Chapter 23

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

$40.

How are Net Exports calculated in GDP?

Exports - Imports.

The two ways of calculating GDP are called:

expenditure and income.

f total spending rises from one year to the next, at least one of two things must be true

the economy is producing a larger output of goods and services, or goods and services are being sold at higher prices.

An economy's gross domestic product is

total income and total spending.

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

20 percent.

Which of the following would be a topic you could expect to study in microeconomics?

Supply and Demand

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

falls because his market income decreases.

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

the federal government sends a Social Security check to your grandmother.

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?

$80

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.

15

____________ ___________ are not made in exchange for a currently produced good or service (Example: government pays a Social Security benefit to an elderly person or an unemployment insurance benefit to a recently laid off worker

Transfer Payments

GDP is an imperfect measure of well-being because it

ignores the environmental degradation from economic activity.

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

only in Japan's GDP

Which is the largest component of GDP?

consumption

Because nominal GDP and real GDP must be the same in the base year, the GDP deflator for the base year always equals ____

100

Microeconomics refers to the economy as a whole, whereas macroeconomics refers to the economic choices of individuals.

False

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

Gross domestic product

The _________ rate is the percentage change in some measure of the price level from one period to the next

Inflation

__________ _____________ equal the foreign purchases of domestically produced goods (exports) minus the domestic purchases of foreign goods (imports).

Net Exports

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

Net exports fall, while GDP does not change.

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

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

______- GDP, which is the production of goods and services valued at constant prices. We calculate real GDP by first designating one year as a _________ year.

Real and base

The production of goods and services valued at current prices, is called _________ GDP.

nominal