Chapter 5: GDP
To find GDP we have to use a ___ year
base
GDP Deflator =
(Nominal GDP / Real GDP ) x 100
What components of GDP (if any) would each of the following transactions affect? The Jackson family buys an old Victorian house from the Walker family.
GDP is not affected, nothing new is produced
What does the word investment mean in economics?
The purchase of capital to produce more goods
Formula for GDP
Y= C + I + G + NG
GDP Deflator Growth Rate=
(New Deflator - Old Deflator) / Old Delfator x 100
3 MacroEconomic Variables
1. GDP 2. Inflation Rate 3. Unemployment Rate
The GDP deflator in the base year will always equal ____
100
To Calculate growth of X rate over n years=
100- (X final - X beg) ^ 1/n - 1
If the price of a hot dog is $2 and the price of a ham- burger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers.
15
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 Barna- by's store to be sold later. What is GDP here?
80
GDP Deflator
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
If all quantities produced rise by 10 percent and all prices fall by 10 percent, which of the following occurs? a. Real GDP rises by 10 percent, while nominal GDP falls by 10 percent. b. Real GDP rises by 10 percent, while nominal GDP is unchanged. c. Real GDP is unchanged, while nominal GDP rises by 10 percent. d. Real GDP is unchanged, while nominal GDP falls by 10 percent.
B
Why do we substract net imports?
Becasue they are already included in consuption
______: Alternating periods of economic expansion and contraction
Business Cycles
4 Components of GDP
C I G NE
An American buys a pair of shoes made in Italy. How do the U.S. national income accounts treat the transaction? a. Net exports and GDP both rise. b. Net exports and GDP both fall. c. Net exports fall, while GDP is unchanged. d. Net exports are unchanged, while GDP rises.
C.
_____: spending on new goods and services
Consumption
What does "C" stand for?
Consuption
Which is the largest component of GDP? a. consumption b. investment c. government purchases d. net exports
Consuption
____ Goods include durable goods, such as automo- biles and appliances, and nondurable goods, such as food and clothing. Services include such intangible items as haircuts and medical care. Household spending on education is also included in consumption of services
Consuption
____ is the biggest part of the economy
Consuption
What components of GDP (if any) would each of the following transactions affect? Uncle Henry buys a new refrigerator from a domestic manufacturer.
Consuption Increases
What components of GDP (if any) would each of the following transactions affect? You pay a hairdresser for a haircut.
Consuption increases
What components of GDP (if any) would each of the following transactions affect? Your parents buy a bottle of French wine.
Consuption increases NE decrease
Which of the following does NOT add to U.S. GDP? a. Air France buys a plane from Boeing, the U.S. air- craft manufacturer. b. General Motors builds a new auto factory in North Carolina. c. The city of New York pays a salary to a policeman. d. The federal government sends a Social Security check to your grandmother.
D
______: Total production and employment are rising
Expansion
T/F Govermental purchases include social security payments
FALSE
T/F Nominal GDP uses a base year
FALSE! only Real GDP
T/F Consumption includes houses
FALSE!!
T/F GDP includes illegal drugs
FALSE!! GDP can not keep track off ilicit items
T/F GDP Deflator = (Real GDP/Nominal GDP) x 100
FALSE!!! Nominal GDP/ Real GDP
T/F GDP also values intermideate goods
FALSE!!! intermediate goods are already included n the price of final goods
What does Y stand for?
GDP
___ Adds up many different kinds of products into a single measure of economic activity
GDP
_______ is the market value of all final goods and services produced within a country in a given period of time (usually a year)
GDP
_____: A price index that tracks the average prices of goods included in GDP
GDP Deflator
What components of GDP (if any) would each of the following transactions affect? California hires workers to repave Highway 101.
Goverment Expenditures increases
What does "G" mean?
Goverment Spending
______: government spending on goods and services
Government purchases
What does GDP sand for?
Gross Domestic Product
IF a US citizen own a factory in Haiti, anything produced there would be part of ___ GDP
Haiti
Foreing goods are ____
Imports
_____ ♣ Buying physical capital to get more goods and services ♣ Includes buying new homes
Invesment
What does "I" stand for?
Investment
______: spending on business capital, residential capital and inventories that will be later used to produce more goods and services
Investment
What components of GDP (if any) would each of the following transactions affect? Honda expands its factory in Ohio.
Investment Increases
What components of GDP (if any) would each of the following transactions affect? Aunt Jane buys a new house from a local builder.
Investment increase
What components of GDP (if any) would each of the following transactions affect? Ford manufactures a Focus and sells it to Avis, the car rental company.
Investment increases, a car is investment to a rental company
What components of GDP (if any) would each of the following transactions affect? Ford sells a Mustang from its inventory to the Martinez family.
Investmnet decreases Consuption increases
______ the study of economy-wide phenomena, including inflation, unemployment, and economic growth
Macroeconomics
What components of GDP (if any) would each of the following transactions affect? The federal government sends your grandmother a Social Security check.
NO GDP effect
Does GDP take into account the purchases of used items?
NO! that would be part of another yera's GDP
If Nominal GDP grew 20% does that mean that the economy also grew 20%?
NO! this value is inflated because of changing prices
What does "NX" mean?
Net Exports
____: spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
Net Exports
Net Exports =
Net Exports - Net Imports
_____: GDP measured at current prices
Nominal GDP
We use ____ to obtain a measure of the amount produced that is not affected by changes in price
Real GDP
____: GDP measured at constant prices
Real GDP
If quantities rise over the years, but prices remain the same...
Real GDP = Nominal GDP
_____: Total production and employment are falling
Recession
T/F GDP Deflator = (Nominal GDP/Real GDP) x 100
TRUE
T/F GDP includes tangible and intangable goods
TRUE
T/F GDP measures all types of things, ie apples and organges
TRUE
T/F Government purchases includes goverment1al salaries
TRUE
T/F Investment is the spenidng of business capital to get more goods and services
TRUE
T/F Real GDP and Nominal GDP will be equal in the base year
TRUE! Just in the base year
____ is the good that has the bigest impact in GDP
The most expensive good
When NE is positive we _____ more
export
Domestic Produced Goods are _____
exports
GDP (or Gross Domestic Product), is the market value of all ____ goods and services produced within a country in a given period of time (usually a year)
final
The city of college station building a new school would be part of ____
goverment expenditure
Consumption includes spending on goods and services by households, with the exception of purchases of new ____
houses
When NE is negative we ____ more
import
Because every transaction has a buyer and a seller, the total expenditure in the economy must equal the total ____ in the economy.
income
GDP (or Gross Domestic Product), is the ______ of all final goods and services produced within a country in a given period of time (usually a year)
market value
GDP
the total market value of all final goods and services produced annually in an economy
GDP (or Gross Domestic Product), is the market value of all final goods and services produced ______ in a given period of time (usually a year)
within a country
