macro

When imports increase, what happens to GDP, ceteris paribus?

GDP decreases

For any given base year, which of the following is true?

GDP deflator = 100 Nominal GDP = Real GDP.

Why is GDP an imperfect measure of the productive capacity of the economy?

GDP does not include goods and services that are not traded in a market.

What generalization can we make about two countries with very different GDP per capita measures: one very high and one very low?

Higher GDP per capita measures are associated with higher standards of living.

Wages + Interest + Rental income + Profits = _________

Income

Which of the following increase U.S. GDP, ceteris paribus?

Increase in output Increase in price level

Which of the following explains why GDP per capita is not a perfect measure of well-being, ceteris paribus?

Increases in leisure (vacations) decrease GDP and increase happiness.

Suppose an auto manufacturer produces 20,000 vehicles this year and only sells 15,000 of them to auto dealers. Under which expenditure approach category do the remaining 5,000 vehicles fall?

Investment

Economists and policy-makers rely more heavily on which GDP measure?

Real GDP

Why do economists only count the market value of final goods and services in GDP?

To avoid double-counting

Identify categories of goods and services that are NOT counted in GDP.

Underground economy Non-market externalities Home production

Suppose, when evaluating a nation's economic activity, economists include the market value of a new truck's tires AND the market value of the truck. This is an example of

double-counting.

When we compare the size and value of an economy,

expenditure equals income.

The sum of all output (excluding spending on intermediate goods) sold in the economy measures total

expenditure.

Goods and services that are consumed by an end-user are called

final goods.

Economic ______ often reduces poverty.

growth or development

Expenditures by one person translate into ______ for another person.

income

Spending on productive inputs designed to improve the future productivity of a firm is called _____ expenditure.

investment

Suppose a household purchase a newly-built house. Economists categorize this purchase as

investment.

The payment that an individual receives from Social Security benefits

is not counted in GDP

The strength of using the market value of goods and services when measuring GDP is that

it puts all goods and services into a common metric.

Economic growth, unemployment, and inflation all compose the field of economics known as ________.

macroeconomics

When economists express goods and services in a common unit (U.S. dollars, for example), they measure the ________ ________ of those goods and services.

market value

Whether or not we measure the economy's expenditure or its income,

national production = national expenditure = national income.

Pollution in the production process is considered by some economists to be

negative output.

Consider the following statement:"Subtract domestic spending on imports from GDP and add international spending on exports."This describes

net exports.

If you evaluate GDP using output from 2013 and prices from 2013, the result is called

nominal GDP.

The GDP measure that contains changes in BOTH output and price is called

nominal GDP.

In the expenditure approach, intermediate goods are part of GDP

only in the sense that their value is contained in the market price of the final good.

Using GDP as a measure of the average individual income across countries can be misleading because of differences in _______.

population

Using GDP as a measure of the average individual income across countries can be misleading because of

population differences.

According to the income method:Income equals wages + interest + _____ + rental income.

profits

U.S. GDP is usually generally calculated

quarterly.

Job creation and improved living standards are often the result of

rapid economic growth.

If you evaluate GDP using output from 2013 and prices from 2009, the result is called

real GDP.

Government purchases refers to

spending on goods and services at all levels of government.

The ratio of nominal GDP to real GDP is called

the GDP deflator.

Consumption, Investment, Government spending, and Net exports compose

the expenditure approach to calculating GDP.

The goods and services included in GDP are determined by

the location of the producer.

Gross domestic product is

the most commonly used measure of an economy's value.

The income method of evaluating a national economy produces

the same result as the expenditure method in a closed economy.

The difference between the sale value of a good, and the value of the good's inputs represents

the value added.

The transactions of goods and services sold below the radar, outside of official records, take place in the _______ economy.

underground

The ________________ approach to measuring the size of a national economy avoids the problem of double-counting and clarifies the resale of existing goods.

value added

Real GDP equals

(nominal GDP/GDP deflator) x 100.

Macroeconomics comprises which of the following?

