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What is GDP?
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What is GDP Per Capita?
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Macro Exam 2
| Question | Answer |
|---|---|
| What is GDP? | The market value of all FINAL GOOD and SERVICES produced within a country in a year. It measures an economy's total output, which includes millions of different goods and services |
| What is GDP Per Capita? | GDP divided by population. |
| What is a FINAL GOOD and SERVICES? | They can be sold to firms and then bundled or processed with other goods or services for sale at a later stage. (intermediate good), |
| What is an Example of an Intermediate Good? (Is not a final good) (tires on a automobile) | EX: If an intel chip were counted in GDP when it was sold to Dell, then counted again when a consumer buys the dell computer, the value of the computer chip be counted twice, To avoid double counting , only the computer (the final good) is included in GDP |
| Why don't we include sales in GDP | What is calculated is Production. GDP measured of incomes wages are paid based on production (Not transactions) |
| Why isnt Sales of financial Intermediaries included in GDP? | It is a transfer of wealth and nothing was produced in the end. |
| What is GNP? | The market value of all final goods and services produced by a country's permanent residents, where ever located, in a year. Ex: Mexican Worker in America contributes to U.s GDP (who produced it) Mexcian worker in America contributes to Mex's GNP. |
| What does National Wealth and Income refers to? | 1.The nations entire stock of assets 2. The flow of the assets. |
| What is Savings? | Income that is not spent on consumption goods. |
| What does individual savings contribute to? | The supply of loanable funds |
| The main reason people save during their working years is ? | A preference towards a smooth consumption path overtime |
| If individuals become less impatient (or more patient), what will happen in the market of loanable funds ? | The supply of loanable funds will increase, interest rates will fall, and the quantity of saving and borrowing will increase. |
| An investment tax credit will cause the interest rate to _______and borrowing to_______ . | increase; increase |
| An increase in government borrowing will cause the interest rate to | rise and private spending to fall. |
| Which of the following would be included in GDP for the United States | Toyota, a Japanese car company, producing cars in the United States |
| Gross domestic product (GDP) is the market value of | All final goods and services produced within a country in a year |
| Business cycles are short-term movements in | real GDP around its long-term trend. |
| A real variable is one that | includes a correction for inflation |
| Which of the following is NOT considered a government purchase | unemployment checks |
| In the national spending approach, investment spending involves the acquisition of which of the following | Capital Goods |
| Which of the following is TRUE in the calculation of GDP | GDP does not include goods and services produced privately inside the home |
| Why does South Korea have a higher level of real GDP per capita than North Korea? | South Korea has a better system of incentives than North Korea |
| The two types of economic growth are | cutting-edge and catching-up. |
| In a steady state, the level of investment: | is equal to depreciation. |
| In a steady state, the capital stock | remains constant. |
| In financial markets, which group best represents the demand side of the market | Stock Markets |
| Why might it be a good thing for the United States if more people in India and China start dying of cancer and heart disease instead of malnutrition and preventable disease? | Companies will invest more in curing cancer and heart disease. |
| Which of the following explains why the supply of savings is upward sloping? | An increase in the interest rate leads to an increase in the quantity of saving. |
| When a given bond’s price increases, we know that the interest rate on this bond | Must Decrease |
| What is Recession? | A significant widespread decline in real GDP and Employment |
| What are Business Cycles? (Business Fluctuations) | The short run movements in real GDP around it long term trend. |
| What is Consumption? | Spending is private on final goods and services. |
| What is Investment? | Spending is private spending on tools, plants and equipment used to produce future output. |
| What is Government Purchases ? | Spending by all levels of government on final goods and services. Transfers are not included in these. |
| What are Net Ports ? | The value of exports minus the value of imports |
| What is the Factor Income Approach ? | Employee compensation (wages) + Rent+ Interest + Profit |
| What Are the Issues with GDP? | NO underground Economy (markets of illegal goods) NO Non priced production (household production, female labor force) NO Leisure (Inverse relationship between leisure and income) NO Bads (pollution) NO Income Distribution |
| The production function is a mathematical function that shows | the relationship between output and the factors of production |
| In a steady state, the level of investment | is equal to depreciation. |
| Countries with more human capital tend to have a | higher GDP per capita. |
| Because of spillovers, the social benefit of research and development | is greater than the private benefit |
| Investment is | the purchase of new capital goods. |
| If income and consumption are equal, saving must be | zero |
| If the interest rate increases, then | both the quantity saved and the quantity supplied of loanable funds will increase. |
| If the interest rate rises from 5% to 9%, the number of new businesses will | decrease |
| If the interest rate in the market for loanable funds is below the market-clearing rate, then | there will be a shortage of savings, and demanders will bid the interest rate up as they compete to borrow |
| Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes | consumption and investment to fall |
| An increase in government borrowing will cause the interest rate to | rise and private spending to fall. |
| If the supply of loanable funds increases and the demand for loanable funds increases at the same time, interest rates will | increase, decrease, or remain the same. |
| When bond prices increase, interest rates: | must decrease |
| GNP measures: | production by U.S. citizens wherever they work in the world |
| A set of tires installed on a vehicle in an automobile factory is counted as | an intermediate good and its market price is not part of GDP. |
| The value of a car produced and sold in 2005 and sold again in 2011 is included in | 2005's GDP only |
| The value of a country's GDP exceeds that of the country's GNP if the value of the | output produced by foreign workers in the country exceeds the value of output produced by the country's permanent residents in other countries. |
| What is the most immediate (or direct) cause of growth in real GDP per capita | factors of production |
| Which best describes the growth process from its ultimate to its immediate causes | institutions → incentives → factors of production → real GDP per capita |
| Which scenario has the greatest potential for free riding? | a system in which work effort and pay are not connected |
| Due to economies of scale, average costs decline as | production levels increase |
| Property rights are important institutions for encouraging investment because | people won't invest if they feel their property is at risk and that they may not realize a return on their investment |
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alishabenefield