Chapter 4- The National Income and Product Accounts

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$250 to the GDP

Whip-It manufactures blenders. In 2009 it had $50,000 of blenders in inventory. In 2010 it sold $300,000 of blenders to consumers and had $40,000 of blenders in inventory. How much did blenders produced by Whip-it add to GDP in 2010?

$290,000

GDP =

C + I + G + X

real GDP

GDP adjusted for price changes

what is real GDP?

GDP adjusted for price changes

If XYZ Corporation buys an original Matisse painting to hang in its board room, then

GDP is unaffected because it is a second hand sale

national income and product accounts (NIPA)

a comprehensive group of statistics that measures various aspects of the economy's performance

underground economy

all the illegal production of goods and services and legal production that does not pass through markets

the bulk of "investment" comes from

businesses

if GDP increases from one year to the next, we can conclude that

either prices or production have increased

two ways the GDP is calculated

expenditures approach and income approach

investment expenditures

expenditures by businesses on plant and equipment and the change in business inventories

net exports

exports minus imports

in the equation GDP=C+I+G+NX, NX stands for

exports-imports

government expenditures

goods and services sold to the government

what happens to real GDP when prices rise and production levels fall?

it decreases

gross domestic product (GDP) GDP deflator

measures the dollar value of production within the nations borders

if you bought a 1957 chevy from a friend, what effect would that have on the GDP

no effect because it's a second hand sale

cabbages grown in your summer garden are

not counted in the GDP

what does GDP measure?

production of final goods and services within a nations borders and income earned during the production process

GDP is calculated for each_______ and by _________

quarter; The Bureau of Economic Analysis

intermediate sales

sales to firms that will incorporate the item into their final product