Module 10

investment in 2018 and disinvestment in 2019

A Ford vehicle is produced in November of 2018 and sold to Sawgrass Ford in December of 2018. The vehicle is later purchased by the Garcia family in January of 2019. The vehicle would be counted as:

$120

A bicycle company must purchase $80 worth of aluminum in order to manufacture one bicycle that it sells for $200. Assuming that aluminum is the only input used to manufacture the bicycle, the value added by the bicycle company is:

net exports

A country's exports minus its imports during a period are _______.

only if it is actually produced within the country's borders.

A good or product will count towards an economy's GDP:

Both

Do businesses demand or supply?

included in the calculation of GDP as part of investment

Money spent on the purchase of a new house is:

the level of income.

One of the main determinants of a society's standard of living is:

intermediate goods

Parts or products that go into producing other finished economic goods are known as:

the new tires (made in California) you purchase for your five year old car (the car was made in Japan)

What counts toward the calculation of GDP?

C + I + G + (X-M)

expenditure approach formula

resource

firms/businesses make payments in the _________ market.

business expenditures, changes in business inventories, new residential construction

investment component of GDP

Households, firms/businesses

the private sector includes...

goods produced within a nation's borders / final goods

what does GDP include?

the level of technology in the United States vastly increases worker productivity. & the size of the U.S. labor force increases in size.

China's GDP is expected to surpass U.S. GDP unless:

savings

Economists call financial investments _______________.

consumption, net exports, gov. purchases, investment

Economists divide the spending on an economy's goods and services into which of the following categories?

by the amount of stuff it produces.

Economists usually measure the size of an economy:

2014

Ford Motor Co. produces a car in Michigan in November of 2014. The car gets purchased by a consumer in March of 2015. The car gets added to GDP of ________.

intermediate goods

GDP does not include:

monetary value

GDP is expressed in:

determine the size of the economy at a certain time and growth of the economy over time

GDP is used to what?

end up in inventories and are included in investment.

Goods that are produced in a particular period but NOT sold in that period:

final goods and services

Gross Domestic Product is the economy's total production of _________ for a given period of time.

product

Households make payments in the __________ market

negative inventory investment.

If the warehouse manager of a Best Buy distribution center sees that the warehouse is running very low of a particular brand of televisions. This could be considered:

A Toyota truck produced in South Carolina in 2021.

If we are calculating the gross domestic product of the United States for the year 2021, which of the following items will be correctly included in that calculation?

imports into the United States are greater than exports out of the United States

In the United States, Net exports is negative because:

comparing GDP year to year

It can help identify where we are on the business cycle. It can help identify rates of economic growth or contraction. It can help measure the effectiveness of government policy.

not counting the value of intermediate goods.

It is important to avoid double counting when calculating GDP by:

All of the sales of the cardboard boxes to the pizza chains not counted as part of GDP since the price of the pizza includes the cost of intermediate goods such as the cardboard boxes.

Joe's Cardboard Co. sells cardboard boxes to various pizza chains such as Papa John's and Pizza Hut.

investment

Spending on new residential construction (housing) is added to which category of GDP?

expenditure

The _________ approach is calculated by adding the aggregate spending of consumers, firms, government, and foreign consumers in the domestic economy.

income

The _________ approach is concentrated in the factor market.

expenditure

The __________ approach is the more commonly used method to calculate GDP.

True

The circular flow diagram illustrates the economic relationship between households and businesses.

True

The government collects taxes from businesses and households.

True

The government is a purchaser in the resource/factor market.

consumption

The largest component of GDP tends to be:

Both

The local mall is in the product or resource market?

physical capital equipment for businesses

The most common type of investment spending is spending on:

true

There is both a buying and a selling side to every economic transaction.

types of resources

entrepreneurship land labor capital

Subsidies to businesses

example of a transfer payment

Welfare to households

example of a transfer payment

building new factories/innovate by creating new technology/constructing new centers of production/restock inventories

examples of business investment

the construction of a distribution center by Amazon / the purchase of a newly built pizza oven (built in Texas) by Bob that also owns a Papa John's franchise

examples of economic investment

Businesses/firms

sell goods and services to households in the product market.

Households

sell resources to firms/businesses in the resource market.

The circular flow model

shows how products, resources and money flow in the economy.

investment (economics)

the value of all goods produced during a period for use in the production of other goods and services

financial investments

these are included in the calculation of GDP because they typically increase the wealth of those people that make those "investments" which they can they use to purchase goods and services.

Household chores such as cooking, vacuuming, and doing laundry

these are not counted in the calculation of GDP since they were not conducted within a market.

The sale of marijuana in states where it has not been legalized

this would not count towards the calculation of GDP since it was conducted in an underground market.

the purchase of a freezer by an ice-cream parlor.

An example of investment spending is:

Your aunt is retired and takes care of your two year old.

What would NOT count towards the calculation of GDP?

Ford vehicles produced in Germany

What would NOT count towards the calculation of U.S. GDP?

You have your car repaired at the car dealership

What would count towards the calculation of GDP?

You use a stock trading website to purchase and manage your stocks, the website charges a fee for each transaction

What would count towards the calculation of GDP?

a Chevy truck made in Michigan in October of 2015 but sold in Mexico in January of 2016

What would count towards the calculation of U.S. GDP for the year 2015?

Toyota Camrys that are built in Ohio

What would count towards the calculation of U.S. GDP?

The government sends an $800 Social security check to an elderly person.

What would not be added into the calculation of GDP?

net exports

Which component of U.S. GDP is usually negative?

AA batteries packaged with a toy/cheese purchased by Pizza Hut

Which of the following is an example of an intermediate good?

Firms buying labor from households.

Which of the following transactions would take place in the factor/resource market?

A households that buys a good or service from a firm.

Which of the following transactions would take place in the product market?

Hyundai cars made in Texas

Which of the following would count towards U.S. GDP?

$1,200

You pay $15,000 for a used car at a dealership. The dealer's commission or fee is $1,200. The total contribution of this transaction towards the calculation of this year's GDP is _______.

investment (colloquial)

a financial investment that earns interest or has the potential to increase in value