Chapter 8 Quiz

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In a simple economy with only businesses and​ households, suppose that the sum total of all the goods and services produced during the relevant periodlong dash—pairs of​ shoes, candy​ bars, digital​ devices, etc. all summed togetherlong dash—is 470470 trillion units. The total dollar value of this flow of output is ​$1414 trillion. The total amount of factors of productionlong dash—​labor, ​land, capital,​ entrepreneurship, all summed togetherlong dash—is 0.90.9 billion units. What is the flow of incomelong dash—that ​is, the sum of​ wages, rents,​ interest, and​ profits? The flow of incomelong dash—the sum of​ wages, rents, interest and profitslong dash—is

$14 trillion

The addition to gross domestic product is

$7705

Using the expenditures approach to national income​ accounting, which of the following would be counted as investment spendinginvestment spending​?

A person in California buys a new house.

Which of the following is a true statement about comparing world​ incomes?

Adjusting world incomes for purchasing power gives a more accurate view than using market foreign exchange rates.

Which of the following equations is​ correct?

All of the above equations are correct.

What is the difference between nominal GDP and real​ GDP?

Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year.

The expenditure approach to tabulating GDP

adds up the total amount spent on newly produced domestic goods and services during the year.

Gross Domestic Product

all of the above

Total income can be viewed as the sum of

all of the above

If nominal GDP​ increases, it is possible that

any of the above might have happened.

Real GDP is computed by adjusting nominal GDP for

changes in the price level.

To derive GDP using the expenditure​ approach, which of the following components are added​ togehter?

consumption​ expenditures, gross private domestic​ investment, government​ expenditures, and net exports

Suppose social security contributions rise by​ $1 billion while social security benefits also rise by​ $1 billion.​ Further, personal income taxes fall by​ $500 million. As a​ result,

disposable income should increase while personal income and national income are unchanged.

GDP counts intermediate goods because to not do so would result in GDP being undervalued.

false

In the circular flow of income

households demand goods and services that are supplied by​ firms, while supplying resources that are demanded by firms.

All of the following transactions are excluded from the measure of GDP except

paying your dentist to have your teeth cleaned.

Per capita real GDP measures the amount of real GDP

per person

The income households actually receive before they pay personal income taxes​ is:

personal income

Which of the following is the definition of disposable personal income (DPI)​?

personal income after personal income taxes have been paid

The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called

purchasing power parity.

When comparing per capita GDP across​ countries, GDP should be adjusted for

purchasing power parity.

When GDP is corrected to reflect constant​ dollars, this​ price-corrected GDP is called

real GDP.

Using the expenditures approach to national income​ accounting, which of the following would be counted as consumption​?

residents of New York city buy food every week.

Which of the following is the definition of personal income (DPI)?

the amount of income that households receive before paying taxes.

If real GDP increases in any​ year, we know that

the output of goods and services produced this year has increased.

Gross output is

the total market value of all goods and services produced during a year by factors of production located within a​ nation's borders, including all forms of​ business-to-business expenditures and thereby double counting business spending across all stages of production.

The simple circular flow model shows that

total income received by households must be equal to the dollar value of all goods and services produced.

For a​ business, profit is a cost of production.

true

The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is known as purchasing power parity.

true

The dollar value of total output is always equal to total income.

true

In the table to the​ right, what is the total dollar amount that is added to the​ nation's gross domestic product​ (GDP)? Why? The total dollar amount that is added to the​ nation's GDP is

​$0.46 because this amount equals the total value added in production.

According to the circular flow of income and​ output, which of the following is not​ true?

​Goods, services and money all flow in one direction since money pays for the goods and services.


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