EC. ch 7

Which of the following transactions would count in GDP?

$14

Suppose that this year a small country has a GDP of $100 billion. Also assume that Ig = $30 billion, C = $60 billion, and Xn = - $10 billion. How big is G?

$20 billion

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is

$210 billion

Refer to the accompanying national income data. All figures are in billions of dollars. Consumption of fixed capital (private sector) is

$23

Refer to the accompanying national income data. All figures are in billions of dollars. The gross domestic product is

$301

One year nominal GDP was $286 billion and the price index was 88. Real GDP that year was

$325

Refer to the accompanying data, using year 1 as the base year. All dollars are in billions. Real GDP in year 4 was approximately

$3562

Refer to the accompanying data. All figures are in billions of dollars. Gross domestic product is

$395

(Advanced analysis) Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per-unit prices of these three goods are A = $2, B = $3, and C = $1. If the per-unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then real GDP in the current year is

$45

In an economy experiencing a persistently falling price level,

$450

Refer to the table. (GDP figures are in billions of dollars.) What was real GDP in Year 2?

$4811

Refer to the accompanying data, using year 1 as the base year. All dollars are in billions. Real GDP increased from year 3 to year 4 by approximately

$68 billion

A nation's capital stock was valued at $500 billion at the start of the year and $575 billion at the end. Consumption of private fixed capital in the year was $35 billion. Assuming stable prices, net investment was

$75 billion.

The base year of the price index given in the accompanying table is

$84

Over a period of time, a nation's GDP increases by 8 percent in constant-price terms and by 6 percent in current-price terms. Other things being equal, the price level must have changed by about

-2%

The table contains data for a hypothetical single-product economy. Real GDP in year 3 is

...

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) were $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?

110

The following table shows the data for a hypothetical economy in a specific year. All figures are in billions of dollars.What is the country's GDP for the year? $_______ billion.

153

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%

The table contains data for a hypothetical single-product economy. Real GDP in year 4 is

450

Over a year, a nation's GDP at current prices rose by 15 percent, while the price index increased from 100 to 110. GDP at constant prices rose by about

5%

The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?

8%

Net exports is a positive number when

A nation's exports of goods and services exceed its imports

(Last Word) The U.S. government agency responsible for compiling the national income accounts is the

BEA

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the information suggests that the production capacity in economy

C is growing more rapidly than economy B.

Nominal GDP is adjusted for price changes through the use of

CPI

If prices increased, we need to adjust nominal GDP values to give us a measure of GDP for various years in constant-dollar terms. We refer to that adjustment as

Deflating GDP

Which of the following is included in GDP?

Fees received by stockbrokers

Computation of GDP by the expenditures method would include the purchase of

Fertilizer by a farmer

If intermediate goods and services were included in GDP,

GDP would be overstated

Answer this question on the basis of the given information for an economy in 2016. Dollar value of resource extraction activity = $20 billion Dollar value of production activity = $50 billion Dollar value of distribution activity = $80 billion Dollar value of final output = $110 billion Suppose that in 2017, the dollar value of distribution activity fell to $70 billion, but the other values remained the same. Based on this, we could conclude that from 2016 to 2017,

GO fell by $10 billion, while GDP was unchanged.

GDP estimates account for which of the following items?

Household spending for health and home insurance

The U.S. Customs Service is a main source of data for

Ig

Gordon sells narcotics "on the street." This type of illegal activity

Is excluded from GDP figures- Is excluded from GDP figures

The following are examples of final goods in national income accounting, except

Lumber and steel beams purchased by a construction company

In an economy that has stationary production capacity,

Net investment is zero

Which of the following is included in the expenditures approach to GDP?

Spending on meals by consumers at restaurants

The "underground economy" is mostly made up of

Tax-evasion activities

Depreciation is all of the following, except

The accumulation of capital stock

Nominal GDP has generally risen more rapidly than real GDP since World War II in the United States, suggesting that

The general price level has increased

Which of the following is a primary use for national income accounts?

To measure changes in the value of production and income in the economy

The value added of a firm is the market value of

a firm's output less the value of the inputs bought from others.

Net exports are negative when

a nation's imports exceed its exports.

