ECON 110 Quiz 5

Even if GDP included these types of​ production, why would it still be an imperfect measure of economic​ well-being?

- GDP is not adjusted for crime or other social problems. - GDP is not adjusted for pollution and it does not account for unequal income distribution. - The value of leisure is not included in GDP. all of the above

U.S. Gross National Product​ (GNP) differs from U.S. Gross Domestic Product​ (GDP) in which of the following​ ways? ​(Mark all that​ apply.)

- GNP is the value of final goods and services produced by residents of the U.S. - GNP considers production that occurs outside the U.S.

How does real GDP deal with the problem inflation causes with nominal​ GDP?

- Real GDP separates price changes from quantity changes. - By keeping prices​ constant, we know that changes in real GDP represent changes in the quantity of output produced. - Real GDP uses the prices of goods and services in the base year to calculate the value of goods in all other years. all of the above

Why in microeconomics can we measure production in terms of​ quantity, but in macroeconomics we measure production in terms of market​ value?

- ​If, in​ macroeconomics, we measured production using​ quantities, we would add tons of wheat grown by U.S. farmers to the number of iPods produced by​ Apple, to gallons of​ milk, and so on. - When we measure total​ production, we​ can't just add together the quantities of every good and service because the result would be meaningless. - Measuring production using market value in dollar terms allows us to add together many different goods and services. all of the above

In​ 2011, the value of the GDP deflator is _____ In​ 2012, the value of the GDP deflator is ____

113;119

National income​ (NI) equals ​$__________ billion Personal income​ (PI) equals ​$__________ billion Disposable personal income​ (DPI)equals $___________ billion

11730; 10980; 9980

Which span of years saw the largest percentage increase in the price​ level, as measured by change in the GDP​ deflator?

2017 to 2018

In Year​ 2, nominal GDP is equal​ to: ​$________ ​,and real GDP is ​$_______

63646.88; 31931.25

Real GDP in 2017 equals ________

6680

a. If the base year is the year​ 2009, then real GDP for 2018 equals ____________ the real GDP for 2019 equals ___________ b. The​ (annual) growth rate of real GDP in 2019 is __________%

9275; 10312.5; 11.19

In the circular flow of expenditure and​ income, why must the total value of production in an economy equal the total value of​ income?

Every penny spent on a good or service must end up as​ someone's income.

How is the GDP deflator​ calculated?

GDP deflator= (nominal GDP/Real GDP) x100

Which of the following is not a shortcoming of GDP as a measure of​ well-being?

GDP only counts final goods and services and not intermediate goods.

If Americans still worked​ 60-hour weeks, as they did in​ 1890,

GDP would be much higher than it​ is, but the​ well-being of the typical person would not necessarily be higher.

GDP is an imperfect measure of economic​ well-being because it fails to measure what types of​ production?

Household production and the underground economy.

What is the difference between the value of a​ firm's final product and the value added by the firm to the final​ product?

The value of a​ firm's final product is the sale​ price; value added is the difference between the sale price and the price of intermediate goods.

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the​ next?

When nominal GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities.

Which equation represents the relationship between GDP and the four major expenditure​ components?

Y= C+I+G+NX

For this result to​ occur, the change in inventories would have to have been

a decrease because this would reduce investment and GDP.

An underground economy involves all of the following except

buying and selling of goods and services by obtaining a permit from the government.

The following table lists hypothetical values.

column 4 1078 1098 1040 1133 1234 column 5 1.86 -5.28 8.94 11.56 column 7 1186 1208 1144 1246 1390 column 8 1.85 -5.30 8.92 11.56

a. You purchase a new Ford Escape Hybrid from a Ford dealer. b. You purchase a 2013​ (preowned) Ford Escape Hybrid from a friend. c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. d. Ford produces​ 1,000 Escapes in a factory in Missouri and ships them to a car dealer in​ Shanghai, China. e. Ford purchases new machine tools to use in its Missouri Escape factory. f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant.

consumption expenditure not included in GDP calculation Not included in GDP calculation net export expenditure investment expenditure government expenditure

If a large amount of production within a country takes place at foreign owned​ facilities, then it is likely that the​ country's GDP will be _________ GNP

larger than

Some countries have larger underground economies than do other​ countries, because

of government policies that are retarding economic growth.

In the United​ States, the difference between GNP and GDP is___________ that of many other countries

smaller than

The Gross National Product​ (GNP) of the United States is equal to

the value of final goods and services produced by U.S. factors of production.

What are the four major components of expenditures in​ GDP?

​Consumption, Investment, Government​ Purchases, and Net Exports