Econ chapter 11

The largest component of GDP is:

consumption expenditure.

Which of the following is TRUE within the circular flow of economic activity?

Households are buyers of products and sellers of production factors.

GNP includes outputs produced _____ but it does not include outputs produced _____.

outside the United States by U.S. citizens; inside the United States by foreign citizens

In the national income accounts, which of the following is NOT classified as government spending?

payments to Social Security recipients

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals:

$140.

John earns $2,000. His taxes are $250 and he spends $1,500. Therefore, his savings must be:

$250.

Gross private domestic investment, which consists of _______________ and changes in private inventories, is an important determinant of _______________________.

fixed investments; swings in the business cycle

Investment in structures, equipment, software, and net inventory is known as:

gross private domestic investment.

The four types of spending in GDP are personal consumer spending, ___________ private domestic investment, government spending, and _______.

gross; net exports

What does M represent in the following formula? GDP = C + I + G + (X - M)

imports

In the national income and product accounts system the two main approaches to measuring the size of the economy are:

income and expenditures.

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit to a customer for $180. The change in GDP would be:

$180.

Which equation summarizes the expenditures approach to measuring GDP?

GDP = C + I + G + (X - M)

The income approach to calculating GDP includes compensation of employees plus:

corporate profits and rental income.

Which of the following items is NOT included in gross private domestic investment?

purchases of common stock

The simple circular flow diagram shows that economic aggregates can be calculated either by the _____________ flows in the product market or by the ______________ flowing to households in the resource market.

spending; income

Which ONE of the following would be included in the GDP calculations?

a hamburger purchased by a hungry restaurant patron

What is an example of a final good?

bacon purchased at a grocery store

The diagram that illustrates how households and businesses interact through product and resource markets is called the:

circular flow diagram.

The largest component of national income is:

compensation of employees.

Economists believe that changes in investment spending are important for forecasting the business cycle because:

investment is a key determinant of economic growth.

What component of U.S. GDP is usually negative in boom years?

net exports

Which of the following items would be considered a durable good?

refrigerator

GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2 Reference: Ref 5-1 (Table) According to the table, net domestic product for 2010 was:

$13,562.1 billion.

Everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP:

does not change.

GDP measures the final value of goods and services produced to avoid the problem of:

double counting.

Net exports equal:

exports minus imports.

Expenditures by individuals for durable goods, nondurable goods, and services is known as:

personal consumption expenditure.

Which of the following items is NOT a category of personal consumption expenditures?

residential housing

Holding other expenditures constant, if imports fall by $20 billion and exports fall by $10 billion, then GDP:

rises by $10 billion.

What component of GDP includes college tuition?

services

Personal consumption expenditures $900 Personal taxes $180 Government expenditures $300 Exports $40 Imports $75 Interest income $60 Depreciation $50 Gross private domestic investment $200 Reference: Ref 5-2 (Table) According to the table, what is this country's GDP?

$1,365

Net domestic product measures:

GDP minus depreciation.

Which of the following will NOT be included in the GDP?

a cruise on a ship registered in Norway

GDP includes outputs produced _____ but it does not include outputs produced _____.

inside the United States by foreign citizens; outside the United States by U.S. citizens

Which component of GDP includes inventory changes?

investment

One important reason economists track business investment is that:

it is a leading indicator of the business cycle.

According to the table, when using the expenditure approach, GDP is: Category Billions Proprietors' income $300 Capital consumption allowance 440 Federal government purchases of goods and services 200 Compensation of employees 800 Personal consumption expenditures 950 Corporate profits 90 Exports 60 Gross private domestic investment 500 Rental income 30 State and local government purchases of goods and services 150 Net interest 100 Federal government deficit 250 Imports 90

$1,770 billion.

GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2 Reference: Ref 5-1 (Table) According to the table, GDP for 2010 was:

$14,592.3 billion.

(Table) Suppose a loaf of bread goes through the following stages of production, with the values noted at the end of each stage: Stage Value 1. Farmer's wheat $0.65 2. Miller's flour $1.20 3. Baker's bread $1.80 4. Grocer's bread $2.65 The sale of the loaf of bread adds _______ to GDP.

$2.65

GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2 Reference: Ref 5-1 (Table) According to the table, net exports of goods and services are equal to:

-$505.4 billion.

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in ______ GDP, and its value should be counted in ________________.

2013's; inventory changes

Which of the following is a criticism of the national income and product accounts?

They do not capture most nonmarket economic activity.

Gross domestic product measures the output produced by ____________________ using resources in this country, while gross national product measures output produced by resources supplied by ______________.

U.S. or foreign citizens; U.S. citizens

The value of the cars that the Ford Motor Company produces in a German plant:

is a part of U.S. GNP.

The capital consumption allowance:

is an allowance for depreciation.

One of the key concepts involved in the circular flow diagram is that:

one person's spending is another person's income

Total spending in an economy is the sum of:

personal consumption plus gross private investment plus government spending plus net exports.