ECON 2020 Chapter 5

Gross Domestic Product measures the

market value of the final goods and services produced in a given year within a country.

Which of the following is included in Germany's GDP?

i. BMWs produced in a German-owned factory in South Carolina

ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange

iii.  china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany

iii.  china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany

When an American college student in Davis, California spends $200 on a pair of Louis Vuitton jeans (a famous French brand), U.S. consumption ________, U.S. net exports ________, and U.S. GDP ________.    

increases by $200; decreases by $200; does not change

In the circular flow, how are the "value of production," "income," and "expenditures" related?

Expenditures on GDP equals the value of production which equals income.

Investment is defined as

the purchase of new capital goods by firms.

In one year, a firm increases its production by $9 million and increases sales by $8 million. All other things in the economy remaining the same, which of the following is true?

 

GDP increases by $9 million and inventory investment increases by $1 million.

In 2009 in the United States, consumption expenditure was $9,996 billion, investment was $1,559 billion, government expenditures on goods and services were $2,927 billion, and total exports were $1,492 billion. GDP equaled

some amount, but there is not enough information given to calculate GDP.

Spending on financial assets ________ counted as part of GDP ________.

are not; because their purchase is not spending on goods or services

The table above has information about an economy. Using this information, GDP equals

$7,800 billion

Item	quantity 2009	price 2009	quantity 2010	price 2010
Bread	50	$4.00	70	$3.00
Soda	50	$5.00	50	$6.00

The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is the nominal GDP in 2009?

$450

Item	quantity 2009	price 2009	quantity 2010	price 2010
Bread	50	$4.00	70	$3.00
Soda	50	$5.00	50	$6.00

The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is the real GDP in 2010?

$530

The business cycle is defined as

irregular ups and downs in production and jobs.

 During the business cycle,

real GDP fluctuates around potential GDP

As more women decide to work outside the home and therefore hire others to work around their home, GDP will increase by

the value of the output produced by the newly working women plus the value of any household work they are now hiring someone to perform.

Which of the following is NOT included in measured U.S. GDP?

the value of leisure time

Item	quantity 2012	price 2012	quantity 2013	price 2013
Banana	100	$2.00	125	$4.00
Sunscreen	60	$5.00	75	$4.00

Bananaland produces only bananas and sunscreen and the quantities and prices for 2012 and 2013 are given in the table above. Between 2012 and 2013, which grew more rapidly, nominal GDP or real GDP?

Nominal GDP grew more rapidly.

Suppose that the nominal GDP in 2009 was less than real GDP in 2009.  Given this information, we know for certain that

the price level in 2009 was less than the price level in the base year.