Econ Ch 8

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Which letter best represents the demand for factors of production in this circular flow model?

C

National income is

GDP minus depreciation.

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

When a significant fraction of the domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:

GDP will be much larger than GNP

The table and figure above show GDP measured in terms of the total income received by households. Use the table and figure to help determine which of the following statements about the division of income is false.

Gross domestic income is measured precisely.

In the circular flow model, who supplies factors of production in exchange for income?

Households

Which of the following are not counted as final goods and used in the GDP calculation?

Intermediate goods

Which of these is not a shortcoming of GDP as a measure of welfare?

It only counts final goods and services and not intermediate goods

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of​ recessions

Macroeconomics

Which of the following statements about microeconomics and macroeconomics is​ correct

Macroeconomics is the study of the economy as a whole

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a _____ issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a ______ issue

Macroeconomics, Microeconomics

Which of the following areas of economics studies issues such as ways to reduce teenage​ smoking

Microeconomics

A primary difference between macroeconomics and microeconomics is

Microeconomics examines individual markets while macroeconomics examines the economy as a whole

Which of the following statements about microeconomics and macroeconomics is​ correct

Microeconomics involves the study of how households and firms make choices

According to most​ economists, is it a serious shortcoming of GDP that it does not count household production or production in the underground​ economy?

Most economists would answer​ "no" because these types of production do not affect the most important use of the GDP​ measure, which is to measure changes in total production over short periods of time.

Dr.​ Strangelove's theory is that the price of mushrooms is determined by the activity of subatomic particles that exist in another universe parallel to ours. When the subatomic particles are emitted in​ profusion, the price of mushrooms is high. When subatomic particle emissions are​ low, the price of mushrooms also is low. Is it possible to test this​ theory

No

Which of the following would be included in the gross national product​ (GNP) of the United​ States

Production from a U.S. firm that operates in Mexico.

Suppose the base year is 2001. Looking at GDP data from the United States from 2001 to the​ present, what would be true of the relationship between nominal GDP and real GDP​?

RGDP​ < NGDP because prices are rising

Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?

Real GDP

Why is GDP adjusted for prices (inflation)?

So changes in quantity can be measured.

Which of the following is included in the economist's definition of investment?

The purchase of new machines, factories, or houses

Suppose economists develop an economic model and find that​ "it works great in​ theory, but it fails in​ practice." Which of the following should the economists do​ next

They should revise the model in light of its failure to explain or predict real world events

Is Buffet correct that it is the role of the federal government to make sure people who work will have enough income to live a​ "decent lifestyle"

This is a normative economic question, so the answer is a matter of the norms or values of the person answering

Click on the graph in the window on the right and select Multiple Time Series to graph nominal GDP and real GDP for the years​ 1990-2006. For Y axis1 select nominal​ GDP, and for Y axis2 select real GDP. Roll your cursor over the plotted data to identify each series. For this​ data, the base year for calculating GDP is 2000. Use the graph to help determine which one of the following statements regarding nominal and real GDP is FALSE

When nominal GDP​ increases, real GDP falls

Which of the following equations sums up the components of Gross Domestic Product​ (GDP)

Y = C+I+G+NX

Suppose you were building an economic model forecasting the number of physicians and physicians assistants likely to be needed in 2020. Should your model take into account the growth of the home medical device​ industry

Yes, because the greater the growth in the use of home medical​ devices, the less patients will require the services of physicians and physician assistants

In calculating​ GDP, which levels of government spending are included in government​ purchases?

spending by​ federal, state, and local governments

If Americans still worked sixty hour weeks, as they did in 1890, __________.

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

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Real GDP is

the value of goods and services evaluated at base year prices

When it comes to assessing how this system affects the financial interests of doctors and the well being of​ consumers, it may be that the former gain more simply because

there are far fewer of​ them, hence each stands to gain much from supply restrictions

Economists use models

to answer questions and analyze issues

Economic data is used

to test models

The Making the Connection explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primary care but not residents who specialize. Which of the following economic statistics would be the most useful in evaluating the positive elements in this​ debate? Assuming that these statistics are available or could be​ gathered, are they likely to resolve the normative issues in this​ debate?

-Physician incomes by specialty and geographic region. -Age distribution characteristics of the population by geographic region. -Med school tuition​ rates, applications, and enrollments. -Poverty rates by geographic region -All of the above No, because normative issues involve value judgments that incorporate an​ individual's full range of​ experiences, beliefs, and emotions

Which of the following statements about a hypothesis is​ correct

A hypothesis is a statement that could in principle turn out to be incorrect

Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?

