Macro-Economics

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Test 2

GDP is measured by:

adding the market value of total final production

If you make dinner for yourself:

only the market value of ingredients that you purchased this year is added to GDP.

Germany's GDP includes

China produced by the English owned Wedgewood Company at a factory in Berlin. Germany

Expenditures on US produced steaks, shoes, and doctor visits

Consumption Expenditures

Investment in GDP:

Cars produced during the year but unsold at the end of the year and the new capital equipment produced and purchased during the year

Bob had 1,000 shirts in inventory, produced 10,000 shirts during the year and ended up with 1,100 shirts in inventory. The 100 shirts added to his inventory is

Investment

GDP is measured through

the expenditures on goods and services by all levels of government included

Net exports of goods and services are defined as equal to

the value of exports of goods and services minus the imports of goods and services

In calculating GDP, we must

add the market value of exports and subtract the market value of imports

In 2007, Candamia's consumption expenditure was 13 billion, interest, rent, and profit was 1.5 billion, government expenditures on goods and services were 3 billion, net exports of goods and services amounted to 2 billion, and investment was 8 billion: the total expenditure was

26 billion

If consumption was 70 percent of GDP and both investment and government expenditure was 18 percent of each other than

exports must be less than imports

The income approach measures GDP as

the incomes paid households for the resources they own

To measure GDP, using the income approach, one of the adjustments made to net domestic product at factor cost is

add depreciation

During 2008, net domestic product factor cost equals 3,300 billion. Indirect taxes minus subsides equals 200 billion, depreciation equals 800 billion, statistical discrepancy equals zero, and net operating surplus equals 150 billion. The country's GDP is

4,300 billion

Real GDP is all final goods and services produced in a year within a country valued at

base year prices

Nominal GDP measures the value of goods and services produces in a given year valued using

prices of the same year

An increase in nominal GDP could result from an increase in

production and price

Last year, a country produced 10,00 pizzas and 30,000 burgers and nothing else. The pizzas sold for 9.00 each and burgers for 2,00 each. The nominal GDP was

150,000

The base year is 2008. A country only produces MP3 Players. The price of an MP3 player in 2008 was 100. The price of an MP3 player was 90 in 2009. The quantity of MP3 players produces in 2008 was 10,000 units and in 2009 was 10,500 units. Nominal GDP in 2008 equals

1,000,000

A reason real GDP does not accurately measure in our standard of living is because real GDP

does not measure all goods and services produced

U.S real GDP

excludes the value of underground production and leisure time.

As measured, GDP omits

Illegal sales of goods and services, changes in the amount of leisure time, and household production of goods and services

Goods and services such as environmental quality, leisure time, and household production are not included in GDP because they are not

bought in the markets

Household production such as baking bread at home, is not included in the GDP because it

does not involve a market transaction.

The calculation of GDP excludes

a family member painting the family home

What is not included in measuring GDP

the value of leisure time

Consumption expenditure accounts for what percentage of GDP

70%

The expenditure approach to measuring GDP does not include spending it on

intermediate goods and services

Real GDP is the value of final goods and services produced in a year

expressed in the prices of a base year

What is NOT a part of the income used in the income approach?

taxes paid by the person

The difference between nominal GDP and real GDP is

the prices used in their calculations

Instead of taking dirty clothes home to GA you got to the laundromat. Using the Laundromat means that

the 1.75 you use to pay for the Laundromat will be included in your GDP.

Leisure time is the economic good

because the more leisure time we have, the better off we are

In the business cycle, what immediately precedes the time when real GDP is falling

peak

The calculation of GDP using the income approach EXCLUDES

environmental quality

Pat Brown is 29 and takes care of her 2 year old daughter. She is not looking for a job. The current population survey counts Pat as

not being in the labor force

Assume the Us population is 275 million. If 210 million people are working of age, 125 million are employed and 6 million are unemployed, what is the size of the labor force.

141 million

When calculating the unemployment rate, the BLS counts those over 16 in jail as

institutionalized and therefore not in the working-age population

If 150 million people are employed, 50 million people are unemployed and the population is 285 million people

25 percent

The working age population is 220 million, the labor force is 150 million, the unemployment rate is 10 percent. The number of unemployed people is

15 million

The labor force participation rate is equal to

the labor force divided by working-age population multiplied by 100

A discouraged worker

is someone who does not have a job and has given up looking.

After taking maternity leave, Katie has decided to return to her medical practice. She will be working on Mondays, Tuesdays, and Thursdays from 8 to 5. She is a

part-time worker for non-economic reasons

Aggregate hours are measured by the total number of

hours worked by both full-time and part-time employees

During the Great Depression, the unemployment rate rose to a maximum of

25 percent

After combining the effects of women and men, over the 40 years in the US the overall labor force has

increased during those times

Over the past 40 years in the US, the labor force participation rate of men has what? and the rate of women has what?

Men-decreased and Women-Increased

Which of the following are sources of unemployment

Job losers, Lob leavers, and Entrants and Re-entrants

Job losers

are those who are laid off

The biggest source of unemployment are

job losers

June has never had a job but will graduate from college this coming spring when she will look for a job. June is

a job market entrant

Withdrawals are people who

decide to stop looking for a job

Frictional unemployment is the result of

the normal process of jobs being created and destroyed.

Rosina quit her job and moved to California. She is looking for work so she is

a frictionally unemployed

An employee who is fired from his or her job because he or she lacks the skills required to accomplish the task is

structural

During a recession, cyclical unemployment does what? and real GDP does what?

Cyclical=increase
real GDP=decrease

The average duration of unemployment is

increase during recession and decrease during expansion

When the economy is at full time employment, the

natural employment rate equals the unemployment rate

Potential GDP is the level of output produced when the unemployment rate is

equal to the natural unemployment rate

During a recession,

real GDP is less than the potential GDP.

The labor force is:

people who are employed or unemployed.

I'm employed that means?

I have worked for pay for one hour or more or else worked without pay for 15 hours or more in a family-owned business or else been temporarily absent from my job.

I am unemployed! That means?

The person must have no job, be available to work, have made specific efforts to find work within a month time or waiting to be recalled to a job from which they were laid off.

What are final goods

Final goods are goods that are purchased by their final user; theyre have been completed and do not need to go through further processes of completion.

What does GDP stand for?

Gross Domestic Product

What is value production?

It uses market prices to value production.

Intermediate goods and services?

Goods and services that are produced by one firm and bought by another; used as a component of a final good or service.

Investment?

Purchases of new capital goods, tools, instruments, machines, buildings and other constructions in addition to inventory

Government expenditure

All levels of government on goods and services

Net exports

Value of exports of goods and services minus the value of imports of goods and services.

GDP is measured by

Expenditure Approach and Income Approach

Expenditure=C+I+G+NX

Consumption, Investment, Government and Net Exports

Income includes

Labor earns wages, capital earns interest, land earns rent and entrepreneurship earns profit

Wages

payment of labor services

Profit

Total revenue-Total Cost

Disposable personal income

income received by households - MINUS- the personal income taxes paid

Real GDP

value of final goods and services produced in a given year expressed by prices of base year

Nominal GDP

final value of goods and services produced in a given year expressed in prices of that same year

Business Cycle

Peak
Recession
Trough
Recovery/Expansion

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