Chapter 10: Measuring a Nation's Income
In the United States in 2009, purchases of capital equipment, inventories, and structures represented approximately
11 percent of GDP
According to the circular flow diagram GDP
Can be computed as either the revenue firms receive from the sales of goods and services or the payments they make to factors of production.
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
GDP
How does U.S. gross domestic product (GDP) differ from U.S. gross national product (GNP)?
GNP = GDP + income earned by US citizens abroad - income that foreign citizens earned in the US
The GDP deflator is the ratio of
a nominal GDP to real GDP multiplied by 100
A form of government spending that is not made in exchange for a currently produced good or service is
a transfer payment
Most goods and services produced at home
and most goods and services produced illegally are excluded from GDP.
GDP per person tells us the income and expenditure of the
average person in the economy
According to the circular-flow diagram GDP
can be computed as the total income paid by firms or as expenditures on final goods and services.
The basic tools of supply and demand are
central to macroeconomic analysis as well as to microeconomic analysis
Real GDP is the yearly production of final goods and services valued at
constant prices
In the national income accounts, depreciation is called
consumption of fixed capital
Retained earnings is income that
corporations have earned but have not paid out to their owners.
recessions are not associated with which of the following?
failing unemployment
Government purchases include spending on goods and services by
federal, state, and local governments.
US GDP
includes production of foreigners working in the US but excludes production by US residents working in foreign countries.
The term economists use to describe a situation in which the economy's overall price level is rising is
inflation
Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink produced by Spots, Inc. is called
intermediate good
What word do economists use to refer to the purchase of goods and services that will be used in the future to produce more goods and services?
investment.
Income generated by a nation's domestic production
is equal to its domestic production.
GDP
is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being
Much of macroeconomics attempts to explain
long-run growth and short-run fluctuations in real GDP
Changes in the GDP deflator reflect
only changes in prices.
In a simple circular-flow diagram, firms use the money they get from a sale to
pay wages to workers pay rent to landlords pay profit to the firms owners
When economist talk about growth in the economy, they measure that growth as the
percentage change in real GDP from one period to another.
The inflation rate is the
percentage change in the price level from one period to another.
The income that households and non corporate businesses receive is called
personal income.
When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study
real GDP
A recession has traditionally been defined as a period which
real GDP declines for two consecutive quarters.
Which of the following is always measured in prices from a base-year?
real but not nominal GDP
Which of the following is included in the investment component of GDP?
spending on new business equipment such as power tools but not spending on stocks and bonds.
Which of the following is included in the investment component of GDP?
spending to build new houses spending to build new factories spending on business equipment such as welding equipment
Which government entity computes US GDP every three months?
the Department of Commerce
Total income from the domestic production of final goods and services equals
the expenditures for these goods whoever buys them
The percentage change in the price level from one period to another is called
the inflation rate
National income is defined as
the total income earned by a nation's permanent residents in the production of goods and services.
GDP is defined as
value of all final goods and services produced within a country in a given period of time.
In a simple circular flow diagram, households buy goods and services with the income they get from
wages rents profits
