macro test 1

Why do economists use real GDP rather than nominal GDP to gauge economic well-being?

real GDP is not affected by changes in prices, so it reflects only changes in the amounts being produced. You cannot determine if a rise in nominal GDP has been caused by increased production or higher prices.

gdp is defined as

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

bc every transaction has a buyer and a seller...

every transaction contributes equally to an economys income and to its expenditure

the value of the housing services provided by the economys owner-occupied houses is...?

included in gdp and the estimated rental values of the houses are used to place a vaue on these housing servies

gdp measure?

income and expenditures

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?

$22,000

In 2009, Corny Company grows and sells $2 million worth of corn to Tasty Cereal Company, which makes corn flakes. Tasty Cereal Company produces $6 million worth of corn flakes in 2009, with sales to households during the year of $4.5 million. The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company's inventory at the end of 2009. The transactions just described contribute how much to GDP for 2009?

6 million

if real gdp is 5100 and nominal gdp is 4900 then the gdp deflator is ?

96.1, so prices are lower than in the base year

Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?

GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. what would happen to gdp?

GDP would definitely increase because GDP excludes environmental quality.

Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

caused measured gdp to rise

List the four components of GDP. Give an example of each

consumption-purchase of a dvd investment-purchase of a computer by a business govt. purchases-order for military aircraft net exports-sale of american wheat to russia

Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume that if Jennifer marries either, they give her what they use to sell her. Which of the following statements is consistent with the way GDP is computed?

gdp will fail if jennifer marries thimas but not if she marries darin

changes in the gdp deflator reflect

only changes in price

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

real output rose and the price level fell

if nominal gdp doubles and the gdp deflator doubes then wht happens to gdp?

remains the same