econ 9

Net domestic product at factor cost

(wage income) + (​Interest, rent, and profit )

The figure shows the flows of expenditure and income on Lotus Island. In​ 2016, R was ​$5 ​billion; W was ​$39 ​billion; U was ​$15 ​billion; J was ​$20 ​billion; and Z was ​$7 billion. Calculate total exenditure and total income.

81 81

The figure shows the flows of expenditure and income in an economy. In​ 2013, U was ​$1.0 ​trillion, V was ​$1.5 ​trillion, W was ​$6.0 ​trillion, J was ​$1.0 ​trillion, and Z was $ 1 trillion. Calculate total​ income, net​ taxes, and GDP.

9 1.5 9

Classify each of the following items as a final good or service or an intermediate good or​ service, and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and services.

A is a final good that is consumption expenditure​, B is a final good that is government expenditure​, C is a final good that is investment​, and D is an intermediate good.

​Chained-dollar real GDP is the measure of real GDP calculated by the​ _____.

Bureau of Economic Analysis

Calculate: U.S. GNP national income

C + I + G + X + M C= consumption I= investment G= government X= exports M= income D= depreciation C + I + G + X + M - D + (Statistical discrepancy)

​______ changed because retail sales increased.​ ______ changed because business inventories increased.

Consumption​ expenditure; Investment

Which of the following is an example of a final good or service​?

Dan bought a Toyota Camry.

GDP Expenditure Approach

G= govt expenditure I= investment C= consumption X= exports M= imports GDP = C + I + G + (X-M)

Which of the following is an example of consumption expenditure​?

Rachel buying a TV.

Which of the following is an example of an intermediate good or service​?

Samsung buys compressors for manufacturing refrigerators.

Which of the following is an example of government expenditure on goods and services​?

The White House buying internet services.

GDP Income Approach

Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income

How can GDP increase by 0.7 percent if consumption expenditure increased at a 2.2 percent​ rate?

U is government expenditure on goods and services and J is investment

When using the income approach to measure GDP at market​ prices, in addition to summing all factor incomes it is necessary to​ ______.

add indirect taxes less subsidies to convert aggregate income from factor cost to market prices

The expenditure approach to measuring U.S. GDP equals​ ______.

all expenditure on final goods and services produced in the United States in a given time period

The economy is in​ ______ because​ ______ between 2016 and 2017.

an​ expansion; real GDP is increasing

Explain why the NBER reported that the 2008 recession began before real GDP had fallen for two successive quarters. The NBER Committee​ _______.

based its decision on peaks in the data on real personal​ income, real​ manufacturing, wholesale and retail​ sales, industrial​ production, and​ employment, which all peaked between November 2007 and June 2008

The standard of living can be easily compared​ ______.

between China and Russia or between Canada and the United​ States, because household​ production, the underground​ economy, leisure​ hours, and the environment are similar in each pair

Net taxes are taxes paid minus​ _____.

cash benefits received from governments

The fall in net exports​ ______.

decreases GDP

The statement that total sales by businesses fell by 0.6 percent means that GDP​ ______ because​ ______.

did not change by 0.6​ percent; GDP measures production of all final goods and services and​ "total sales by​ businesses" includes final and intermediate goods and services

Based on this​ information, differences in real GDP per person​ ______ correctly rank the standard of living in these countries because​ ______.

do; when other factors that influence the standard of living are similar the differences in real GDP per person are​ small, but when these other factors are not​ similar, the differences are huge

The standard of living cannot be easily compared in​ ______ and​ ______ because​ ______.

either China or​ Russia; either Canada or the United​ States; in each pair household​ production, the underground​ economy, leisure​ hours, and the environment are different

Statistical discrepancy

expenditure - income

What are the two approaches to measuring GDP described in the news​ clip? Why is one of these measures of the contribution of WhatsApp to GDP​ wrong?

expenditure approach and the income approach ​$30 million because when Facebook pays its​ workers, it incurs a loss of​ $30 million

Gross domestic product is the market value of all the​ ______ in a given time period.

final goods and services produced by all firms located in the United States

GDP is a poor measure of economic​ well-being because it​ _______.

includes only production that is traded in markets

Saving equals​ ______.

income minus consumption expenditure minus net taxes

The following statements about the business cycle are correct except ​______.

it is a regular predictable cycle in real GDP around potential GDP

Saving is the amount of income that is​ _____ in net taxes or spent on​ _____ goods and services.

not​ paid; consumption

Real GDP per person is not an accurate measure of the standard of living because it​ ______.

omits the goods and services that people produce for themselves

A​ ______ is a final good and​ ______ is an intermediate good.

tank of gasoline bought by​ you; jet fuel bought by Southwest Airlines

Exports of goods and services are items that firms in​ _____ produce and sell to​ _____.

the United​ States; any other country

It is possible for GDP to increase by only 0.7 percent when consumption expenditure grew at a 2.2 percent rate because​ _______.

the sum of investment and net exports shrank

To accurately assess the relative standard of living in these​ countries, we need additional information about​ _____.

the value of household​ production, the underground​ economy, leisure, and environment differences

Which of the following countries is facing a recession​?

​Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012.

Depreciation is the​ _____ in the value of​ _____ that results from its use and from obsolescence.

​decrease; capital

Net exports of goods and services is the value of​ _____ of goods and services​ _____ the value of​ _____ of goods and services.

​exports; minus; imports

Real GDP is the value of the​ _____ goods and services produced in a given year expressed in terms of the prices in​ _____ year. Nominal GDP is the value of the​ _____ goods and services produced in a given year expressed in terms of the prices of ​ _____ year.

​final; a​ base; ​final; that same

Gross domestic product ​(GDP​) is the market value of all the​ _____ goods and services produced​ _____ a country in a given time period.

​final; within

Imports of goods and services are items that​ _____ in the United States​ _____ the rest of the world.

​households, firms, and​ governments; buy from

Potential GDP is the value of real GDP when all the​ economy's factors of production​ - _____,​ _____, _____, and​ _____ - are fully​ _____.

​labor; capital;​ land; entrepreneurial​ ability; employed

The business cycle is a​ _____ but​ _____ up-and-down movement of total​ _____ and other measures of economic activity.

​periodic; irregular; production