47 terms
ECON 250 midterm ch 23-26+28
GDP is defined as
the market value of all final goods and services produced within a country in a given period of time
To compute GDP, we
add up the market values of all final goods and services
Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?
GDP is unaffected because previously the rent payments were included in GDP, and now the rent payments are replaced in GDP by the estimate of the value of housing services
The total sales of all firms in the economy for a year
is larger than GDP for the year
Which of the following items is included in GDP?
all of the above are included in GDP
NAtional income is defined as
the total income earned by a nation's residents in the production of goods ad services
If a U.S. citizen buys a television made in Korea by a Korean firm,
U.S. net exports are unaffected and U.S. GDP is unaffected
The consumer price index is used to
measure the quantity of goods and services that the economy produces
The term inflation is used to describe a situation in which
the overall level of prices in the economy is increasing
Economists use the term inflation to describe a situation in which
the economy's overall price level is rising
The inflation rate is defined as the
percentage change in the price level from the previous period
What basket of goods is used to construct the CPI?
the goods and services that are typically bought by consumers as determined by government surveys
Using 2006 as the base year, the consumer price index is
100 in 2006, 135 in 2007, and 155 in 2008
Using 2007 as the base year, the consumer price index is
74.07 in 2006, 100 in 2007, and 114.81 in 2008
Using 2008 as the base year, the consumer price index is
64.52 in 2006, 87.10 in 2007, and 100 in 2008
Let 2004 be the base year; then
inflation rate in 2005 = ((CPI in 2005 - CPI in 2004) / CPI in 2004) * 100
A nation's standard of living is measured by its
real GDP per person
Which of the following is not correct?
Countries that have had higher output growth per person have typically done so without higher productivity growth
Human capital is the
knowledge and skills that workers acquire through education, training, and experience
In a market economy, scarcity of resources is most clearly reflected in
market prices
If there are constant returns to scale, the production function can be written as
xY = 2xAF(L,K,H,N)
If a production function has constant returns to scale, output can be doubled if
all of the inputs double
Using the notation and production function in the text, Y/L is
productivity
Which of the following would increase productivity?
all of the above are correct
A bond is a
certificate of indebtedness
The length of time until a bond matures is called the
term
The identity that shows that GDP is both total income and total expenditure is represented by
Y = C + I + G + NX
Y = C + I + G + NX is an identity because
the equality holds due to the way the variables are defined
Which of the following equations will always represent GDP in an open economy?
Y = C + I + G + NX
Which of the following equations represents national saving in a closed economy?
Y - C - G
The natural rate of unemployment is the
amount of unemployment that the economy normally experiences
Cyclical unemployment refers to
year-to-year fluctuations of unemployment around its natural rate
The labour force
equals the number of people employed plus the number of people unemployed
A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a
bond
Compared to long-term bonds, other things the same, short-term bonds generally have
less risk and so pay lower interest
Stock represents
all of the above
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product
For an economy as a whole,
income is equal to expenditure
In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,
market prices
Which of the following transactions adds to U.S. GDP for 2006?
all of the above transactions adds to GDP for 2006
Estimates of the values of which the following non-market goods or services are included in GDP?
the estimated rental value of owner-occupied homes
Darla, a Canadian citizen, works only in the United States. The value that her labor contributes to U.S. output is
included in the U.S. GDP, but it is not included in U.S. GNP
Suppose there are only two firms in an economy: Cowhide, Inc. produces leather and sells it to Couches, Inc., which produces and sells leather furniture. With each $1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch and sells it for $2,000. Neither firm had any inventory at the beginning of 2006. During this year, Cowhide produced enough leather for 20 couches. Couches, Inc. produced 16 couches during 2006 and sold each one during that year for $2,000. What was the economy's GDP for the year?
$36,000
In Italian company operates a pasta restaurant in the U.S. The profits from this pasta restaurant are included in
U.S. GDP and Italian GNP
U.S. GDP and U.S. GNP are related as follows:
GNP = GDP - Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad
How is Net National Product (NNP) calculated?
Depreciation losses are subtracted from the total income of a nation's permanent residents
National income differs from net national product in that it includes business subsidies and excludes
indirect business taxes