Macroeconomics Chapter 10

A steel company sells some steel to a bicycle company for $150. The bicycle company then uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute.

$250 to GDP

In the economy of Wrexington in 2008, nominal GDP was $20 billion and the GDP deflator was 100. What was wrexington's real GDP in 2008?

20 billion

The following is an example of a final good or service

A CD player purchased as a gift

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

Constant prices

Nominal GDP is calculated by using

Current prices

Example of an investment expenditure

Jack's Boat Storage buys a new boat lift

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself, then GDP

Necessarily falls

Example of an intermediate product

The lumber produced by Boise Cascade and sold to a builder of new houses.

GDP

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

An Italian company operates a pasta restaurant in the U.S. The value of the output produced by this pasta restaurant is included in

U.S. GDP and Italian GNP

Net exports equal

exports minus imports

Goods that go into inventory and are not sold during the current period are

included in current period GDP as inventory investment

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

income and expenditure both rise

Changes in real GDP reflect

only changes in the amounts being produced

To encourage formation of small businesses, the government could provide subsidies; the subsidies

would no be included in GDP because they are transfer payments