Deck 23: Measuring a Nation S Income

Question 1

An economy's income is the same as its expenditure because every transaction has a buyer and a seller.

Answer 1

True

Question 2

Macroeconomic statistics tell us about a particular household, firm, or market.

Answer 2

False

Question 3

In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find.

Answer 3

False

Question 4

GDP is the most closely watched economic statistic because it is thought to be the best single measure of a society's economic well-being.

Question 5

The basic tools of supply and demand are central to microeconomic analysis but are of little use to macroeconomics.

Question 6

GDP includes the value of paper clips but does not also count the value of the metal used to make them.

Question 7

GDP excludes the value of intermediate goods because their value is included in the value of final goods.

Question 8

The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously.

Question 9

Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and the trade deficit.

Question 10

GDP adds together many different kinds of products into a single measure of the value of economic activity by using market prices.

Question 11

Microeconomics and macroeconomics are closely linked.

Question 12

GDP is the market value of all final goods and services produced within a country in a given period of time.

Question 13

For an economy as a whole, income must exceed expenditure.

Question 14

GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services, but GDP cannot measure both at the same time.

Question 15

U.S. GDP includes the market value of rental housing, but not the market value of owner-occupied housing services.

Question 16

U.S. GDP excludes the production of most illegal goods.

Question 17

Macroeconomics is the study of the economy as a whole.

Question 18

GDP is the market value of all final goods and services produced by a country's citizens in a given period of time.

Question 19

Both the value of hamburgers sold by a restaurant and the value of the beef it used to make these hamburgers are included in GDP.

Question 20

U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.

Question 21

While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and exterminators.

Question 22

Expenditures by households on education are included in the investment component of GDP.

Question 23

If the value of an economy's imports exceeds the value of that economy's exports, then net exports is a negative number.

Question 24

At a rummage sale, you buy two old books and an old rocking chair; your spending on these items is not included in current GDP.

Question 25

Most goods whose purchases are included in the investment component of GDP are used to produce other goods in future periods.

Question 26

New home construction is included in the consumption component of GDP.

Question 27

The investment component of GDP refers to financial investment in stocks and bonds.

Question 28

If someone in the United States buys a surfboard produced in Australia, then that purchase is included in both the consumption component of U.S. GDP and the net exports component of U.S. GDP.

Question 29

Additions to inventory subtract from GDP, and when the goods in inventory are sold, the reductions in inventory add to GDP.

Question 30

If a good produced this quarter goes into inventory, then it is included in this period's GDP. If it is sold in the next quarter, it will have no effect on GDP.

Question 31

When an American doctor opens a practice in Bermuda, his production there is part of U.S. GNP.

Question 32

Disposable personal income is the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

Question 33

The government's purchases of goods but not its purchases of services are included in GDP.

Question 34

If the U.S. government reports that GDP in the third quarter was $16 trillion at an annual rate, then the amount of income and expenditure during quarter three was $4 trillion.

Question 35

Expenditures by households on education are included in the consumption component of GDP.

Question 36

The government purchases component of GDP includes salaries paid to soldiers but not Social Security benefits paid to the elderly.

Question 37

Changes in inventory are included in the investment component of GDP.

Question 38

When an American doctor opens a practice in Bermuda, his production there is part of U.S. GDP.

Question 39

The government computes measures of income other than GDP because these other measures usually tell different stories about overall economic conditions.

Question 40

If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have "purchased" the good so it will count as part of that period's investment expenditures.

Question 41

If consumption is $4000, exports are $300, government purchases are $1000, imports are $400, and investment is $800, then GDP is $5700.

Question 42

U.S. GDP was almost $12 trillion in 2015.

Question 43

If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125.

Question 44

If Brazil buys $100 million of tractors from the U.S., then U.S. net exports will decrease.

Question 45

Real GDP is a better gauge of economic well-being than is nominal GDP.

Question 46

Real GDP evaluates current production using prices that are fixed at past levels and therefore shows how the economy's overall production of goods and services changes over time.

Question 47

If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800.

Question 48

Changes in real GDP reflect only changes in the amounts being produced.

Question 49

If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.

Question 50

A consumer buys toys made in China. The value of the toys is included only in the net exports component of GDP.

Question 51

The term real GDP refers to a country's actual GDP as opposed to its estimated GDP.

Question 52

Changes in the GDP deflator reflect only changes in the prices of goods and services.

Question 53

An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.

Question 54

Nominal GDP uses constant base-year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.

Question 55

If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200.

Question 56

If consumption is $1800, GDP is $4300, government purchases are $1000, imports are $700, and investment is $1200, then exports are $300.

Question 57

If real GDP and the GDP deflator both rise, then it must be that nominal GDP rose.

Question 58

In 2015, government purchases were the largest component of U.S. GDP.

Question 59

The output of goods and services produced in the United States has grown on average 3 percent per year since 1965.

Question 60

The overall effect of accounting for purchases of foreign goods in GDP reduces GDP.

Question 61

The GDP deflator can be used to take inflation out of nominal GDP.

Question 62

​GDP can be measured in terms of expenditures but not income, since income is subject to taxation.

Question 63

If real GDP is higher in one country than in another, then we can be sure that the standard of living is higher in the country with the higher real GDP.

Question 64

GDP is adjusted to reflect changes in the quality of the environment such as changes in air and water quality.

Question 65

​When you purchase a run-down 1965 Ford Mustang to restore and resell, the purchase of the vehicle and all restoration expenditures are included in current GDP.

Question 66

GDP is a good measure of economic well-being for all purposes.

Question 67

Recessions are associated with lower incomes, rising unemployment, and falling profits.

Question 68

Real GDP per person tells us the income and expenditure of the average person in the economy.

Question 69

If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

Question 70

GDP is a useful measure since it provides a single measure of the value of the entire variety of goods and services produced by an economy.
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Question 71

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person.

Question 72

Economists use the term inflation to describe a situation in which the economy's overall production level is rising.

Question 73

If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000.

Question 74

In 2015, the level of U.S. real GDP was more than four times its 1965 level.

Question 75

GDP does not make adjustments for leisure time, environmental quality, or volunteer work.

Question 76

If the GDP deflator in 2009 was 150 and the GDP deflator in 2010 was 175, then the inflation rate in 2010 was 25%.

Question 77

Periods during which real GDP rises are called recessions.

Question 78

​GDP excludes the purchases of sliced bread by a sandwich shop, because the bread is an intermediate good in this case.

Question 79

GDP does not directly measure those things that make life worthwhile, but it does measure our ability to obtain many of the inputs into a worthwhile life.

Question 80

Typically in countries with lower levels of real GDP person, a smaller percentage of the population is literate.