macro ch 7
Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:
$630.
The U.S. consumer price index contains data from approximately _____ different cities.
87
Which of the following transactions is included in the nation's gross domestic product?
A college student buys a pizza and has it delivered to her dorm room.
In Macroland, the GDP deflator for 2014 is 105 with 2013 as the base year. Real GDP in 2014 equaled $210 billion. Therefore, nominal GDP in 2014 equaled _____, while nominal GDP in 2013 equaled _____.
$220.5 billion; $200 billion
The equation that breaks GDP down by the four sources of aggregate spending is:
GDP = C + I + G + X - IM.
is the total value of all final goods and services produced in the economy during a given year.
Gross domestic product, or GDP,
Included in GDP of the US
Hondas assembly and sale of cars in the US, old navy purchases mannequins to display clothes
included in GDP
a new skateboard you buy for your niece, the commission paid tot he seller of a previously owned collectors skateboard, a new building for tony hawk industries
examples of government
a public school teachers salary
the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports, is the total spending on domestically produced final goods and services in the economy.
aggregate spending
A price index:
always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.
examples of net exports
an exported dollhouse
what is inflation?
an increase in the overall price level
is borrowing in the form of an IOU that pays interest.
bond
is the method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year.
chained dollars
The most widely-used price index in the United States is the:
consumer price index
a measure of inflation based on the cost of goods that households typically purchase
consumer price index
is household spending on goods and services.
consumer spending
why is hypothetical basket of goods used to measure inflation?
consumers can see the general increase in price over time by using a basket of goods
Economists frequently use GDP per capita to reflect:
differences in living standards across countries.
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save.
disposable income
The total income of households after taxes and government transfers is called:
disposable income.
Goods that are produced in a particular period but NOT sold in that period:
end up in inventory and are included in investment.
Aggregate spending on domestically produced final goods and services is _____ the factor income earned by all households in the economy.
equal to
Goods and services sold to other countries are
exports
are goods and services sold to the final, or end, user.
financial goods and services
The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing, are known as the
financial markets
a broad price index based on all the components of gdp
gdp deflator
is GDP divided by the size of the population; it is equivalent to the average GDP per person.
gdp per capita
is the total amount of funds borrowed by federal, state, and local governments in the financial markets.
government borrowing
are total expenditures on goods and services by federal, state, and local governments.
government purchases of goods and services
are payments by the government to individuals for which no good or service is provided in return.
government transfers
_____ refers to the total market value of all final goods and services produced in an economy during a given period.
gross domestic product
The circular-flow diagram illustrates all of the following in the U.S. economy EXCEPT:
growing income inequality.
_____ sell factors of production in the factor markets.
households
examples of consumption
ice cream, a domestically manufactured personal computer, cab fare for personal use, 55 cent tacos, super bowl ticket bought new from nil
The dollar value of final goods and services only is counted in GDP because:
if we counted the value of all goods, we would count inputs, like the value of steel in a new automobile, more than once.
Goods and services purchased from other countries are
imports
Bensalem is a small country; it had only 10 people and the GDP of its economy was $10,000 in 2014. Amazingly, the GDP in Bensalem in 2015 increased to $20,000 while the population increased by 50 percent. As a result, GDP per capita in Bensalem in 2015:
increased, because the percentage change in GDP was greater than the percentage change in population.
a person whose salary has increased is able to purchase fewer goods and services. is evidence that
inflation has occurred
are goods and services—bought from one firm by another firm—that are inputs for production of final goods and services.
intermediate goods and services
are stocks of goods and raw materials held to facilitate business operations.
inventories
is spending on productive physical capital—such as machinery and construction of buildings—and on changes to inventories.
investment spending
A country's GNP:
is the total factor income earned by residents of a country.
A country's exports minus its imports during a period are:
net exports
are the difference between the value of exports and the value of imports.
net exports
_____ is the value of all final goods and services produced in the economy during a given year; it is calculated using the current prices from the year in which the output is produced.
nominal gdp
a measure of an economies output using current prices uses
nominal gdp
a measure of output that is not adjusted for inflation uses
nominal gdp
A(n) _____ compares the cost of purchasing a given market basket in a given year to the cost of purchasing the market basket in the base year.
price index
equal to disposable income minus consumer spending, is disposable income that is not spent on consumption.
private savings
a price index based on the cost of common inputs for firms
producer price index
Investment spending is spending on:
productive physical capital.
a measure of an economies output using constant prices uses
real gdp
a measure of output that is adjusted for inflation uses
real gdp
is the total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year.
real gdp
NOT included in GDP of the US
resale of used textbooks, GMs assembly and sale of cars in mexico, ocean spray purchases plastic to make bottles, sale of wheat to Mr. Bakerys
An example of a government transfer is a(n):
social security payment
The difference between spending on inputs and investment spending is that:
spending on investment goods is included in the calculation of GDP.
is a share in the ownership of a company held by a shareholder.
stock
From a household's perspective, a share of stock represents:
the ownership of part of the firm
real gdp per capita is NOT an adequate measure of
the well being of each person in an economy
The outflow of funds from the financial markets include funds:
to finance government purchases of goods and services, and funds to foreign borrowers.
Examples of investments
underfoot sneaker co stores shoes that are produced in the current time period but not sold in inventory, float in away kayak co buys equipment to use in its factory, a domestically manufactured business computer
The consumer price index, the producer price index, and the GDP deflator:
usually move close together
of a producer is the value of its sales minus the value of its purchases of intermediate goods and services.
value added
NOT included in GDP because of double counting
wheels used to produce a skateboard that will be sold new, a used copy of the tony hawk video game, a used skateboard you buy for your brother, a previously owned collectors skateboard, a ticket for the x games bought from a person on a street corner