Aggregate consumption Aggregate production Aggregate prices

In the base year, the GDP deflator equals

100.

GDP is commonly divided into __________ important parts, which include ____________.

4; market value, final goods, borders, time period

Define GDP per capita.

A country's GDP divided by its population.

Which of the following is considered a personal consumption expenditure?

A individual purchases a new mountain bike A household buys groceries for the week A student buys a new tablet

Indicate which of the following activities are included in GDP.

A local government installs a new stoplight Paying college tuition Renting an apartment Buying a new computer

Which of the following purchases are considered investment spending?

A new factory A newly-built house

Which of the following comprises government spending?

An FBI agent's salary A series of new drone-type aircraft A newly-purchased presidential limousine

The expenditure approach to calculating GDP can be given by,

C + I + G + NX.

Rent and college tuition belong to which category of expenditure?

Consumption

GDP is defined by which of the following categories?

Country boundaries Final goods Time period Market value

Which two methods do economists employ in order to calculate the market value of all final goods and services?

Expenditure approach Income approach

Suppose inflation in a given year is 4.1% and that output remains constant. What is the effect on GDP during this period?

GDP increases

The most commonly used measure of an economy's value is

GDP or gross domestic product

In order to determine the amount a country produces per person, economists use

GDP per capita.

A U.S. citizen working in Mexico contributes to Mexico's _________ and to U.S. _________.

GDP; GNP

Identify four categories of total expenditure.

Investment Net exports Consumption Government spending

Suppose a house is built in 1995 and sells that same year. In 2013, the house is sold again. Which of the following is true about the market value of the house?

It is not included in GDP calculations for 2013 It is included in GDP calculations for 1995

Researchers have expanded on GDP per capita as a measure of well-being and happiness by employing which of the following metrics?

Life Satisfaction Index

is a field of economics that covers topics such as the consumption and production decisions made by individuals and individual firms.

Microeconomics

Indicate which of the following is a solution to double-counting.

National income accounting

GDP deflator = _____RealGDP_____RealGDP x 100

Nominal GDP

The GDP deflator is given by

NominalGDPRealGDPNominalGDPRealGDPX 100

Suppose a firm produces high-quality whitewater rafts. The process, however, generates a great deal of pollution. Why is the market value of the rafts NOT an accurate measure of the effect on the economy?

Pollution is a negative externality

What error in assessment can occur if we look at GDP per capita without accounting for differences in the cost of living?

Poorer countries appear less well-off than they really are.

Suppose it would cost you $100 to have a cleaning service clean your apartment. Rather than pay for the service, you and your roommates decide to clean it yourselves. How would the GDP of your economy be affected by this decision?

The GDP would remain unaffected.

Which GDP evaluation method highlights consumer activity versus government spending?

The expenditure approach

Suppose, this year, you spend $15,000 on a car that was originally produced and sold during the last year. The sales person earns a commission of 3% on the sale. Which of the following statements is correct?

The sale contributes $450 to GDP this year.

The formal measure of U.S. GDP may tend to understate the actual size and value of the national economy due to the exclusion of which category of goods and services?

The underground economy

Aside from the income approach and the expenditure approach to measuring an economy's value, what is third method?

The value-added approach

Why are accumulated inventories categorized as they are in the expenditure approach?

They add to the future revenue of the firm

According to the income approach, income can be defined as which of the following?

Wages paid to labor Profit paid to entrepreneurs Rent paid to land Interest earned on capital

The income approach involves adding which of the following?

Wages, interest, rental income, and profits

When is a recession or a depression considered "official"?

When the National Bureau of Economic Research declares it.

Falling GDP, rising unemployment, and increased bankruptcies all characterize

a recession.

The expenditure approach to calculating GDP eliminates the issue of double-counting by

adding the market value of all final goods and services.

In a closed economy, the income approach and the expenditure approach of evaluating the economy

are equal.

Goods and services that are produced and consumed in the home

are not calculated in GDP.

Spending on productive inputs designed to improve the future productivity of a firm is called _______ expenditure.

consumption or consumer