Chapter 26 GDP and the Measurement of Progress

Suppose your weekly earnings (the number on your paychecks) increase by 2 percent over the course of a year and prices in the economy rise by 3 percent. In this case, your nominal earnings have _____ and your real earnings have _____.

risen; fallen

The growth rate of GDP tells us how rapidly the country's:

production is rising or falling over time.

What is not a variable in the national spending approach to GDP calculation?

profit

If pressed to choose a single indicator of current economic performance, most economists would probably choose:

real GDP growth.

The product (2011 prices × 2010 quantities) is equal to:

real GDP in 2010 if 2011 is the base year.

The expression (2011 prices ÷ 2010 prices) × 100 is not equivalent to the: Please choose the correct answer from the following choices, and then select the submit answer button.

real growth rate between 2010 and 2011.

A(n) ______ good is one that is sold to the end user and then consumed or held in personal inventories.

finished

Gross national product (GNP) is the market value of all:

finished goods and services produced by a country's permanent residents, wherever located, in a year.

If GDP for a certain economy is $1,510 billion at the end of year 1 and it grows by 6 percent, what will be the GDP at the end of year 2?

$1,600.60

Based on the transactions that take place in the scenario that follows, how much should be added to U.S. GDP for 2017? Scenario: At 11:50 p.m. on December 31, 2016, you ordered a $2 soda in a restaurant. Your waiter brought it to you at 11:55 p.m. You did not drink it until 12:05 a.m. At 12:10 a.m., you ordered a $14 plate of nachos, which arrived at 12:20 a.m. You paid your bill at 12:30 a.m. on January 1, 2017, and you did not leave a tip. You are a permanent U.S. resident and the restaurant is located in the United States and owned by a permanent U.S. resident.

$14

If GDP for a certain economy is $2,400 billion at the end of year 1 and it grows by 2.5 percent, what will be the GDP at the end of year 2?

$2,460

Based on the transactions that take place in the scenario that follows, how much would be added to U.S. GDP for 2017? Scenario: On October 1, 2017, you win an eBay auction for an antique desk for $1,000. eBay charges a 2 percent commission on the sale, and you have to pay $200 to have it shipped. Both you and the seller are located in the United States and are permanent residents of the United States.

$220

Assume that the Seedland economy produced approximately 100 packets of sunflower seeds and 75 packets of pumpkin seeds. If the average price of sunflower seed packets was $2 and the average price of pumpkin seed packets was $5, the market value of the production of sunflower seed packets was $:

200.

Assume that the Candyland economy produced approximately 150 candy bars, 80 bags of caramels, and 30 solid chocolate bunnies. If the average price of candy bars is $3, the average price of caramel bags is $2, and the average price of chocolate bunnies is $10, the market value of chocolate bunnies is $:

300.

Assume that the Candyland economy produced approximately 150 candy bars, 80 bags of caramels, and 30 solid chocolate bunnies. If the average price of candy bars is $3, the average price of caramel bags is $2, and the average price of chocolate bunnies is $10, the market value of candy bars is $:

450.

If GDP for a certain economy is $1,200 billion at the end of year 1 and $1,300 billion at the end of year 2, the economy's growth rate between the two years is:

8.33 percent.

Assume that the Candyland economy produced approximately 150 candy bars, 80 bags of caramels, and 30 solid chocolate bunnies. If the average price of candy bars is $3, the average price of caramel bags is $2, and the average price of chocolate bunnies is $10, the market value of candy bars and chocolate bunnies is $:

900

Investment is:

private spending on tools, plant, and equipment used to produce future output.

Which statement is TRUE?

Business fluctuations, or business cycles, are the short-run movements in real GDP around its long-term trend.

Y equals:

C + I + G + NX.

If a wealthy woman marries her gardener, stops paying him, and does not hire a new firm to perform the work, then:

GDP decreases.

Which statement is TRUE?

GDP does not count leisure, or time spent not working.

Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?

GDP does not count leisure.

Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?

GDP does not count non-priced production.

Which statement is NOT given in the textbook as a problem associated with using GDP as a measure of output and welfare?

GDP does not count the purchase of corporate stock.

Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?

GDP does not count the underground economy.

Which statement MOST accurately describes GDP?

GDP is the market value of all finished goods and services produced within a country in a given year.

Which statement is TRUE?

GDP only counts finished goods to avoid double counting.

The market value of all finished goods and services produced within a country in a year is:

GDP.

