Econ 2

Inflation is a:

general rise in prices

Which phase of the business cycle occurs immediately before a trough?

recession

GDP can be found either by adding up all of the __________ or all of the __________ in the economy.

spending; income

A benefit of using GDP per capita instead of GDP is that it:

takes into account the size of the population when measuring the value of the goods and services a country produces.

Category Billions Proprietors' income $300 Capital consumption allowance 440 Federal government purchases of goods and services 200 Compensation of employees 800 Personal consumption expenditures 950 Corporate profits 90 Exports 60 Gross private domestic investment 500 Rental income 30 State and local government purchases of goods and services 150 Net interest 100 Federal government deficit 250 Imports 90

$1,770 billion

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals:

$140

(Table) Suppose a loaf of bread goes through the following stages of production, with the values noted at the end of each stage: Stage Value 1. Farmer's wheat $0.65 2. Miller's flour $1.20 3. Baker's bread $1.80 4. Grocer's bread $2.65 The sale of the loaf of bread adds _______ to GDP.

$2.65

Suppose the market basket of goods and services cost $3,500 in 1996 but today costs $4,250. Using 1996 as the base year, the consumer price index for today is:

121.4

Suppose the Bureau of Labor Statistics collects the data presented in the following table: Year Cost of Basket 2010 $200 2011 $230 2012 $250 If 2010 is the base year, then the consumer price index for 2012 is:

125

The event that stimulated the U.S. government's commitment to tracking the economy's health through a national income accounting system was the:

Great Depression.

_____ is an index of the change in the average prices for all goods and services in GDP, the broadest measure of inflation.

The GDP deflator

_____ is a measure of the change in average prices paid by urban consumers for a typical market basket of goods and services.

The consumer price index

_____ is an overall decline in prices throughout the economy.

Deflation

What is an example of a final good?

bacon purchased at a grocery store

Alternating periods of macroeconomic expansion and contraction are known as:

business cycles.

In using the income approach to GDP, the largest category is:

compensation of employees.

The largest component of GDP is:

consumption expenditures

GDP includes outputs produced _____ but it does not include outputs produced _____.

inside the United States by foreign citizens; outside the United States by U.S. citizens

The high point of a business cycle is called the:

peak

Which of the following items is NOT included in gross private domestic investment?

purchases of common stock