ECON Macro Exam 2 Review Part 1 – Flashcards
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During a business cycle expansion, total production _____ and total employment _______.
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increases; increases
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Which of the following headlines would be more closely related to what macroeconomists study than what micro economists study?
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Real GDP grows by 2.3% in the second quarter.
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Gross Domestic Product is calculated by summing up
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The total market value of final goods and services produced in the economy during a period of time.
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Which of the following goods is directly counted in GDP?
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a 12 inch Subway sandwich purchased by a student
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Which of the following transactions represents the purchase of a final good?
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Your father buys a new John Deere riding lawn mower.
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Which of the following is not directly counted in GDP?
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Intermediate goods
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Product: Quantitity: Price Shoes|40|$60 DVDs|100|$18 Tomatoes|2000|$1 Ketchup|300|$4 Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchupp and the other half of the tomatoes are purchased by households. Nominal GDP for this simple economy equals
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$6,400
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In the circular flow model, the value of total production for an economy ______ the value of total expenditures on final goods and services.
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Equals
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The nominal GDP of the U.S. in 2012 was approximately $16.2 trillion. This means that
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-The value of final output in 2012 was around $16.2 trillion. -Total income in 2012 was around $16.2 trillion. -Total spending on final goods and services in 2012 was around $16.2 trillion.
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Which of the following is not an example of a transfer payment?
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Health insurance payments to an army private
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The factors of production include
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Capital
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Investment, as defined by economists, would include the purchase of a
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Computer by an accounting firm
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Investment, as defined by economists, would not include which of the following? Ford
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buys U.S government bonds
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The purchase by a Chinese household of a CD produced in the United States is included in U.S.
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Net Exports
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Stage of Production: Seller: Buyer: Price 1|Steel Mill|Auto Manufacturer|$10,000 2|Auto Manufacturer|Auto Dealer|18,000 3|Auto Dealer|Consumer|25,000 Refer to the table above showing three stages of production of an automobile. The value added by the automobile dealer equals
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$7,000
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Which of the following transactions would be included in the official calculated of GDP?
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You buy a new iPod
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A transfer payment is a payment by the government to an individual
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For which the government does not receive a good or service in return.
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An example of a transfer payment is
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A welfare payment
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In the circular flow diagram, ______ supply the factors of production, and ______ goods and services.
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Households; buy
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Which of the following equations correctly measures GDP in an economy?
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GDP = C + I + G + NX
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Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add?
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$1,425
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Gross domestic product understates the total production of final goods and services because of the omission of
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The underground economy
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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?
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GDP will decrease.
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Legalizing all forms of illegal activities
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Increases GDP and reduces the size of the underground economy
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The underground economy can be described as
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Economic activity that is hidden from the government to avoid taxes or because the activity is illegal.
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Scott is a woodworker and charges $125 an hour for his time manufacturing custom - made wood products. For his wife's birthday, he designs and creates an intricate birdseye maple jewelry box that takes him 15 hours to complete. By how much and in what direction does GDP change as a result of his efforts?
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GDP is not affected by Scott's production of the jewelry box.
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Nominal GDP is GDP in a given year
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Valued in the prices of that year
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Real GDP is GDP in a given year
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Valued in the prices of the base year
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Year:Guns Produced:Price of Guns: Butter Produced: Price of Butter 2005|80|$5|40|$4 2013|90|6|60|10 Real GDP for Tyrovia for 2013 using 2005 as the base year equals
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$690
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Year: Nominal GDP: Real GDP 2008|$7,400|$7537 2009|7813|7813 2010|8301|8165 2011|8760|8516 The base year used in calculating real GDP is
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2009
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Year: Oranges Produced: Price of Oranges: Shirts Produced: Price of Shirts 2009|1800|0.90|110|$30 2011|2000|1.00|110|35 Real GDP for Vicuna for 2009 using 2011 as the base year equals
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$5,650
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If the quantity of goods and services produced in the economy decreases
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It may be possible for nominal GDP to increase
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Which of the following could cause nominal GDP to decrease, but real GDP to increase?
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The price level falls and the quantity of final goods and services produced rises.
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Real GDP will increase
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Only if the quantity of final goods and services produced rises
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Year: Nominal GDP: Real GDP 2012|14,078|13254 2013|14441|13312 The GDP deflator for 2013 equals
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108.5
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If real GDP increase we know for sure that
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Output has risen
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A very simple economy produced 3 goods movies burgers and bikes. The quantities produced and their corresponding prices for 2006 and 2013 are shown in the table above. What is real GDP in 2013, using 2006 as the base year?
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6360
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A very simple economy produced 3 goods cameras, legal services, and books. The quantities produced and their corresponding prices for 2006 and 2013 are shown in the table above. What is real GDP in 2013, using 2006 as the base year?
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11,790
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A very simple economy produced 3 goods cameras, legal services, and books. The quantities produced and their corresponding prices for 2008 and 2013 are shown in the table above. What is GDP deflator in 2008 if 2013 is the base year?
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87
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If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?
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2.7%