The annual output and prices of a 3-good economy are shown in the table below.

a) $34 (= (54)+(32)+(2)(4)) b) $45 (= (56)+(33)+(2)(3))

In the treatment of U.S. exports and imports, national income accountants

add exports, but subtract imports, in calculating GDP.

Suppose that inventories were $40 billion in 2015 and $50 billion in 2016. In 2016, national income accountants would

add$10 billion to other elements of investment in calculating total investment.

A statistic called Gross Output (GO) sums together the value of economic activity taking place in each of the four stages of a productive economy, namely,

addition, subtraction, multiplication, and division.

Adding the market value of all final and intermediate goods and services in an economy in a given year would result in

an amount greater than GDP for that year.

National income accountants define investment to include

any increase in business inventories.

In national income accounting, the consumption category of expenditures includes purchases of

automobiles for personal use but not houses.

Refer to the accompanying national income data (in billions of dollars). In these data, U.S. exports are

changes in nominal GDP understate changes in real GDP.

The value of corporate stocks and bonds traded in a given year is

excluded from the calculation of GDP because they make no contribution to current production of goods and services.

Transfer payments are

excluded when calculating GDP because they do not reflect current production.

Tina walks into Ted's sporting goods store and buys a punching bag for $100. That $100 payment counts as _______________ for Tina and _______________ for Ted.

expenditure, income

Refer to the accompanying data. All figures are in billions of dollars. The economy characterized by the data is

experiencing declining production capacity because net investment is negative

The National Income and Product Accounts (NIPA) help economists and policymakers to

follow the long-run course of the economy to determine whether it has grown or stagnated.

Historically, real GDP has increased less rapidly than nominal GDP because

general price level has increased

In the reservoir analogy of stock and flow for the economy,

gross investment is an inflow and depreciation is an outflow

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be

inflated to $1080 billion

(Consider This) When making a capital stock and reservoir analogy, the

inflow from the river is gross investment.

"Corporate profits" in the national income accounts consists of the following, except

interest

In 2012, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November 2012. The bicycle was sold to E.Z. Ryder in March 2013. This bicycle is counted as

investment in 2012 and as negative investment in 2013.

Refer to the diagram. The base year used in determining the price indices for this economy

is 2000

In the reservoir analogy for stock versus flow, the stock of capital is similar to the

level of water

(Consider This) When making a capital stock and reservoir analogy, the

level of water in the reservoir is the stock of capital.

The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using

monetary measure

The system that measures the economy's overall performance is formally known as

national income accounting

The GDP deflator or price index equals

nominal GDP divided by real GDP

Suppose GDP is $16 trillion, with $10 trillion coming from consumption, $2 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $500 billion coming from net exports. Also suppose that across the whole economy, depreciation (consumption of fixed capital) totals $1 trillion. From these figures, we see that net domestic product equals:

none of the above

By summing the dollar value of all market transactions in the economy, we would

obtain a sum substantially larger than the GDP

The ZZZ Corporation issued $25 million in new common stock in 2016. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment

of $18 million has occurred.

If the price index in year A is 130, this means that

prices in year A are on average 30 percent higher than in the base year.

Which of the following do national income accountants consider to be investment?

purchase of a new house

In national income accounting, government purchases include

purchases by federal, state, and local governments.

The economy described in the table has experienced a

rising real GDP.

Corporate profits are found by

summing corporate income taxes, dividends, and undistributed corporate profits.

(Last Word) Which of the following is a source of data for the investment component of U.S. GDP?

the Census Bureau's Housing Starts Survey and Housing Sales Survey.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

the child-care services provided by stay-at-home parents

If depreciation exceeds gross investment,

the economy's stock of capital is shrinking.

Real GDP is

the nominal value of all goods and services produced in the domestic economy, corrected for inflation or deflation.

In the second quarter (three-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that

the price level rose by more than nominal GDP

Which of the following is not economic investment?

the purchase of 100 shares of AT&T by a retired business executive

A distinguishing characteristic of public transfer payments is that

they involve no contribution to current production in return.

If the economy adds to its inventory of goods during some year,

this amount should be included in calculating that year's GDP.

The service a homeowner performs when she mows her yard is not included in GDP because

this is a nonmarket transaction

Gross output (GO) for an economy in a given year

will always exceed GDP for that economy in the same year.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are shown in the table. In determining real GDP, the nominal GDP for

year 1 and 2