economics chapter 7

Real GDP is gross domestic product measured

to reflect changes in the price level

Social Security payments, welfare payments, and veterans' payments that the government makes directly to households are called government public ________ payments

transfer

______ GDP, or adjusted GDP, reflects changes in the price level

Real

Which of the following is counted as gross private domestic investment?

Residential construction

The annual amount allocated to the wear and tear on private investment is called or termed

depreciation

A country's exports are included in GDP when the goods and services are:

produced within the borders of said country

GDP is:

C+Ig+G+Xn

A final good is

Counted as part of GDP; A good directly consumed by individuals or businesses.

Net exports include goods produced:

Domestically that are sold abroad, less goods that are produced abroad that are sold domestically

_____ goods are included in the calculation of GDP while _____ goods are not included

Final; Intermediate

Which of the following are components of the expenditure approach to measuring GDP?

Gross Private Domestic Investment; Personal consumption expenditures; Government purchases

Including the value of ________ goods along with the value of final goods in the calculation of GDP would amount to multiple counting of goods and distort GDP

Intermediate

As a measurement of economic output and the nation's wealth, GDP fails to account for:

Leisure time; The underground economy; Improved product quality; Non-market activities

What are the two ways to adjust nominal GDP to reflect price changes?

Multiply the current year's output by price of the output in the base year; Nominal GDP divided by the price index

Gross private domestic investment consists of:

Newly produced housing; any changes in inventories; spending on new plant and equipment during the year

When computing GDP using current prices, it is referred to as

Nominal GDP

The formula for real GDP is:

Nominal GDP divided by a price index (in hundredths)

What are the three categories of personal consumption expenditures?

Nondurable consumer goods; Durable consumer goods; services

The term that covers all expenditures by households is ______ ______ expenditures

Personal consumption

A measure of the value of a specified collection of goods and services in a given year as compared to the value of a highly similar collection of goods and services in a reference year is called a _______ _______

Price index

Which of the following is not included in investment spending in the national income accounts?

The purchase of stocks and bonds

One of the flaws of GDP is that is:

ignores transactions that do not take place in organized markets

Viewing GDP in terms of earnings derived or created by producing something is called the ______ approach

income

Goods and services that are purchased for resale or for further processing or manufacturing are called ______ goods.

intermediate

When gross investment is less that depreciation, net investment is _____

negative

The view of GDP as the sum of money spent on buying it is called the aggregate ______ approach

output

Imports must be subtracted from GDP because they are goods and services _____ the borders of the United States

produced outside

More abundant leisure increases_____, but it _______ real GDP

social welfare; decreases

Private domestic investment expenditures consist of:

spending on new plant and equipment; any increase in inventories; newly produced housing

In national income accounts, value added refers to:

the difference in the market value and the cost of inputs purchased from other firms

The formula for calculating a price index is:

the price of a market basket in a specific year divided by the price of the same market basket in the base year multiplied by 100

For the purposes of GDP accounting, government purchases include

the purchase of new military equipment; spending on highway construction

The sale of _____ is excluded from the calculation of GDP because they contribute nothing to current production.

used goods

Net private domestic investment is:

what is left over from total new private investment after depreciation

When gross investment and depreciation are equal, the value of net investment is ______

zero