GDP is defined as
the market value of all final goods and services produced within a country in a given period of time
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
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
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 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
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
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
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
The natural rate of unemployment is the
amount of unemployment that the economy normally experiences
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
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product
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