Chapter 5
The value of capital used up in the production of goods and services is called
depreciation
Investment currently claims about _____ of U.S. output.
one sixth
Which of the following two items are ADDED to national income to arrive at personal income? - Indirect business taxes - Corporate profits - Depreciation - Net foreign factor income - Personal taxes - Capital Income - Transfer payments
Capital income, transfer payments
The GDP for this economy is? Basketballs price: $35 Output: 30 million Cellphones Price: $450 Output: 20 million Corporate jets Price:$10 million Output: 200
(Basketball price * basketball output) + (cellphone price * cellphone output) + (jet price * jet output) = 12050
GDP accounts have two sides. One side focuses on the demand side (called the ________ approach) and the other side focuses on the supply side (called the _______ approach). - Income, expenditure - Value added, expenditure - Expenditure, income - Value added, price
- Expenditure, income
Which of the following is subtracted from national income to arrive at personal income?
- Indirect business taxes - Corporate profits
When calculating GDP, consumption makes up approximately
Two-thirds of total output.
Real GDP is the
Value of final output produced in a given period measured in current prices.
The GDP identifies the mix of output a country has selected, which also answers the question of _______ to produce.
What
The value of capital used up in the production of goods and services is called
depreciation or GDP
Nominal GDP measures the value of all goods and services
in current prices
Gross ________ product refers to output produced by American-owned factors of production
national
The flow of income that starts with GDP ultimately returns to the market in the form of:
new consumption, investment, and government purchases
Computing GDP using current prices gives us
nominal GDP
Net investment is:
what is left over from total new private investment after depreciation
Which of the following is equal to net investment?
Gross investment minus depreciation
GDP can be measured using the _____ approach, which adds the items that make up national earnings on the supply side. - total - national - expenditure - income
Income
Which of the following is SUBTRACTED from national income to arrive at personal income?
Indirect business taxes Corporate profits
American-owned factors of production employed in other nations creates an _____ of income for U.S. households.
Inflow
When describing the flow of income, GDP returns to the market in the form of which of the following? - Investment - Consumption - Sales revenue - Government spending - Transfer payments
Investment, consumption, government spending
National income (= income earned by factors of production)
Less: - Indirect business taxes - Corporate profits - Interest and miscellaneous payments - Social security taxes plus: - Transfer payments - Capital income
The GDP per capita is the most practical way to
Make international comparisons of the standard of living.
National income formula
NI= NET domestic product + NET foreign factor income
To avoid counting the same output more than once, the calculation of GDP includes
Only value of final goods
Disposable income formula
Personal income - personal taxes = Disposable income
True or false: Prices serve as a measure of value for calculating total output.
True Reason: Once we know the price of each good, we can calculate the value of output produced.
Depreciation is
the wearing out of plant and equipment
To measure an economy's output adjusted for changes in the price level, one would use
real gdp
