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Chapter 07
Econ 07 Study Questions
| Question | Answer |
|---|---|
| In the definition of GDP, the words "total market value" refer to total | dollar value at current prices. |
| Which of the following items is a final good? | a sweater purchased by someone in a department store |
| Which of the following would definitely not be included in the measurement of GDP? | value of the services of a person who mows his or her own lawn |
| Net exports equals | exports minus imports. |
| The expenditure approach to measuring GDP sums | consumption, investment, government purchases, and net exports. |
| Suppose the total market value of all final goods and services produced this year in economy X is $4 million. Of the $4 million worth of goods, $3 million is sold and $1 million is held in inventory. For this year, the GDP for economy X is | $4 million. |
| Business firms make which of the following two types of investment? | fixed investment and inventory investment |
| Capital consumption allowance refers to | capital goods being used up in production through natural wear, obsolescence, and accidental destruction. |
| An example of income received but not earned is | government transfer payments. |
| Refer to Exhibit 7-1. Which of the following summations represents GDP using the expenditure approach? | $2,150 + $692 + $250 + $331 + $300 - $320 |
| Which of the following would not be included in the calculation of this year's GDP? | a headlight bulb purchased by Ford Motor Co. from a supplier |
| Real GDP is GDP | GDP this year exceeds the Real GDP this year. |
| "Economic growth" has occurred if the | Real GDP this year exceeds the Real GDP of last year. |
| The standard definition of "recession" is | two or more consecutive quarters of falling Real GDP. |
| Which of the following does GDP omit? | a, b, and c |
| Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP? | Yes, since the country with a relatively large GDP could have a relatively large population. |
| durable goods = $200 billion; nondurable goods = $350 billion; services = $600 billion; fixed investment + inventory investment = $200 billion; government purchases = $400 billion; exports = $30 billion; imports = $79 billion. GDP = | $1,701 billion. |
| Suppose you have data on durable goods, nondurable goods, fixed investment, government purchases, exports, and imports. Can you compute GDP? | No, since data on inventory investment and services are missing. |
| Increases in import spending | lower GDP. |
| Why do economists prefer to compare Real GDP figures for various years instead of GDP figures? | Because when GDP in one year is higher than in another year, there is no way to tell why it is higher.This is not the case with Real GDP. If Real GDP is higher in one year than in another year, it is because output is higher. |
| If Real GDP was $8,742 billion in year 2 and it had been $8,509 billion in year 1, what was the approximate economic growth rate during this time period? | 2.74 percent |
| What is the proper sequence of the phases of a business cycle? | peak, contraction, trough, recovery, expansion |
| What does annual economic growth refer to? | annual increases in Real GDP |
| Which of the following statements is false? | b and c |
| Suppose that fixed investment is $550 billion and (total) investment is $630 billion. What does inventory investment equal? | $80 billion |
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