question

In 2013, Ford Motor Company's sales were rising. These events were caused by

answer

An economic expansion

question

During a business cycle expansion, total production ____ and total employment _____ :

answer

increases; increases

question

Macroeconomics seeks to expand:

answer

Economic growth, business cycles and inflation

question

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA

answer

Values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

question

Which of the following transactions represents the purchase of a final good?

answer

Your father buys a new John Deere riding lawn mower.

question

In the circular flow model, the value of total income for an economy ________ the value of total production.

answer

Equals

question

To calculate GDP by the expenditure method, one must add

answer

Wages, rents, interest, and profits.

question

Value added equals the market price of the firm's product minus

answer

The price of intermediate goods

question

Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to homeowners. Which of the following would be counted in GDP?

answer

The sale of a new door to homeowner

question

Investment, as defined by economists, would not include which of the following? General Motors

answer

Buys U.S. government bonds.

question

Which equation represents the relationship between GDP and the four major expenditure components?

answer

Y = C + I + G + NX

question

The purchase of a new house is included in

answer

investment expenditures.

question

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

answer

net exports.

question

In 2012, which component of GDP had a negative value?

answer

government spending

question

CANOES-R-US makes canoes. It buys the shell of the canoe from another firm for $300 and uses its labor and intermediate goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200. Refer to Scenario 8-1. The value added of CANOES-R-US for each canoe equals

answer

$500

question

CANOES-R-US makes canoes. It buys the shell of the canoe from another firm for $300 and uses its labor and intermediate goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200. Refer to Scenario 8-1. The value of each canoe in gross domestic product equals

answer

$1200

question

A transfer payment is a payment by the government to an individual

answer

for which the government does not receive a good or service in return.

question

The largest component of spending in GDP is

answer

consumption spending.

question

The purchase by a household in China of a CD produced in the United States is included in U.S.

answer

net exports.

question

Gross domestic product understates the total production of final goods and services because of the omission of

answer

household production.

question

Gross domestic product understates the total production of final goods and services because of the omission of

answer

the underground economy

question

The size of the underground economy would tend to increase if the government of a country

answer

increased income tax rates.

question

The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector

answer

do not pay taxes to the government.

question

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

answer

8%

question

Which of the following is likely to increase measured GDP?

answer

Marijuana becomes legal to grow and sell.

question

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will

answer

increase GDP and decrease well being in the economy.

question

Statistics on real GDP during World War II may give a misleading indication of whether World War II was a period of prosperity because

answer

most of the increased production was for military goods, not consumption goods.

question

Presently, GDP is ________ to compensate for the costs of environmental damage.

answer

not adjusted

question

Developing countries with large informal sectors tend to have firms that invest less in capital equipment.

answer

True

question

Real GDP per capita is calculated by dividing the value of real GDP for a country by the country's adult population.

answer

False

question

Nominal GDP is GDP in a given year

answer

valued in the prices of that year.

question

Real GDP is GDP in a given year

answer

valued in the prices of the base year.

question

If the quantity of goods and services produced in the economy decreases,

answer

it may be possible for nominal GDP to increase.

question

If prices in the economy rise, then

answer

the purchasing power of a dollar declines.

question

Real GDP will increase

answer

only if the quantity of final goods and services produced rises.

question

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

answer

125

question

The GDP deflator is the

answer

ratio of nominal GDP to real GDP multiplied by 100.

question

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is

answer

5% higher in year 2 than in year 1.

question

If the GDP deflator is equal to 100, then for that year nominal GDP is equal to real GDP

answer

True

question

Gross national product, GNP, of the United States is the market value of all final goods and services

answer

produced by citizens of the United States anywhere in the world.

question

If an American firm opens a production facility in India, the total value of the production will be included in the

answer

gross domestic product of India.

question

Which of the following is included in both the U.S. GDP and U.S. GNP?

answer

the value of all cars produced by General Motors in the United States

question

National income equals gross domestic product (GDP) minus

answer

depreciation.

question

Suppose that in 2011, the national income in the United States was $200 billion, depreciation was $15 billion, personal taxes were $20 billion, and transfer payments were $10 billion. Gross domestic product in 2011 is

answer

$215 billion.

question

Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?

answer

Real GDP grows by 2.3% in the second quarter

question

Gross domestic product is calculated by summing up

answer

the total market value of final goods and services produced in the economy during a period of time

question

Which of the following goods is directly counted in GDP?

answer

12-inch Subway sandwich purchased by a student

question

In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.

answer

Equals

question

Which of the following is not a durable good?

answer

Clothing

question

The factors of production include

answer

Capital

question

The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that

answer

A. total income in 2010 was around $14.6 trillion. B. the value of output in 2010 was around $14.6 trillion. C. total spending in 2010 was around $14.6 trillion. Incorrect

question

Investment, as defined by economists, would not include which of the following? Ford

answer

buys U.S. government bonds

question

The purchase by a household in China of a CD produced in the United States is included in U.S.

answer

Net Exports

question

The sum of the value added of every firm involved in producing all final goods and services ________ gross domestic product.

answer

Equals

question

Gross domestic product understates the total production of final goods and services because of the omission of

answer

Household Production

question

Gross domestic product understates the total production of final goods and services because of the omission of

answer

the underground economy

question

The size of the underground economy would tend to decrease if the government of a country

answer

decreased government regulations on businesses.

question

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

answer

GDP will decrease.

question

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

answer

8%

question

Legalizing all forms of illegal activities

answer

increases GDP and reduces the size of the underground economy.

question

The U.S. work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours

answer

decreases U.S. GDP and increases the well-being of a typical working person in the U.S

question

Which of the following is not a true statement about the impact of World War II on the U.S. economy?

answer

The war time years were a period of prosperity for U.S. consumers

question

Presently, GDP is ________ to compensate for the costs of environmental damage.

answer

Not Adjusted

question

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

answer

True

question

Nominal GDP is GDP in a given year

answer

valued in the prices of that year.

question

Suppose that nominal GDP in 2011 was less than real GDP in 2011. Given this information, we know for certain that

answer

the price level in 2011 was less than the price level in the base year.

question

To examine how the total production of an economy has changed over time, it would be better to examine

answer

Real GDP

question

Real GDP will increase

answer

only if the quantity of final goods and services produced rises.

question

Nominal GDP will increase

answer

if either the price level or the quantity of goods and services produced rises.

question

The GDP deflator is a measure of the

answer

average level of prices of final goods and services in the economy.

question

If prices rise on average in the U.S. economy, the purchasing power of a dollar declines

answer

True

question

Gross national product, GNP, of the United States is the market value of all final goods and services

answer

produced by citizens of the United States anywhere in the world.

question

The output of Mexican citizens who work in Texas would be included in the

answer

gross national product of Mexico.

question

The output of U.S. citizens who work in Canada would be included in the

answer

gross domestic product of Canada.

question

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S. ________ and the South Korean ________.

answer

GNP; GDP

question

National income equals gross domestic product

answer

minus the consumption of fixed capital.

question

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

answer

disposable personal income.

ECON 201- Chapter 8 – Flashcards

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