Chapter 10: Measuring a Nation's Income

only in Japan's GDP.

After graduation, an American college student moves to Japan to teach English. Her salary is included

final goods and services

Gross domestic product is the sum of the market value of the

Consumption increases by $40,000 and net exports decrease by $40,000.

How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the U.S. GDP accounts?

falls because his market income decreases.

If Mr. Keating quits his job as a teacher to home school his own children, GDP

foreigners are producing more in the United States than Americans are producing in foreign countries.

If U.S. GDP exceeds U.S. GNP, then

$500

If a cobbler buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth of shoes to consumers, the contribution to GDP is

Real GDP rises by 5 percent, while nominal GDP is unchanged.

If all quantities produced rise by 5 percent and all prices fall by 5 percent, which of the following best describes what occurs?

risen or fallen because there is not enough information to determine what happened to real output.

If nominal GDP in 2019 exceeds nominal GDP in 2018, then the production of output must have

15

If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers.

Investmenet

If your grandparents buy a new retirement home, this transaction would affect

base year, current year

Real GDP is measured in ______ prices while nominal GDP is measured in ______ prices.

Depreciation

The value of plant and equipment worn out in the process of manufacturing goods and services is measured by

a home built in 2018 and first sold in 2019.

Which of the following would be excluded from 2019 GDP? The sale of

GDP formula

Y = C + I + G + NX

GDP deflator

a measure of the price level calculated as the ratio of nominal GDP to real GDP times

Consumption

spending by households on goods and services, with the exception of purchases of new housing

Depreciation

wear and tear on the economy's stock of equipment and structures

Net exports fall, while GDP does not change.

An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction?

20 percent

An economy produces 10 cookies in year 1 at a price of $2 per cookie and 12 cookies in year 2 at a price of $3 per cookie. From year 1 to year 2, real GDP increases by

total income and total spending.

An economy's gross domestic product is

unemployment benefits

An example of a transfer payment is

$80

Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?

Disposable personal income

Disposable personal income is the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

ignores the environmental degradation from economic activity.

GDP is an imperfect measure of well-being because it

consulting services

GDP would include which of the following?

consumption, investment, government purchases, and net exports.

Gross domestic product can be measured as the sum of

Gross Domestic Product (GDP)

Measures the total income of a nation Measures two things at once: Total income of everyone & Total expenditure on the economy's output of goods and services

$40

Sam bakes a cake and sells it to Carla for $10. Woody pays Diane $30 to tutor him. In this economy, GDP is

Macoreconomics

Study of the economy as a whole

Gross Domestic Income (GDI)

The Total income in the economy

statistical discrepancy

The difference between GDI and GDP

cotton purchased by Lee Jeans

U.S. GDP would exclude which of the following?

people and factories located within the borders of the United States.

U.S. gross domestic product (in contrast to gross national product) measures the production and income of

22 percent

What is the approximate percentage increase in prices from 2018 to 2019?

13 percent

What is the percentage increase in prices from 2017 to 2018?

0 percent

What is the percentage increase in real GDP from 2018 to 2019?

$1,200

What is the value of nominal GDP for 2018?

$1,060

What is the value of real GDP for 2018?

113

What is the value of the GDP deflator in 2018?

consumption

Which is the largest component of GDP?

The federal government sends a Social Security check to your grandmother

Which of the following does NOT add to U.S. GDP?

identity

an equation that must be true because of how the variables in the equation are defined

Gross Domestic Product (GDP)

is the market value of all final goods and services produced within a country in a given period of time.

Investment

spending on business capital, residential capital, and inventories

Net Exports

spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

Government purchases

spending on goods and services by local, state, and federal governments

retained earnings

the income that corporations earn but do not pay out to their owners.

Personal income

the income that households and noncorporate businesses receive

Real GDP

the production of goods and services valued at constant prices

Nominal GDP

the production of goods and services valued at current prices

Microeconomics

the study of how individuals, households, and firms make decisions and how they interact with one another in markets

Gross national product (GNP)

the total income earned by a nation's permanent residents (called nationals)

National income

the total income earned by a nation's residents in the production of goods and services

Net National Product (NNP)

the total income of a nation's residents (GNP) minus losses from depreciation