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Econ set 1

GDP may be defined as
Monetary value of all final domestic goods and services produced within a nation in a given year
The term final goods and services refers to
Goods and services purchased by ultimate users as opposed to resell or further processing
If intermediate goods and services were included in GDP:
The GDP would be overstated
GDP include:
Final but not intermediate goods
Net exports are a negative figure when
The nations imports exceeds its exports
Which of the following is not considered to be an investment
The purchase of 100 shares of AT&T by retired business executive
The nation’s gross domestic product:
Is the dollar value of the total output produced within the borders of the nation
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:
Not counted
The largest component of total expenditures is
Transferred payment are
Excluded when calculating GDP because they do not reflect current production
The value of American imports is
Subtracted from exports when calculating GDP because imports do not entail production in the United States
Consumption of fixed capital depreciation can be determined by
Subtracting net investment from gross investment
The largest component of national income is
Compensation of employees
The total income earned in any given year by American resource suppliers as measured by
Which of the following best defines disposable income
Income received by households less personal taxes
A price index is
A comparison of the price of a market basket from the fixed point of reference
The GDP deflator:
Includes all goods compromising the nations domestic output
If the consumer price index falls from 150 to 100 in the nations particular.:
Deflation about 33% has occurred
Real GDP measures
Current output at base year prices
The term real GDP refers to
GDP data which have been adjusted for changes in the price level
Nominal GDP is:
The sum of all monetary transactions involving final goods and services which occur in the economy on a given year
Real GDP is
The nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation
The consumer price index
Measures changes in the prices of a market basket of some 300 good and services purchased by urban consumers
The consumer price index has been criticized because it fails to account for
Changed spending patterns, quality improvements, new products, and price discounting
The immediate determinant of the volume of output and employment is the
Level of total spending
The phase of the business cycle where real domestic output declines is called
A recession
The phase of the business cycle where real domestic output is at the minimum is called
The trough
The production of durable goods is more variable then the production of nondurable goods because
Durable purchases or postponable and producers of durables have monopoly power
The United States economy is considered to be at full employment when
About 5.5 to 6% of the labor force is unemployed
Kimberly voluntarily quit her job as an insurance agent to return to school full-time to get earn an MBA. With degree in hand she is now searching for a precision a management Kimberly presently is in
Fractionally unemployed
The natural rate of unemployment is
The rate of employment occurring when the economy is at its potential output
The labor force includes
Employed workers in persons who are officially unemployed
If the unemployment rate is 9% and the natural rate of unemployment is 5.5% then the
Cyclical unemployment is 3.5%
Official unemployment statistics
Understate unemployment because discourage workers are not counted as employed
Demand pull inflation
Occurs when total spending exceeds the number the economy’s ability to provide output at the existing price level
The aggregate demand curve is
Downsloping because of the interest rate, wealth or Real balances, and foreign purchase effects
The interest rate affect suggest that
An increase in the price level will increase the demand for money, increase interest rates and decrease consumption in investment spending
The wealth or real balances effect indicates that
A higher price level will decrease the real value have many financial assets and therefore reduce spending
Real Per capita GDP will increase
When real GDP increases at a faster rate than population increase
Economic growth is often measured by increases in real GDP. historically, in the United States
Real GDP has risen in more years than it has fallen since 1900

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