D. the study of how fast prices in general are increasing
Gross domestic product is best defined as
C. the market value of all final goods and services produced in a country during a period of time.
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
A. by adding the value in dollar terms of all of the final goods and services produced domestically
Which is the largest component of GDP?
A. consumption
Which of the following are not part of “final goods,” as used in the definition of GDP?
D. intermediate goods
Which of the following is not true of GDP?
B. GDP includes both intermediate and final goods.
When a consumer purchases a new computer, how is that purchase counted in GDP?
C. by counting only the value of the computer and ignoring the value of the components
Which of the following is counted in this year’s GDP?
A. only this year’s production of goods and services
If we add up the value of every good and service produced in the economy, we get a total that is
A. larger than GDP.
If we add up the value of every final good and service produced in the economy, we must get a total that is exactly equal to the value of
A. all of the income in the economy.
Which of the following would be considered a factor of production?
D. all of the above
In the circular-flow diagram, who supplies factors of production in exchange for income?
A. households
Complete the following sentence: Total income in the economy equals the sum of wages, interest, _________ and ________.
C. rent; profit
Fill in the blank. The flow of funds from ___________ into the financial system makes it possible for government and firms to borrow.
D. households
An important conclusion to draw from the circular-flow diagram is that
A. we can measure GDP by calculating the total value of expenditures on final goods and services, or we can measure GDP by calculating the value of total income.
Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?
C. a new house
Which of the following is counted in the gross private domestic investment category used by the Bureau of Economic Analysis when measuring GDP?
D. all of the above
Which of the following is included in the economist’s definition of investment?
A. the purchase of new machines, factories, or houses
In calculating GDP, which levels of government spending are included in government purchases?
A. spending by federal, state, and local governments
When accounting for exports and imports in GDP, which of the following is correct?
A. Exports are added to the other categories of expenditures.
In the equation that sums up the information on the components of GDP, Y = C + I + G + NX, which component has the largest dollar value?
D. C (Consumption)
Which of the following is true about the consumption component of U.S. GDP in 2008?
D. Consumer spending on services was greater than the sum of spending on durable and nondurable goods.
Which of the following is true about the government purchases component of U.S. GDP in 2008?
B. Purchases by state and local governments are greater than purchases by the federal government.
The difference between the price the firm sells a good for and the price it paid other firms for intermediate goods is called
C. value added.
Household production and the underground economy
D. are important but unaccounted for in the Commerce Department’s estimate of GDP.
Which of the following is not a shortcoming of GDP as a measure of welfare?
A. It only counts final goods and services and not intermediate goods.
According to most economists, is not counting household production or production in the underground economy a serious shortcoming of GDP?
D. Most economists would answer “no” because these types of production do not affect the most important use of the GDP measure, which is to see how the economy is performing over short periods of time.
In many developing countries, the informal sector is ________ because taxes are ________ and government regulations are ___________.
D. large; high; extensive
If Americans still worked 60 hour weeks, as they did in 1890,
C. GDP would be much higher than it is, but the well-being of the typical person would not necessarily be higher.
As the value of a country’s GDP increases, the country is likely to
B. devote more resources to pollution reduction.
Real GDP is
B. the value of goods and services evaluated at base year prices.
Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?
B. Real GDP
. Suppose that the base year is 2000 and we want to calculate real GDP for 2009. Which procedure would you use?
D. Multiply the quantities in 2009 by the prices in 2000, and add up the results.
In an economy with rising prices, compared to the base year,
D. nominal GDP is larger than real GDP in years after the base year.
Growth in the economy is almost always measured as
A. growth in real GDP.
Using the year 2000 as the base year, and assuming that prices during the 1990s were lower on average than prices in 2000, we can conclude that
A. nominal GDP was lower than real GDP in the 1990s
Over time, prices may change relative to each other. To allow for this, the Bureau of Economic Analysis calculates
B. real GDP and the price deflator using chain weights.
If the GDP deflator has a value of 105.0, then
B. prices have risen 5% since the base year
When a significant fraction of domestic production takes place in foreign-owned facilities, a country’s difference between GDP and GNP is as follows:
D. GDP will be much larger than GNP.
Which of the following do we subtract from GNP to obtain NNP?
B. depreciation
In the National Income and Product Accounts (NIPA), sales taxes are referred to as
C. indirect business taxes.
The total national income actually received by a country’s residents is
B. smaller than the value of GDP.
To calculate personal income from national income, which of the following must be done by the BEA?
C. add government transfer payments
Disposable personal income is equal to
A. personal income minus personal tax payments plus government transfer payments.
The best measure of the income households actually have available to spend is
