Macro CH.10

Real GDP is the yearly production of final goods and services valued at

Constant prices

The consumption component of GDP includes spending on

Durable goods, non durable goods, and services

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

Ellen's but not Sam's

Government purchases include spending on goods and services by

Federal, state, and local government

The inflation rate in year 2 equals

GDP deflator year 2- GDP deflator year 1/ GDP deflator year 1 X 100

Net exports equal

exports minus imports

GDP is defined as

value of all final goods and services produced within a country in a given period of time

If nominal GDP doubles and the GDP deflator doubles, then real GDP

remains constant

In the economy of Ukzten in 2010, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $2000 and imports were $600. What was their investment in 2010?

$1600

If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?

$17 billion

Whip-It manufactures blenders. In 2009 it had $50,000 of blenders in inventory. In 2010 it sold $300,000 of blenders to consumers and had $40,000 of blenders in inventory. How much did blenders produced by Whip-it add to GDP in 2010?

$290,000

A country's real GDP rose from 500 to 550 while its nominal GDP rose from 600 to 770. What was this country's inflation rate?

16.7%

Which are included in GDP?

1: Carrots purchased at a farmers market and eaten by your family 2: Carrots purchased at a grocery store and eaten by your family

If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is

120, and this indicates that the price level has increased by 20 percent since the base year

What items is counted as part of government purchases?

1: The federal government pays the salary of a navy officer 2: The state of Nevada pays a private firm to repair a Nevada state highway 3:The city of Las Vegas, Nevada pays a private firm to collect garbage in that city

These are questions macroeconomists would address

1: Why is average income high in some countries while it is low in others? 2:Why do production and employment expand in some years and contract in others? 3: Why do prices rise rapidly on some periods of time while they are more stable in other periods?

What is included in the investment component of GDP?

1: households purchases of newly constructed homes 2: net additions to firms inventories 3: firms purchases of capital equipment

In a simple circular-flow diagram, forms use the money they get from a sale to

1: pay wages to workers 2: pay rent to landlords 3: pay profit to the firms owners

Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells $2 per unit. Production of good A contributes

3/4 times as much to GDP as the production of good B

A form of government spending that is not made in exchange for a currently produced good or service is

A transfer payment

Which is an example of a durable good and which is not?

IS 1: A refrigerator 2: an automobile 3: a furnace NOT 1: a business suit

Which is an example of a non durable good and which is not?

IS 1: a loaf of bread 2: a pair of jeans 3: a pound of bacon NOT 1: a microwave

If an economy's GDP falls, then it must be the case that the economy's

Income and expenditure both fall

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

Nominal GDP but not real GDP

Ralph pays someone to mow his lawn, while Mike mows his own lawn. Regarding these two practices, which of the following statements is correct?

Only Ralph's payments are included in GDP

Consumption consist of spending by households on goods and services, with the exception of

Purchasing of new houses

If real GDP doubles and the GDP deflator doubles, then nominal GDP

Quadruples

What else is included in the investment component of GDP?

Spending on new business equipment such as power tools but not spending on stocks and bonds

Sally purchases a classic 1964 car she saw for sale on someone's lawn. She then purchases some new parts and spends 120 hours refurbishing the car which she keeps. What is included in GDP?

The amount she paid to buy the new parts

A Minnesota farmer buys a new tractor made in Iowa by a German company, as a result:

U.S. investment and GDP increase, but German GDP is unaffected

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP

Macroeconomists study

economy-wide phenomena

If total spending rises from one year to the next, then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

Gross domestic product measures

income and expenditures

For an economy as a whole,

income must equal saving

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100

Transfer payments are

not included in GDP because they are not payments for currently produced goods or services

What is always measured in prices from base-year

real but not nominal GDP

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year