macro chapter 5

government expenditure

interstate construction

Aggregate accounting identity

production=expenditure= income

The government (G) component of aggregate expenditure includes​

salaries to teacher, firefighter, and police officers infrastructure such as highways and bridges military hardware purchases.

If Americans still worked sixty hour weeks, as they did in 1890, __________.

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher

Consider a small country with only three​ producers, X,​ Y, and​ Z, who produce​ ink, pen, and​ paper, respectively. Y uses ink​ (output of​ X) in its production of pens. X produces 1 comma 028 liters of ink​ monthly, Y produces 58 comma 491 pens​ monthly, and Z produces 19 metric tons of paper monthly. X sells all of the ink it produces to Y at a market price of ​$354 per liter. Y sells 42 comma 146 pens at a market price of ​$0.36 per pen and stores the rest as inventory. Z sells all of its paper at the market price of ​$727 per metric ton. The annual market value of production in this economy is ​$418,437.12 . ​(Round your answer to two decimal places​.) In the economy described​ above, if we measure the economic activity by aggregating the expenditure of households and firms instead of aggregating production of​ firms, the annual market value will be the same . This is true since​ Y's output which was not sold is coded as having been purchased by Upper Y itself . Which of the following statements about gross domestic product​ (GDP) and the aggregate accounting identity are not​ true? ​(Check all that apply.​)

- GDP is a measure of sales to consumers -The aggregate accounting identity states that production-income=expenditure

Which of the following will be considered a final good in the calculation of U.S.​ GDP?

- Golf outings at courses in North Carolina - school supplies purchased by a local school board

Short coming of GDP

- does not include the value of leisure - it is not adjusted for crime and other

Production-based accounting is used to estimate GDP by

-computing for each firm the difference between sales revenue and the purchase of intermediate​ products, then summing this difference across all firms. -summing each​ firm's value added to the production process.

Economists include the word final in the definition of GDP because we​

-must avoid the error of double counting. -only seek to value the end product in a chain of production.

​Production-based accounting is used to estimate GDP by​ ____________.

-summing each​ firm's value added to the production process. - computing for each firm the difference between sales revenue and the purchase of intermediate​ products, then summing this difference across all firms.

Which is the largest component of GDP?

Consumption

Suppose U.S. drivers purchased ​$70 billion of​ ExxonMobil-produced gasoline during a recent​ year, with​ one-half purchased directly from​ ExxonMobil-owned gas stations and​ one-half from independent​ (or third-party) gas stations. Suppose further that ExxonMobil purchased the oil​ (which it refined into​ gasoline) from foreign producers for ​$24 billion and that it receives 60 percent of the sales revenue that independent stations generate from selling ExxonMobil gasoline.

In this​ case, the value added by ExxonMobil to U.S. GDP is ​$32 billion

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

Which one of the following is not in the circular flow diagram as one of the three systems of GDP​ measurement?

Taxes are shown as a flow from the private sector to the public sector.

Imports are subtracted from the calculation of GDP in the national income accounting identity because

Expenditure on foreign production is already included in the consumption, investment and government expenditure terms.

circular flow model

Households supply factors of production in exchange for income

Which of these is the national income accounting identity? also associated with the expenditure-based accounting method

Y = C + I + G + X - M

When government statisticians gather and analyze data on the purchases of goods and services produced in the domestic​ economy, they are measuring GDP using the​ ____________.

expenditure-based accounting method

Macro

focuses on unemployment, growth, trade, and inflation

Which one of the sets of terms given below would correctly complete the following definition of​ GDP? "Gross Domestic Product is the​ ____ value of the​ ____ goods and services produced​ _____ of a country during a particular period of​ time."

​market; final; within the borders.

items are classified as final goods only if they are the:

end product in a chain of production

If the level of aggregate expenditure was​ $16.8 trillion in​ 2013, the level of aggregate income in the economy during 2013 was​ ___________.

also​ $16.8 trillion because of the identity between aggregate expenditure and income.

A​ firm's value added refers to the dollar value of​ ____________.

a​ firm's sales revenue minus the​ firm's purchases of intermediate products from other firms.

The category of expenditure that accounts for the highest share of GDP in the United States is

consumption

As the value of a country's real GDP increases, the country is likely to:

devote more resources to pollution reduction

Which of these is not a shortcoming of GDP as a measure of welfare?

It only counts final goods and services and not intermediate goods.

Gross domestic product

Market value of all final goods & services produced in a country during a period of time

Mariam cleans her house twice a week. This task would cost Mariam $100 a week if she were to hire someone to clean. Mariam's activity adds to the GDP.

Nothing

National Income accounts

A framework used to measure the level of aggregate economic activity in a country

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house

Capital income is

Income derived from owning physical and financial capital

Which of the following is included in the economist's definition of investment?

The purchase of new machines, factories, or houses

Real GDP

The value of goods & services evaluated at base year prices

In developed economies, labor income accounts for ______ of total income payments.

2/3

Which of the following are not counted as final goods and hence not included in the calculation of GDP?

Intermediate goods