The Macroeconomic Perspective

Disposable income is:

A measure of the income households have to spend after paying taxes.

Included in the investment category under the expenditure approach to GDP accounting is (are)

Additions to inventory Machines and tools Newly constructed residential housing.

Gross domestic product is a measure of:

An economy's total output

Alternating increases and decreases in economic activity are known as:

Business cycles

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the:

Circular flow diagram

Why does GDP measure only the value of goods and services produced within a country?

Domestic production

Which category of consumption spending tends to be the most unstable over the business cycle?

Durable consumer goods.

GDP is calculated including:

Final products but not intermediate products.

Investment includes

Fixed investment pus addition to business inventories.

The event that stimulated the U.S. government's commitment to tracking the economy's health through a national income accounting system was the:

Great Depression

The total market value of all final goods and services produced by resources in the United States is called:

Gross domestic product

How does GDP treat the sales of used goods?

It does not count it.

Why does GDP measure only the final value of good and services>

Keeps you from double counting.

Which organization dates business cycles?

National Bureau of Economic Research

_____ are over 70% of GDP, while ______ nearly 11% of GDP

Personal consumption expenditures; gross private domestic investments.

How does GDP treat sales of corporate stock from one stockholder to another?

Rearrangement of ownership and is not counted.

Which phase of the business cycle occurs immediately before a trough?

Recession

The contractionary phase of the business cycle is characterized by:

Reduced output and increased unemployment.

GDP can be found either by adding up all of the ____ or all of the ____ in the economy.

Spending; income

An example of intermediate product is:

The purchase of tires by Ford Motor Company to put on its Ford Explorers. The purchase of wood by a home construction firm. The purchase of leather by a shoe manufacturer.

Which of the following is not considered a factor payment?

Transfer payments

We can be certain that net exports fall if

exports fall and imports rise

Total spending in an economy is the sum of:

personal consumption+ gross private investment+ government+ net exports

Disposable personal income can be either ____ or _____

spent; saved

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle in order are:

Expansion, peak, contraction, and trough.

Net exports

Exports minus imports

(True/False) A recession is always followed by a depression.

False

(True/False) Following the expenditure method, GDP= C+I+G+X

False

(True/False) Macroeconomics studies economic activity from the level of one individual or firm.

False

(True/False) the distinction between whether a good is durable or nondurable is clear and easy to apply

False

Which of the following statements is correct?

Households supply both labor and non-labor resources.

French perfume that is purchased in the United States is accounted for in which expenditure category of U.S. GDP

Net exports

Nominal GDP differs from real GDP in that:

Nominal GDP is measured in current year prices, while real GDP is measured in case year prices.

The nation's gross domestic product (GDP) is equal to:

The total market value of all final goods and services produced by resources in the United States.

What is the definition of GDP?

The total value of goods produced and services provided in a country during one year.

Which of the following is not included in the government purchases?

Transfer payments

(True/False) "Jobless recovery" was a recent phenomenon during the recession of 2001 because the early rate of employment increase was well below average for past recoveries.

True

(True/False) Fixed investments include all spending on capital goods as well as residential construction.

True

(True/False) If we counted the value of intermediate goods as well as the full value of the final products in GDP, we could be double counting.

True

(True/False) In boom periods, expenditures on consumers durables often increase more than expenditures on nondurables.

True

(True/False) Macroeconomics focuses on issues such as economic growth, the output of the entire economy, and inflation rates.

True

(True/False) Personal consumption expenditures are good and services purchased by residents of the United States.

True

Business cycles

Vary in duration and intensity

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

A hamburger purchase by a hungry restaurant patron.

Using any relevant information below, calculate GDP using the expenditure approach: (numbers in billions) Inventor investment: $50 Fixed investment: $120 Consumer durables: $420 Consumer nondurables: $275 Interest: $140 Indirect business taxes: $45 Gov. wages and salaries: $300 Gov. purchases of goods and services: $110 Imports: $80 Exports: $40 Profits: $320 Services: $600

$1,835 billion GDP

If the United States imported $1.5 billion worth of goods and services and sold $2.9 billion worth of goods and services outside its borders, net exports would equal.

$1.4 billion

If personal consumption = $100, investment =$25, government purchases = $25, imports $20, and exports =$10, the GDP=

$140

Which of the following is not included in the calculated gross domestic product?

A construction firm's purchase of lumber to build a four-bedroom home.