Chapter 7 Econ

National Income is the sum of employee compensation, profits, and the following items, except:

Depreciation or consumption of fixed capital

Net Domestic Product (NDP) is equal to:

GDP - depreciation (or consumption of fixed capital)

Real GDP refers to:

GDP data that have been adjusted for changes in the price level.

What is the difference between national income and personal income?

National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned.

Transfer payments are included in:

PI (Personal Income)

An example of intermediate goods would be:

Paper and ink bought by a publishing company

Disposable income can be measured by:

Personal Income - Personal Taxes & Consumption Expenditures + Savings

Which of the following transactions would be included in GDP?

Peter buys a newly constructed house

Net exports are positive when:

The country is exporting more goods and services than it is importing, the country is experiencing a trade surplus, the country is experiencing a favorable balance of trade.

Net exports are negative when:

The country is importing more goods and services than it is exporting, the country is experiencing a trade deficit, the country is experiencing an unfavorable balance of trade.

A price index is:

a comparison of the current price of a market basket to a fixed point of reference.

The largest component of national income is:

compensation of employees

Real GDP measures:

current output at base year prices

If depreciation (or consumption of fixed capital) exceeds gross investment, we can conclude that:

net investment is negative

If depreciation (or consumption of fixed capital) is less than gross investment, we can conclude that:

net investment is positive

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

not counted

National income accountants can avoid multiple counting by:

only counting final goods

In national income accounting, government purchases include:

purchases by federal, state, and local governments

Value added can be determined by:

subtracting the purchase of intermediate products from the value of the sales of final products.

If intermediate goods and services were included in GDP:

the GDP would be overstated

GDP excludes:

the market value of unpaid work in the home.

The GDP tends to:

understate economic welfare because it does not take into account increases in leisure.

A large underground economy results in an:

understated GDP

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:

44 percent

Which of the following is a final good or service?

A haircut purchased by a father for his 12 year-old son.

The largest component of total expenditures in the United States is:

Consumption

The amount of after-tax income received by households is measured by:

disposable income

Net exports are:

exports - imports

Net investment is equal to:

gross investment minus depreciation (or consumption of fixed capital)

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.