Chapter 6 Macro

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True or False Value added is the difference between the value of good as they leave a stage of production and cost of the goods as they entered that stage of production.

False

What should be subtracted from GDP to calculate national income?

depreciation

The total value of all capital goods newly produced in a given period is

gross investment.

Which of the following would be counted in 2003's GDP? A. the value of a loan you take in 2003 .B. the value of a TV that was produced in 2002 but not sold until 2003 C. the bonus check a stockbroker gets from his/her company in 2003 D. the value of a bond sold by the federal government

the bonus check a stockbroker gets from his/her company in 2003

The value of what KFC produces in Japan is included in the U.S. ________ and in the Japanese ________.

GNP; GDP

Which of the following is NOT counted in the GNP of the United States? A. The wage of a U.S. citizen who works in a foreign country for a foreign firm. B. The interest earned by a U.S. bank on loans to a business firm located in Brazil. C. The profit earned by a restaurant located in the United States but owned by a Mexican company. D. The value of services that are produced by state and local governments in the United States.

The profit earned by a restaurant located in the United States but owned by a Mexican company.

Gross national product is the total market value of

all final goods and services produced by resources owned by a country, regardless of where production takes place.

Gross domestic product measures: A. the total spending of everyone in the economy B. the value of all output in the economy. C. the total income of everyone in the economy. D. all of the above

all of the above

True or False Final sales plus changes in inventories equals GDP.

True

True or False New houses count as consumer durables.

True

True or false Depreciation is included in GDP, but excluded from NNP.

True

A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as

part of gross private domestic investment.

Which of the following is NOT included in 2008's GDP? A. the value of a motorcycle produced in the United States and exported to Japan B. the profit earned in 2008 from selling a stock that you purchased in 2005 C. the value of a motor that is used in the production of a lawn mower D. the commission earned by a headhunter when she locates a job for a client

the profit earned in 2008 from selling a stock that you purchased in 2005

Net national product is

A measure of all goods and services produced by a country in a year, including production from its investments abroad, minus the loss or degradation of natural resource capital as a result of productivity.

The change in business inventories is measured as

GDP minus final sales.

The GDP deflator is the

The ratio of nominal GDP to real GDP multiplied by 100

Which of the following is included in both the U.S. GDP and GNP? A. The value of all cars produced by Ford in Mexico. B. The value of all cars produced by General Motors in the U.S. C. The value of all cars produced by Toyota in the U.S. D. The value of cars produced by Nissan in Japan and the U.S.

The value of all cars produced by General Motors in the U.S

True or False Consumers can spend their entire personal income.

True

In 2008 the change in business inventories is -$70 billion and GDP is $200 billion. Final sales in 2008

are $270 billion.

If in a year there is a positive inventory investment, then final sales

are less than GDP.

Net interest is the interest on loans paid by

businesses.

The largest income component of GDP is

compensation of employees

The single largest expenditure component in GDP is

consumption.

Nominal GDP is gross domestic product measured

current dollars

If the change in business inventories is zero, then final sales are

equal to GDP.

Saving rates tend to ________ during boom times and ________ during recession periods

fall; rise

The total market value of all final goods and services produced within a given period by factors of production located within a country is

gross domestic product.

If net investment is zero, then

gross investment equals depreciation

Net investment is

gross investment minus depreciation

Net investment equals

gross investment minus depreciation.

If the value of net exports is negative, then

imports exceed exports.

Nominal GDP measures the value of all goods and services

in current dollars.

In 2007 final sales equal $200 billion, and the change in business inventories is $50 billion. GDP in 2007

is $250 billion

In 2006 final sales equal $350 billion and the change in business inventories is -$60 billion. GDP in 2006

is $290 billion

Exports equal

net exports + imports.

If the GDP deflator is greater than 100, then

nominal GDP is greater than real GDP

Interest paid by households and by the government is

not counted in GDP because it is not assumed to flow from the production of goods and services.

Double counting can be avoided by

not counting the value of intermediate goods in GDP.

The total income of households is

personal income

Gross domestic product measured in terms of the prices of a fixed, or base, year is

real GDP.

Personal income is national income minus

the amount of national income not going to households

The change in capital stock in a period is equal to

the amount of the capital stock at the beginning of the period plus gross investment minus depreciation.

If no foreign companies produce in a country, but many of the country's companies produce abroad, then

the country's GNP will tend to exceed its GDP.

The personal saving rate is

the percentage of disposable personal income that is saved.

Which of the following is an example of an intermediate good? A. the dough you buy to fix yourself a pizza for dinner B. the chocolate you buy to make yourself some cookies C. the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to D. lumber you buy to build a house for your dog

the pizza sauce you purchase to make pizzas to sell for a fund-raiser for an organization you belong to

Which of the following would NOT be counted in 2007's GDP? A. the value of a 2005 boat you purchase from a boat dealer in 2007 B. the 2007 salary of a used motorcycle salesperson C. the commissions earned by a real estate agent in selling condominiums built prior to 2007 D. the value of a refrigerator manufactured in 2007 but not sold in 2007

the value of a 2005 boat you purchase from a boat dealer in 2007

GDP includes

the value of all final goods and services.

In 2007, GDP was exactly equal to final sales. This implies that

there was no change in inventories that year.

8 dishwasher machines in 2005. The company sold 6 in 2005 and added 2 to its inventories. The market value of the dishwasher machines in 2005 was $200 per unit. What is the value of this company's output that will be included in the 2005 GDP?

$1,600.

Suppose that net investment in 2008 was $20 billion and depreciation was $4 billion. Gross investment in 2008 was

$24 billion.

When calculating GDP, exports are ________ and imports are ________.

added; subtracted

The GDP of the U.S. in 2002 was around $10 trillion. This means A. that the value of output in the U.S. in 2002 was around $10 trillion B. that total income in the U.S. in 2002 was around $10 trillion C. that total spending on final goods and services in the U.S. in 2002 was around $10 trillion. D. All of the above

All of the above

Profits earned in the United States by foreign-owned companies are included in

The U.S. GDP but not GNP.

Which of the following is an example of a final good or service? A. wheat a bakery purchases to make bread B. coffee beans Starbucks purchases to make coffee C. lumber purchased by a construction company to used in building houses D. a computer purchased by Federal Express to track shipments

a computer purchased by Federal Express to track shipments

Depreciation is

a lessening in value

Which of the following is a good or service counted in GDP? A. tires Ford buys to put on a car B. a used tire you buy for your personal car C. a new tire you buy for your personal car D. used tires bought by a used car dealer to put on a car on his lot

a new tire you buy for your personal car

Personal income

may be greater than or less than national income.

The equation for GDP using the expenditure approach is

GDP = C + I + G + EX - IM.

True or False Total income in the economy can sometimes be greater than total spending

False

True or False Transfer payments are subtracted from national income to get to personal income.

False

True or False GDP measures the total income of everyone and the total spending by everyone in the economy.

False

True or False If investment is larger than depreciation, the capital stock decreases.

False

True or False Stock market transactions are part of GNP.

False

True or False The income of U.S. citizens working abroad counts in U.S. GDP.

False


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