in GDP

purchasing a new house is considered ____________ and not ____________ because a house can be used as an income-generating asset

Investment Consumption

The gross domestic product (GDP) of the United States is defined as the ______________________________ all ____________________________________ _______________________ in a given period of time.

Market value of Final Goods and services produced Within the US

Households earn their income when firms ________ or ____ these factors of production to use them to produce ______ and ________.

Purchase, Rent Goods, Services

Why is real GDP a more accurate measure of an economy's production than nominal GDP? Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes. Real GDP is not influenced by price changes, but nominal GDP is.

Real GDP is not influenced by price changes, but nominal GDP is.

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation. Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? The costs of air and water pollution The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The leisure time enjoyed by households Funds spent by city governments to renovate their buildings

The costs of air and water pollution The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The leisure time enjoyed by households

T/F For the economy as a whole, expenditures must equal income.

True

Households earn income when __________ purchase ___________________ in markets for factors of production.

firms, labor and capital

In the circular-flow model of an economy, households own all

the factors of production