A new house

Which of the following transactions or activities would not be counted in the U.S. GDP?

Coffee beans bought by a coffee shop

To calculate personal income from national income, which of the following must be done by the BEA?

Add government transfer payments

Which of the following statements about an economic variable is​ correct

An economic variable is something measurable that can have different values

Why are models based on​ assumptions

Because models have to be simplified to be useful

How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?

By adding the value in dollar terms of all the final goods and services produced domestically.

Indicate whether each of the following is a final​ good, an intermediate​ good, or neither

Coffee beans purchased by a coffee shop.. intermediate good One share of Google stock.. neither A new​ pick-up truck purchased by a consumer... final good A new home purchased by a family... final good

The figure above shows the values of the components of GDP for the year 20142014. Based on the data​ shown, which of the following statements regarding the components of GDP are​ false

Consumer spending on services is less than the sum of spending on durable and nondurable goods.

Which is the largest component of GDP?

Consumption

What are the four major categories of​ expenditure

Consumption, investment, government​ purchases, and net exports

Which of these do we subtract from GDP to obtain national income?

Depreciation

Based on the above table and​ graph, which of the following statements regarding total production and total income is​ true

Each measure of production and income gives a different value for total production and income

Why is GDP an imperfect measurement of total production in the​ economy

GDP does not include household production or production from the underground economy

What happens if we measure GDP by adding up the value of every good and service produced in the​ economy?

GDP is overestimated because of double counting.

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomic issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a _____ issue. b. The effect of higher income taxes on the total amount of consumer spending. This is a _____ issue. c. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a _____ issue. d. The reasons for low rates of profit in the airline industry. This is a _____ issue.

a Microeconomics b Macroeconomics c Macroeconomics d Microeconomics

A higher per capita GDP translates​ to:

a higher standard of living

Economic growth is important to an economy because it typically translates to:

a higher standard of living for the country's population.

To calculate personal income from national​ income, which of the following must the BEA​ do

add government transfer payments

Household production and the underground economy

are not accounted for in the Bureau of Economic​ Analysis' estimates of GDP.

An alternating period of economic contraction and economic expansion measured over time with real GDP is known as the:

business cycle.

Which of the following is true about the consumption component of U.S. GDP in​ 2014?

consumer spending on services was greater than the sum of spending on durable and nondurable goods

Any attempt to determine whether or not this is a good system must focus on its

cost and benefits

Which of the following do we subtract from GDP to obtain national​ income

depreciation

As the value of a country's real GDP increases, the country is likely to

devote more resources to pollution reduction

The best measure of the income households actually have available to spend is:

disposable personal income

A period of real economic growth, where production and employment are both moving higher is known as:

expansion.

The _______ approach is the most widely used method to measure GDP.

expenditure

This system may help protect consumers by ensuring that

future doctors receive​ high-quality training

In the​ circular-flow diagram, who supplies factors of production in exchange for​ income

households

The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.

households

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices

Real GDP is the nominal GDP adjusted​ for:

inflation

Gross domestic product is best defined as the

market value of all final goods and services produced in a country during a period of time

Personal income is

national income minus retained corporate earnings plus government transfer payments and interest on government bonds.

In an economy with rising​ prices, compared to the base​ year,

nominal GDP is larger than real GDP in years after the base year

Disposable personal income is equal to personal income minus:

personal tax payments

If the GDP deflator in 2012 has a value of​ 98.0, then

prices have decreased 2 percent between the base year and 2012

Which of the following is true about the government purchases component of U.S. GDP in​ 2014?

purchases by state and local governments was greater than purchases by federal government

Economic growth is measured by the change in

real GDP

The GDP per capita is computed by dividing a country's:

real GDP by its population

Over​ time, prices may change relative to each other. To take this change into​ account, the Bureau of Economic Analysis calculates

real GDP using chain weights.

The total national income actually received by a country's residents is:

smaller than the value of GDP

The buying and selling of goods and services that is hidden from the government in order to avoid taxes and/or regulation is known as the:

underground economy.

The difference between the price the firm sells a good for and the price the firm paid other firms for intermediate goods is called

value added

In​ 2014, the largest component of gross domestic income was

wages

The largest component of gross domestic income is

wages

An important conclusion to draw from the​ circular-flow diagram is that

we can measure GDP by calculating the total value of expenditures on final goods and​ services, or we can measure GDP by calculating the value of total income


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