MACRO ECON Chapter 5 Test Prep

USD 0,00

A JAPANESE AUTOMAKER produces $1 million worth of automobiles in its factory IN THE UNITED STATES. How much of that is added to the GNP of the United States?

USD 1,000,000

A Japanese automaker produces USD 1,000,000 worth of automobiles in its factory IN THE UNITED STATES. How much of that is added to the GDP of the United States?

swings

GDPI as a percentage of GDP: GDPI is volatile and causes ____ in the business cycle.

GDP, Population

GDP Per Capita: Takes into account differences in the SIZE of countries by dividing ____ by _____

necessarily falls

If Susan switches from going to Speedy Lube for an oil change to changing the oil in her car herself, then GDP________

Recession, 3

Leading Economic Index: Measures 10 important leading indicators. - _____ likely if index falls ______ months in a row.

GDP= USD 14 billion

Use the following data to calculate GDP: Consumption =USD 9.5 billion, Investment=USD 3 billion Government spending =USD 2.5 billion Exports=USD 2 billion Imports=3 billion

- Rental Income - Proprietor's Income - Compensations to Employees

Used to calculate GDP as part of the INCOME approach

lower than interest rates on short-term bonds.

We are MOST likely to see a recession if interest rates on long-term bonds are _______.

Gross Domestic Product per Capita (GDP per capita)

________ is/are a country's GDP divided by its population

The value of the cars in inventory will be counted as part of 2006 GDP, and the value of the cars sold in 2007 will not increase 2007 GDP.

The local Chevrolet dealership has an increase in inventory of 25 cars in 2006. In 2007, it sells all 25 cars. Which of the following statements is correct?

G

__ : GOVERNMENT Spending

GDP, standard of living

A HIGHER ____ generally equates to a HIGHER ___ ____ ____. Real GDP takes PRICES into account.

True

GDP also can be calculated as the compensation to factors of production: - Compensation of employees - Proprietor's income - Corporate profits - Rental income - Net interest - Taxes on production and imports - Adjustments to national income

informal, nonmarket

GDP does not measure ____ or ____ activities. These markets vary from country to country (about 10% of the U.S. economy).

Recession, -0.70

National Activity Index: A weighed average of 85 indicators of economic activity. - ______ likely if index falls below _____.

USD 50,000

Suppose in 2018 the United States had consumption worth $13 trillion, investment worth $5 trillion, and government spending worth $3 trillion, with $2 trillion in exports and $3 trillion imports. What was its GDP per capita, assuming there were 400 million residents?

- A negative slope of the Treasury spread indicates a possible recession - A Treasury spread represents the difference between interest rates of a long-term bond and a short-term bill. - A normal yield curve refers to the positive value of the Treasury spread

TRUE statements about the Treasury Spread

durable goods, nondurable goods, and services

The consumption component of GDP includes spending on __________

Income Produced, Spending

The economy can be measured in two basic ways: - By adding up all of the _________ OR - By adding up all of the ______.

Recovery

The part of the business cycle that goes FROM economic TROUGH TO economic PEAK is known as _

short-term interest rates exceed long-term rate

Treasury Spread: When _____-_____ _____ _____ ____ _____-______ _____ _____, the Treasury spread turns NEGATIVE, which has been a reliable predictor of a pending recession.

An inverted yield curve occurs when the interest rate of a long-term 10-year bond is more than the interest rate of a short-term 3-month bill.

Which of these is NOT true about the Treasury spread?

Recession

Which phase of the business cycle occurs immediately BEFORE A TROUGH?

interest, maturity

Yield Curve: Shows the ____ rates for bonds (vertical axis) with different _____ rates (horizontal axis)

Gross Domestic Product

_____ _____ _____ : The total market value of all final goods and services produced by resources IN A COUNTRY in a given year.

Treasury Spread, recession

______ _____: When short-term interest rates exceed long-term rates, the Treasury spread turns negative, which has been a reliable predictor of a pending _______.

Expenditure Approach

______ ______: MEASURES TOTAL SPENDING, including consumption, investment, government spending, and net exports

peak, recession, trough, and recovery.

Business cycles are the alternating INCREASES and DECREASES in economic activity. - Business cycles vary in intensity and duration. - The four phases include ____, _______, _______, and _______.

intensity and duration

Business cycles are the alternating increases and decreases in economic activity. - Business cycles vary in _______ and _______. -The four phases include peak, recession, trough, and recovery.

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

Expenditure Approach To GDP

per capita

GDP ____ ____: a useful measure of the relative STANDARD OF LIVING of citizens in different countries

Purchasing Power Partity

GDP ____: Takes into account differences in the COST OF LIVING between countries (especially services to adjust GDP measures.

always equal because every transaction has a buyer and a seller

In a simple circular-flow diagram, total income and total expenditure are _________

- Lower Business Expectations - Reduced Consumer Confidence - Higher Unemployment Rate

Rising prices that slow an economy can lead to all of these

An increase in demand for goods and services

Rising prices that slow an economy can lead to all of these EXCEPT

Trough

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

Recovery

What phase of the business cycle does the headline "Consumer Confidence at Highest Level in Three Years" suggest?

PAYING a $50 consultation fee over the phone with a doctor

Which item would be included in the GDP accounts?

Government Spending

Which of these is NOT used to calculate GDP as part of the income approach?

Y

___ : Gross Domestic Product

X

____ : Exports

M

____ : Imports

C

____ : Personal CONSUMPTION Expenditures

I

____ Gross Private Domestic INVESTMENTS (GPDI)

Government Spending

____ ____ Includes: Wages (Federal, State, and Local), purchases of goods and services from PRIVATE business and purchases of NEW STRUCTURES and EQUIPMENT

Gross Domestic Product

____ _____ ____ : Is the most common measure of an economy's size.

Gross National Product

_____ ____ ____ : The market value of all goods and services produces DOMESTICALLY AND ABROAD using resources supplied by a COUNTRY'S CITIZENS

Net Exports

_____ ____: Equal Exports - Imports In most years, U.S. imports EXCEED exports. Net exports are a NEGATIVE percentage of GDP.

Personal Consumption Expenditures

_____ _____ ____ : Include purchases of DURABLE goods, NONDURABLE goods, and SERVICES by consumers and businesses.

Gross Private Domestic Investment

_____ _____ ____ ____ Includes: - Investment in STRUCTURES (Residential and business.) - EQUIPMENT and SOFTWARE purchases - Changes in business INVENTORY

The National Income and Product Accounts (NIPA)

____________________: - measure our nation's economic performance. - compare U.S. income and output to those of other nations. - track the economy's condition throughout the business cycle.

gross national product

simon kuzNets (1901-1985) - Developed a systematic approach to measuring and analyzing national data - Developed key concept: ______ - Won Nobel Memorial Prize in Economic Sciences in 1971

two, negative

A recession begins after ____ consecutive quarters of ______ growth.

NBER (National Bureau of Economic Research)

- The __________________ is the official arbiter to decide when a recession begins and when it ends. - It looks for TURNING POINTS, at which the economy switches from peak to downturn or from trough to recovery. - TURNING POINTS are established by a consensus of eminent economists after private deliberations.

double-dip

A ______-____ recession occurs when a recovering economy does not reach its former peak.

increases by $10,000

A bakery PURCHASES frozen dough worth of $10,000 and puts it in the INVENTORY TO BE SOLD LATER. What happens with the national income accounts?