Macro Ch. 7

After calculating national income, what is added to national income to obtain GDP?

-consumption of fixed capital -statistical discrepancy

A final good is:

-counted as part of GDP -a good directly consumed by individuals or businesses

What are three domestic sectors of the economy?

-government -households -firms (businesses)

A price index:

-is normalized to 100 for the base year -measures the cost of purchasing a market basket of output across different years -always includes a base year

Government transfer payments include:

-payments to the elderly from social security -direct payments to veterans -direct welfare payments to low-income households

For the purposes of GDP accounting, government purchases include ___.

-the purchase of new military equipment -spending on highway construction

GDP=

C+Ig+G+Xn

T/F: Government purchases include only federal expenditures on final goods.

F

The primary measure of the economy's performance is its annual total output of goods and services, which is called its:

aggregate output

Which of the following is not included in investment spending in the national income accounts? a) the purchase of machinery and other productive physical capital b)spending on inventories c) the purchase of stocks and bonds d) new residential construction

c) the purchase of stocks and bonds

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

depreciation

Foreign goods or ___purchased by consumers, firms, or the government should be subtracted from GDP because the goods were not produced in the US.

imports

net exports is exports minus ___

imports

National ___ accounting measures the overall performance of the economy.

income

Goods and services that are used up in the production of final goods are called ___ goods.

intermediate

When gross investment is ___ depreciation, net investment is negative.

less than

GDP may be understated because:

non-market activities are not included in GDP

Transfer payments are excluded from government purchases in GDP accounting because:

nothing is being produced in return for the paymentq

The tern that covers all expenditures by households on goods and services is known as ___ ___ expenditures.

personal consumption

___ transfer payments are excluded from GDP because they produce no output and are simply a transfer of funds from one private individual to another.

private

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

produced within the borders of said country

___ ____ consists of the net income of sole proprietorships, partnerships, and other unincorporated businesses.

proprietor income

A nation's gross domestic product (GDP):

reflects the total market value of all final goods and services produced within an economy in a given year

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

The market value of a firm's output minus the value of the inputs the firm has bought from others is called:

value added

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