Chapter 12 review – Flashcards
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What is one of the primary steps for deriving GNP from GDP?
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adding income earned outside the U.S. by U.S. firms and citizens
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GDP expressed in constant, or unchanging, prices is referred to as
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real GDP
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Why do fluctuating price levels cause individuals and businesses to change their purchasing decisions?
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Lower price levels translate into greater purchasing power
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If we are using the expenditure approach, which of the following would be count in GDP this year?
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trucks produced this year in Texas bt a Japanese car company
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Good that last for relatively long time, such as refrigerators, cars, and furniture are considered to be
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durable goods
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Suppose an economy's entire output is automobiles. In Year 1, the country's real GDP is $300,000 and all manufacturers in the economy produce cars at $15,000 each. In Year 2, all manufacturers produce cars at $16,000 each. What is the real GDP in Year 2, if 20 cars are
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$300,000
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As both real GDP and price level fall,
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there is a movement down the aggregate supply curve
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The total amount of goods and services in the economy available at all possible price levels is the
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aggregate supply
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Goods used in the production of final goods are
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intermediate goods
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The annual income earned by U.S.-owned firms and U.S. citizens is referred to as
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gross national product
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A decline in real GDP combined with a rise in the price level is
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stagflation
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All of these statements about recessions are true EXCEPT
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a recession is usually no longer than 6 months
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A prolonged economic contraction that is not especially long or severe is referred to as a
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recession
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Key economic variables that economists use to predict a new phase of a business cycle are referred to as
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leading indicators
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A steady, long-term increase in real GDP is
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economic growth
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How would a rise in business investment affect the aggregate demand curve?
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the aggregate demand curve shifts to the right
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What stage of the business cycle would be most appropriate to describe the years from 1929 to 1933?
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contraction
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A period of economic growth as measured by a rise in real GDP is a(n)
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expansion
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Three of the four main economic variables are
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external shocks, business investment, and interest rates.
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All of the following are situations involving external shocks EXCEPT
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consumers reduce spending because they fear that their nation is going to war
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The proportion of disposable income that is saved is referred to as
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saving rate
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Which of the following is an example of technological progress?
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producing more output by revamping operation methods of the assembly line
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A patent is an exclusive right to produce and sell a product for
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20 years
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__________ is the increase in efficiency gained by producing more output without using more inputs
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technological progress
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The process of increasing the amount of capital used per worker is
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capital deepening
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Real GDP divided by the total population is referred to as
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real GDP per capita
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In the long run, potential growth in the economy and a rise in real GDP per capita might occur from all of the following EXCEPT a(n)
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growth in population
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Income not used for combustion is referred to as
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savings
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All of the following are reasons capital deepening is an important source of economic growth EXCEPT
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more investment funds are made available to businesses.
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Last year, Ted earned an after-tax income of $40,000, spent $30,000, and saved $10,000. How much money did he make available to firms for investing?
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$10,000
