Macro Chapter 8

Nominal GDP is GDP in a given year

valued in the prices of that year

The nominal GDP of the US in 2010 was approximately $14.6 trillion. This means

total spending in 2012 was around $14.6 trillion, total income in 2012 was around $14.6 trillion, and the value of output in 2012 was around $14.6 trillion

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

gross national product of Mexico

Disposable personal income equals personal income

minus personal tax payments

In 2010, which component of the GDP had a negative value?

net exports

In the US since the mid-1980s, consumption as a percentage of GDP has

increased

In May 2009, Ford Motor Company’s sales were down 20% from a year earlier. These events were caused by

an economic recession

National income equals gross national product minus

depreciation

Which of the following in not directly counted in GDP?

intermediate goods

Which of the following statements about the underground economy is true?

Excluding underground economy production from meadsured GDP causes errors in GDP growth estimates in the long run

A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

GDP is much larger than GNP

Which of the following could cause nominal GDP to decrease, but real GDP to increase?

the price level falls, and the quantity of final goods and services produced rises

GDP understates the total production of final goods and services because of the omission of

the underground economy

If real GDP in 2011 (using 2002 prices) is lower than nominal GDP of 2010, then

prices in 2011 are lower than prices in 2010

Depreciation is

the value of worn-out equipment, machinery, and buildings

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm

To calculate GDP by the expenditure method, one must add

consumption spending, investment spending, government spending, and net exports

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

decreases US GDP and increases the well-being of a typical working person in the US

Which of the following is not an example of a transfer payment?

health insurance payments to an army private

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

it may be possible for nominal GDP to increase

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

GDP of India

The purchase by a foreign government of an airplane produced in the US is included in US

net exports

Which of the following would be directly counted in GDP in 2012?

kitchen cabinets purchased from Home Depot in 2012 to be installed in a house built in 1977

The Philippines and Vietnam have roughly the same size population. suppose the GDP of the Philippines if $1,000 billion and the GDP of Vietnam is $10,000 billion. you should conclude

it is not possible to make a good comparison of the economic well being of a typical individual in the 2 countries without additional info

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

5% higher in year 2 than in year 1

If GDP calculations included measurements of pollution and environmental damage, GDP values would most likely be

less than their values without these measurements

During a business cycle expansion, total production ______ and total employment ______

increases; increases

Recent estimates put the size of the underground economy in the US at _____ of measured GDP

8%

Real GDP is GDP in a given year

valued in the prices of the base year

T/F: GDP accounting rules do not adjust for production that pollutes the economy

True

In the first half of 2011, automobile sales in the US were lower than they were in the first half of 2010. the decrease in auto sales impacts GDP because new automobiles are counted as ______ when purchased by households and ______ when purchased by businesses

consumption; investment

Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, the

averaged hours worked per week increased

Which of the following headlines would be more closely related to what macro economists study than what micro study?

Real GDP grows by 2.3% in the second quarter

If prices in the economy rise, then

the purchasing power of the dollar declines

The GDP deflator is a measure of the

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

National income equals GDP

minus the consumption of fixed capital

Macro, as opposed to micro, includes the study of what determines the

wages paid to employees by Dell

Suppose, in 2012, you purchased a house built in 2003. Which of the following would be included in the GDP of 2012?

the value of services of the realtor

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

equals

The GDP deflator is

ratio of nominal GDP to real GDP multiplied by 100

Which of the following is not true about the composition of GDP in 2010?

The majority of consumer spending is on durable goods

The purchase of a new house is included in

investment expenditures

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

increased income tax rates

Which of the following is not a durable good?

clothing

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

125

Which of the following goods is directly counted in GDP?

a 12-inch Subway sandwich purchased by a student