question

why in microeconomics can we measure production in terms of quantity, but in macroeconomics we measure production in terms of market value?

answer

if, in macroeconomics, we measured production using quantities, we would add tons of wheat grown by US farmers to the number of iPods produced by Apple, etc when we measure total production, we can't just add together the quantities of every good and service because the result would be meaningless measuring production using market value in dollar terms allows us to add together many different goods and services

question

if the US Bureau of Economic Analysis added up the values of every good and service sold during the year, would the total be larger or smaller than measured GDP?

answer

Larger; the value of all goods and services sold would include intermediate goods

question

in the circular flow of expenditure and income, why must the total value of production in an economy equal the total value of income?

answer

every penny spent on a good or service must end up as someones income

question

what equation represents the relationship between GDP and the four major expenditure components

answer

y=c+i+g+nx

question

what are the four main components of expenditures in GDP

answer

consumption, investment, government purchases, and net exports

question

what is the difference between the value of a firm's final product and the value added by the firm to the final product?

answer

the value of a firm's final product is the sale price; value added is the difference between the sale price and the price of intermediate goods

question

is the value of intermediate goods and services produced during the year included in GDP? for example, is the aluminum used to produce a new mountain bike included in GDP?

answer

yes; the value of aluminum is not directly counted in GDP, but the production of aluminum is included in the value added method of measuring GDP

question

true/false: Consumer spending on services was greater than the sum of spending on durable and nondurable goods.

answer

true

question

which is a final, intermediate, or neither type of good: -coffee beans purchased by a coffee shop -one share of google stock -new pick up truck purchased by consumer -new home purchased by family

answer

intermediate, neither, final, final

question

GDP is

answer

market value of all final goods and services produced in a country during a period of time

question

inventories are part of investment and therefore included in GDP because

answer

firms produce goods, however sometimes the goods may be unsold at the time GDP is computed

question

a recession occurs when an economy experiences a period in which there is

answer

a decrease in total production

question

the business cycle exists because

answer

total production experiences periods of increases and periods of decreases

question

transfer payments are not included in GDP calculations because

answer

transfer payments are simply transfers of income from one group to another and not a purchase of a new good or service

question

how does the size of a countrys GDP affect the quality of life of the countrys people

answer

generally, the more goods and services people have, the better off they are

question

GDP is an imperfect measure of economic well-being because it fails to measure what types of production?

answer

household production and the underground economy

question

even if GDP included these type of production, why would it still be an imperfect measure of economic well-being?

answer

GDP is not adjusted for pollution and it doesn't account for unequal income distribution; the value of leisure is not included in GDP; GDP is not adjusted for crime or other social problems

question

today, the typical American works fewer than 40 hours per week. In 1890, the typical American worked 60 hours per week. Would the difference between the real GDP per capita in 1890 and the real GDP per capita today understate or overstate the difference in the population's economic well-being?

answer

the increase in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP

question

"Informal economic activities pose a particular measurement problem [in calculating GDP], especially in developing countries, where much economic activity may go unrecorded." What does the World Bank mean by "informal economic activities"?

answer

In many developing countries, informal economic activities refer to the sector in which output of goods and services is measured.

question

Why do these activities make it harder to measure GDP and, as a result, the standard of living?

answer

If a large portion of an economy's production is done in the underground economy, measured GDP will underestimate production and economic well-being.

question

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

answer

GDP doesn't include household production or production from the underground economy

question

The GDP of the country Sumeria has grown at an average rate of 6% over the last two years, while the rate of inflation has remained more or less stable. Macroeconomists in the country are arguing that this increase in GDP is a clear indication of an overall improvement in the well-being of its people Which of the following, if true about the last two years in Sumeria, would weaken this argument?

answer

The wealthiest Sumerians possess an increasingly large share of Sumeria's wealth

question

The GDP of the country Sumeria has grown at an average rate of 6% over the last two years, while the rate of inflation has remained more or less stable. Macroeconomists in the country are arguing that this increase in GDP is a clear indication of an overall improvement in the well-being of its people Which of the following, if true about the last two years in Sumeria, would strengthen this argument?

answer

An increasing percentage of the population is choosing leisure time over time spent in the work force

question

why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?

answer

when nominal GDP increases from year to year, the increase is due partly to changes in prices and partly to changes in quantities

question

how does real GDP deal with the problem inflation causes with nominal GDP

answer

real GDP uses the prices of goods, and services in the base year to calculate the value of goods in all other years; by keepings prices constant, we know that changes in real GDP represent changes in the quantity of output produced; real GDP separates price changes from quantity changes

question

how is the GDP deflator calculated?

answer

nominal GDP/real GDP x100

question

assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in years after the base year, nominal GDP is _______ real GDP (less, greater, equal to)

answer

greater than

question

assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in base year, nominal GDP is _______ real GDP (less, greater, equal to)

answer

equal to

question

assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? in years prior to the base year, nominal GDP is _______ real GDP (less, greater, equal to)

answer

less than

question

agree/disagree: if nominal GDP is less than real GDP, then the price level must have fallen during the year

answer

Agree. Nominal GDP will be less than real GDP if the price level falls and is lower than the base year's prices

question

agree/disagree: whenever real GDP declines, nominal GDP must also decline

answer

Disagree. real GDP falls if output falls; nominal GDP can increase if output falls and prices rise

question

agree/disagree: if a recession is so severe that the price level declines, then we know that both real GDP and nominal GDP must decline

answer

Agree. if both output and prices are falling, then both real GDP and nominal GDP will fall

question

agree/disagree: if real GDP stayed the same while nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined

answer

Agree. If nominal GDP declined between 2008 and 2009, the GDP deflator must also have declined

question

suppose the base year is 2001. looking at GDP data from the United States from 2001 to present, what would be true of the relationship between nominal GDP and real GDP

answer

RGDP < NGDP because prices are rising

question

in the US, GDP and GNP are close in value. under what circumstances would GNP be much larger than GDP?

answer

many US citizens currently work in foreign countries while few foreign citizens currently work in the US; few foreign citizens currently work in the US and few foreign firms maintain facilities in the US; few foreign firms maintain facilities in the US while many US firms are currently operating abroad

question

suppose the amount the federal government collects in personal income taxes increases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income?

answer

remain the same; remain the same; decrease

question

disposable personal income is

answer

personal income minus personal taxes

question

which of the following would be included in GNP of the US?

answer

production from a US firm that operates in mexico

question

largest component of GDI is

answer

wages

question

national income is

answer

GDP minus depreciation

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