Chapter 10: Measuring a Nation's Income

Imagines measure of well-being that includes time spent working in the home and taking leisure. The change in this measure of well-being would be ________ the change in GDP.

Less than

Gross Domestic Product (GDP)

Measures the total income of everyone in the economy; measures the total expenditure in the economy

True or false. Including the value of goods that are resold would make GDP a less informative measure of economic well-being.

True

Determine whether the following is a consumption, investment, government purchase, or a net export. 1. A family buys a new refrigerator 2. Aunt Jane buys a new house. 3. Ford sells a Mustang from its inventory. 4. You buy a pizza. 5. California replaces Highway 101. 6. Your parents buy a bottle of French wine. 7. Honda expands its factory in Marysville, Ohio.

1. Consumption 2. Investment 3. Consumption 4. Consumption 5. Government purchases 6. Consumption, net export 7. Investment

If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much as to GDP as ____ hamburger.

15

Which is the largest component of GDP? A. Consumption B. Investment C. Government Purchases D. Net exports

A

If GDP included goods are resold, it would _____________________. A. Be a more accurate measure of economic well-being B. Double-count goods that were sold more than once C. Count goods in GDP only once if they were produced in one year and resold in another

B

If all quantities produced rise by 10 percent, and all prices fall by 10 percent, which of the following occurs? A. Real GDP rises by 10 percent, while nominal GDP falls by 10 percent. B. Real GDP rises by 10 percent, while nominal GDP is unchanged. C. Real GDP is unchanged, while nominal GDP rises by 10 percent. D. Real GDP is unchanged, while nominal GDP falls by 10 percent.

B

An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction? A. Net exports and GDP both rise. B. Net exports and GDP both fall. C. Net exports fall, while GDP is unchanged. D. Net exports are unchanged, while GDP rises.

C

Which of the following does NOT add to U.S. gross domestic product? A. Air France buys a plane from Boeing, the U.S. aircraft manufacturer. B. General Motors builds a new auto factory in North Carolina. C. The city of New York pays a salary to a policeman. D. The federal government sends a Social Security check to your grandmother.

D

The participation of women in the US labor force has risen dramatically since 1970. This rise likely __________ GDP in the US.

Increased

Y = C + I + G + NX

Y: GDP C: consumption; spending by household on goods & services; exclude purchase of new home; durables and non-durables I: investment; spending on cap. equipment, inventory, and structure; purchase new house G: government spending; gov. consumption expenditure & gross investment; doesn't include transfer payment NX: net export; export-import