Term
True or False?
When an individual mows her lawn, the value of those lawn care services is included in GDP. |
|
Definition
FALSE.
GDP does not include household production. |
|
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Term
True or False?
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. By
itself, this change in behavior has increased GDP. |
|
Definition
TRUE.
The value of meals cooked at home is not included in GDP, but the value of meals
purchased at a restaurant is included in GDP. |
|
|
Term
True or False?
When an individual pays his friend (an accountant) "under the table" for preparing the individual's
income tax return, the value of those accounting services is included in GDP. |
|
Definition
FALSE.
GDP does not include production in the underground economy. |
|
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Term
True or False?
One pound of flour is sold for $2 to a bakery that uses the flour to bake a cake that it sells for $15 to a
consumer. A second pound of flour is sold for $3 to a consumer in a grocery store. These three transactions
increase GDP by $20. |
|
Definition
FALSE.
The value of the flour sold to the bakery is not included separately in GDP because its
value is already included in the value of the cake, so these transactions increase GDP by $15 + $3 =
$18. |
|
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Term
True or False?
If we add up the value of every good and service produced in the economy, we get a total that is larger
than GDP. |
|
Definition
TRUE.
The value of every good and service produced in the economy would include the values of
many intermediate goods that are not counted separately in GDP. |
|
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Term
True or False?
When an individual hires a lawyer, the value of the lawyer's services is included in GDP. |
|
Definition
TRUE.
GDP includes the value of newly produced goods AND services. |
|
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Term
True or False?
When an individual purchases a house built 30 years ago, the value of that house is included in the
current year's GDP. |
|
Definition
FALSE.
GDP does not include the value of used goods that are sold. |
|
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Term
True or False?
If the Bureau of Economic Analysis' quarterly report states that GDP was $4 trillion, then the market
value of all final goods and services produced within the United States during that quarter was $1 trillion. |
|
Definition
TRUE.
The BEA measures total production over three months (one quarter), then multiplies that
value by 4, so each quarterly report gives an annual measure of GDP. |
|
|
Term
True or False?
The U.S. has the world's second-highest GDP. |
|
Definition
FALSE.
The U.S. has the world's highest GDP. |
|
|
Term
True or False?
As of Quarter 2, 2011, U.S. total income was approximately $13 trillion. |
|
Definition
TRUE.
As of Quarter 2, 2011, U.S. GDP, which is equal to U.S. total income, was approximately
$13 trillion. |
|
|
Term
True or False?
Firms pay wages to households for the use of natural resources. |
|
Definition
FALSE.
Firms pay rent to households for the use of natural resources. |
|
|
Term
True or False?
Expenditures by households on education services are included in the investment component of GDP. |
|
Definition
FALSE.
Expenditures by households on education services are included in the consumption
component of GDP. |
|
|
Term
True or False?
When an individual purchases a newly built house, the value of that house is included in the
consumption component of GDP. |
|
Definition
FALSE.
When an individual purchases a newly built house, the value of that house is included in
the investment component of GDP. |
|
|
Term
True or False?
When an individual purchases stocks and bonds, the value of those stocks and bonds is included in the
investment component of GDP. |
|
Definition
FALSE.
The investment component of GDP includes the purchase of physical capital, not the
purchase of financial capital. |
|
|
Term
True or False?
Households supply the factors of production to the government in exchange for transfer payments. |
|
Definition
FALSE.
Transfer payments are payments by the government to individuals for which the
government does not receive a new good or service in return. |
|
|
Term
True or False?
The U.S. is the world's third-largest exporter of goods, the world's largest exporter of services, the world's
largest importer of goods, and the world's largest importer of services. |
|
Definition
|
|
Term
True or False?
When a U.S. citizen buys a television made in South Korea by South Korean citizens, U.S. net exports
decrease, but U.S. GDP is unaffected. |
|
Definition
TRUE.
The purchase increases imports, which decreases net exports, but the purchase is added to
consumption and subtracted from net exports, so GDP does not change. |
|
|
Term
True or False?
For the U.S., the following list is in order from largest to smallest: consumption, investment,
government purchases, net exports. |
|
Definition
FALSE.
For the U.S., the following list is in order from largest to smallest: consumption,
government purchases, investment, net exports. |
|
|
Term
True or False?
The value of GDP is reduced to reflect the impact of pollution generated by production. |
|
Definition
|
|
Term
True or False?
A decrease in nominal U.S. GDP must imply that the United States is producing a smaller output of
goods and services. |
|
Definition
FALSE.
Nominal GDP may have decreased because prices decreased while quantity of output
stayed the same or even increased. |
|
|
Term
True or False?
Real GDP will increase only if prices increase. |
|
Definition
FALSE.
Real GDP holds prices constant, so real GDP will increase only if production increases. |
|
|
Term
True or False?
In an economy with rising prices, nominal GDP is smaller than real GDP in years before the base year. |
|
Definition
|
|
Term
True or False?
The base year is 2002, and the GDP deflator was 125 in 2005. This means that the average price of
goods and services was 25% higher in 2005 than it was in 2004. |
|
Definition
FALSE.
This means that the average price of goods and services was 25% higher in 2005 than it
was in 2002. |
|
|
Term
True or False?
The market value of the final goods and services produced by Japanese citizens working in Spain is
included in Japan's GNP and Spain's GDP, but not in Japan's GDP or Spain's GNP. |
|
Definition
|
|
Term
Dogylvania has gathered the following data for 2010:
spending by households on goods and services = $7000
spending by households on new houses = $4000
spending by households on financial capital = $1000
spending by firms on physical capital = $3000
spending by government on goods and services = $2000
spending by government on employee salaries = $1000
spending by government on transfer payments = $500
imports = $500
exports = $800
What was the value of Dogylvania's consumption in 2010? |
|
Definition
|
|
Term
Dogylvania has gathered the following data for 2010:
spending by households on goods and services = $7000
spending by households on new houses = $4000
spending by households on financial capital = $1000
spending by firms on physical capital = $3000
spending by government on goods and services = $2000
spending by government on employee salaries = $1000
spending by government on transfer payments = $500
imports = $500
exports = $800
What was the value of Dogylvania's investment in 2010? |
|
Definition
|
|
Term
Dogylvania has gathered the following data for 2010:
spending by households on goods and services = $7000
spending by households on new houses = $4000
spending by households on financial capital = $1000
spending by firms on physical capital = $3000
spending by government on goods and services = $2000
spending by government on employee salaries = $1000
spending by government on transfer payments = $500
imports = $500
exports = $800
What was the value of Dogylvania's government purchases in 2010? |
|
Definition
|
|
Term
Dogylvania has gathered the following data for 2010:
spending by households on goods and services = $7000
spending by households on new houses = $4000
spending by households on financial capital = $1000
spending by firms on physical capital = $3000
spending by government on goods and services = $2000
spending by government on employee salaries = $1000
spending by government on transfer payments = $500
imports = $500
exports = $800
What was the value of Dogylvania's net exports in 2010? |
|
Definition
|
|
Term
Wrexington has gathered the following data for 2010:
Y = $36,000
I = $13,000
G = $7,000
exports = $1,000
imports = $3,000
What was the value of Wrexington's consumption in 2010? |
|
Definition
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