Macroeconomics - Chapter 8

What are the four major categories of expenditure?

Consumption, investment, government purchases, and net exports

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

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

National income is

GDP minus depreciation.

The table and figure 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.

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.

What are the four categories of​ income?

Wages, Interest,​ Rent, and Profit.

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

Y=C+I+G+NX

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

Households

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

real GDP by its population

Real GDP is:

the value of goods and services evaluated at base year prices

Which is the largest component of GDP?

consumption

Personal income is

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

Disposable personal income is

personal income minus taxes

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

Expansion

Disposable personal income is equal to personal income minus:

Personal Tax Payments

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

Real GDP

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.

is often used as a measure of general​ well-being. While increases in real GDP often do lead to increases in the​ well-being of the​ population, why is real GDP not a perfect measure of​ well-being?

The value of leisure is not included. The costs of pollution are not included. GDP does not include crime rates or income distribution.

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

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

smaller than the value of GDP

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

disposable personal income

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

households

If prices rise over​ time, then real GDP will be

larger than nominal GDP in years before the base year.

GDP Deflator

Nominal / Real x 100

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

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

Add government transfer payments

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

C

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

Based on the 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.

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

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

The purchase of new machines, factories, or houses

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

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

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 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

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

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:

the underground economy

The largest component of gross domestic income

wages