The market value of all finished goods and services produced by a country's permanent residents, wherever located, in a year is the definition of:

GNP.

Which statement is NOT true?

Gross domestic product is the market value of all intermediate goods and services produced within a country in a year.

Which statement is TRUE?

Growth in real GDP and growth in real GDP per capita typically give the same broad idea of how economic conditions are changing, but real GDP per capita provides a clearer one for countries with rapidly growing populations.

Child care conducted in the home is not included in GDP because it:

does not involve a market transaction.

A measure of a country's production is its gross:

domestic product.

Real GDP and nominal GDP are:

equal only in the base year.

The market value of the output produced in the United States by a permanent resident of another country is included in:

U.S. GDP only.

The market value of the output produced in another country by a permanent U.S. resident would be included in:

U.S. GNP only.

Which statement is TRUE?

Using the national spending approach to GDP, a firm's purchase of a robotic assembly line is counted as investment.

A variable that has not been adjusted for inflation is called:

a nominal variable.

The equation Y = employee compensation + rent + interest + profit represents the:

factor income approach to GDP calculation.

The market value of the output produced in the United States by a permanent U.S. resident is included in:

both U.S. GDP and U.S. GNP.

If 2010 is chosen as the base year, then the product (2010 prices × 2010 quantities) is equal to:

both nominal and real GDP.

GDP can be calculated by:

both the factor income and national spending approaches.

The short-run movements in real GDP around its long-term trend are called:

business fluctuations.

A finished good is one that is sold to the end user and then _____ or held in personal inventories.

consumed

Assuming that each option refers to the United States and the current year, the calculation of GDP excludes the:

cooking and cleaning done by a homemaker.

Lawful goods sold under the table to evade taxes:

do not show up in GDP.

Intermediate goods are:

goods that are sold to firms and then bundled or processed with other goods or services for sale at a later stage.

To determine how rapidly a country's production is rising or falling over time, we would have to calculate the:

growth rate of GDP.

Real variables:

have been adjusted for inflation.

A(n) _____ good is one that is sold to a firm and then bundled or processed with other goods for sale at a later stage.

intermediate

A farmer buying a tractor fits into the __________ category of the national spending approach to GDP.

investment

Spending on tanks, airplanes, office equipment, and roads fits into the __________ category of the national spending approach to GDP.

investments

Nominal GDP is defined as GDP:

measured at prices that prevailed during the year GDP was measured.

The equation Y = C + I + G + NX is referred to as the:

national spending approach to GDP calculation.

The market value of the output produced in another country by a permanent resident of that country but sold and consumed in the United States would be included in:

neither U.S. GDP nor U.S. GNP.

If a nation sells fewer finished goods and services abroad than it buys from other nations:Based on the transaction that takes place in the scenario that follows, how much would be added to U.S. GDP for 2017? Scenario: On August 6, 2017, you go to a specialty food store and purchase a $4 can of imported sardines that was produced on February 1, 2017. You are a permanent U.S. resident, and the store is located in the United States and owned by a permanent U.S. resident. You paid 6 percent state sales tax on your purchase.

net exports will be negative.

Suppose your weekly earnings (the number on your paychecks) decrease by 2 percent over the course of a year and prices in the economy fall by 3 percent. In this case, your _____ earnings have decreased and your _____ earnings have increased.

nominal; real

Nominal variables have:

not been adjusted for inflation.

Purchases of stocks and bonds are:

not included in GDP because they are not part of production of goods and services.

For calculating GDP, the purchase of a used car is:

not included.

To calculate GDP, we use the market value of:

only finished goods and services.

Entertainment is:

part of GDP because it involves a market transaction.

Suppose your weekly earnings (the number on your paychecks) increase by 3 percent over the course of a year and prices in the economy rise by 2 percent. In this case, your nominal earnings have _____ and your real earnings have _____.

risen; risen

Government purchases are:

spending by all levels of government on finished goods and services.

Which activity BEST describes how GDP is calculated?

summing the market value of all finished goods and services

The expression (2011 prices ÷ 2001 prices) × 100 is equal to:

the GDP deflator between 2001 and 2011.

Growth in real GDP per capita is:

the best reflection of changing living standards.

If you cook breakfast at your home on Saturday morning:

the market value of the ingredients that you purchased is included in GDP.

Net exports are the:

value of exports minus the value of imports.

Both U.S. GDP and U.S. GNP include output produced:

within the United States by permanent U.S. residents.