Chapter 4

income approach to calculate GDP

wages + profit + rent + interest (+ depreciation + indirect taxes less subsidies?)

Growth Rate of Real GDP

% change in real GDP = (rGDPYear2 - rGDPYear1) / rGDPYear1

Which of the following is an example of a final good or service​? 1. GM buys Firestone tires. 2. Dell buys Intel chips. 3. PCL construction company buys Lafarge cement. 4. Dan bought a Toyota Camry.

4

Three Indian firms are producing components for Boeing fighter jets F15 and F18 and for the Chinook​ heavy-lift helicopter in​ Bangalore, Hyderabad, and other places in India. Explain how​ Boeing's activities and its transactions affect U.S. and Indian GDP. The sale of​ Boeing's fighter jets and​ heavy-lift helicopters is recorded as​ _______, and the​ Boeing's outsourcing of components to India is recorded as​ _______. A. government expenditure in U.S.​ GDP; imports in U.S. GDP B. exports in​ India's GDP; exports in​ India's GDP C. imports in U.S.​ GDP; imports in U.S. GDP D. government expenditure in U.S.​ GDP; government expenditure in U.S. GDP

A

What is a final good or service?

An item that is bought by its final user during a specified time period ex: Ford truck, Ipad, Dan bought a toyota camry

Intermediate good definition:

An item that is produced by one firm, bought by another firm, and used as a component of a final good or service ex: Firestone tire for truck, Apple M1 chip inside iPad.

Which of the following is an example of government​ expenditure? AThe income received by lobbyists from the interest groups that they represent BThe purchase of office supplies for the office of the junior senator from New York C. The amount spent on hotel accommodation when tourists visit Washington D.C. D.The payment of social security benefitsThe payment of social security benefits

B

Which of the following is an example of investment​? A. Randy buying a BMW B. Continental buying Airbus planes C. Ron buying stocks and bonds D. Mike buying an Apple iPad

B

Why would nominal GDP have a faster growth rate?

Because prices increased

Imports in US GDP

Boeing purchasing components from Indian firms

Choose the correct statement about factors that influence the standard of living. A. The omission of household production from GDP means that GDP overestimates total production.GDP overestimates total production. B. Over the years, leisure time has steadily decreased. C. The underground economy includes production that avoids taxes and regulations. D. Resources used to protect the environment are not valued as part of GDP.

C

Shares in the ford motor company are... A. A final good B. An intermediate good C. Neither

C

The value of GDP per person might misrepresent the average​ African's standard of living because​ _______. A. GDP includes home production and the black market and both of these are difficult to measure B. Africa's population is very large C. GDP does not include home production and​ Africa's GDP is calculated with the low prices that prevail in Africa D. GDP includes the goods produced and sold in the black market and Africa has a relatively small black market

C

The standard of living of those living on​ $2 a day might be underestimated because​ _______. A. many of the African people are well educated B. many international firms outsource to Africa and they pay wages much higher than​ $2 a day C. the currencies in Africa and the United States cannot be compared D. many of the transactions of the poorest people in Africa do not occur in markets

D.

Describe the relationship between the fluctuations in the change in real GDP and business inventory investment. Why might inventory changes sometimes lag real GDP​ changes? ​Generally, business inventories and real GDP​ _______. Inventory changes sometimes lag real GDP changes because​ _______

D. change in the same​ direction; inventories increase during​ recessions, and when an economy moves into expansion it takes some time to move the inventories down to target levels before businesses start producing more inventory

It is possible for GDP to fall by only 1.0 percent given the big cuts in expenditure reported because​ _______. A. imports increased by more than government expenditure increased B. imports increased but government expenditure​ didn't change C. imports increased and government expenditure fell D. government expenditure increased by a large amount and imports barely changed

D? i don't really get this one look back at the quiz

Real GDP:

Final Goods and services produced in a given year when valued at the prices of a reference base year

During 2020​, flow A was ​$374 billion, flow I was ​$219 billion​, flow C was ​$68 billion​, and flow (X-M) was $ 19 billion. Calculate GDP and government expenditure.

GDP = 374 billion Government expenditure = 68 billion

Nominal GDP in Year 1 calculation

PricesYear1 * QuantitiesYear1

What is an example of an investment

Purchase of home

Investment definition:

The purchase of a new plant, equipment, and building, and additions to inventories. ex: continental buying airbus planes

net domestic income at factor cost

Wages + factor income + DEPRECIATION

What is Y, C, I, G, and (X-M)? What is the equation?

Y = C + I + G + (X-M) Y = GDP C = Consumption I = Investment G = Government expenditure X - M = Exports - imports

expansion

a business cycle phase between a trough and a peak- a period in which real GDP increases.

recession

a business cycle phase in which real GDP decreases for at least two successive quarters.

GDP = what and what?

aggregate expenditure & aggregate income

why does GDP income approach not equal GDP expenditure approach sometimes?

if the problem says there's statistical discrepancies or something than you know that there's an issue.

government expenditure:

like purchasing fighter jets from Boeing

expenditure approach to calculate GDP

measures GDP as the sum of consumption expenditure (C), investment (I), government expenditure on goods and services (G), and net exports of goods and services (X-M). or Y = C + I + G + (X-M)

net domestic income at market price

net domestic income = GDP - depreciation

are intermediate goods a part of GDP?

no

what is the Lucas wedge?

the dollar value between the accumulated gap between what real GDP per person would have been if the 1960's growth rate persisted and what GDP per person had turned out.

potential GDP

the maximum level of real GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurial ability that would bring rising inflation.

Business cycle:

the periodic but irregular up-and-down movement of total production and other measures of economic activity.

Real GDP

the value of final goods and services produced in a given year when valued at the prices of a reference base year.

Nominal GDP

the value of goods and services produced during a given year valued at the prices that prevailed in that same year.