ch. 9 questions Flashcards Preview

Macro economics > ch. 9 questions > Flashcards

Flashcards in ch. 9 questions Deck (26)
Loading flashcards...
1
Q

t/f explain: wealth and income are the same thing

A

false; income is a flow that reflects value creation. wealth is a stock of what you own, which is accumulated saving from past income earned

2
Q

t/f explain: we actually measure income as the social gain from production

A

true; measure of income is social gain, we measure how much is paid for output that is produced

3
Q

define GDP

A

the market value of all final goods and service produced within a country’s borders in one year

4
Q

what is a final good?

A

one that is sold to a final consumer

5
Q

t/f explain: the value of crystal meth production is not included in US GDP

A

true; because we do not have reliable records of the production

6
Q

t/f explain: sales of used goods are not counted in GDP

A

true; because they have been previously counted, so to count them again would double count them

7
Q

t/f explain: the value of a newly issued share of stock is counted in GDP

A

false; the money that comes from the stock sale will purchase capital, and to count both transactions would double count

8
Q

what are two approaches to calculate GDP?

A

the expenditure approach and the income approach

9
Q

which approach does government use in calculating GDP? why?

A

in income approach because tax records give information about income

10
Q

which is bigger, the double value of output produced in the economy or the dollar value of income earned in the economy? why?

A

they are equal, because every penny gained from the sale of a final good is income for someone in the production process

11
Q

what are the four components of the expenditure approach?

A

consumption, investment, government purchases, net exports

12
Q

of the four components of GDP as measured by the expenditure approach, which is largest,second largest, and third largest?

A

in order: consumption, government purchases, investment, net exports

13
Q

what is the definition of investment as regards the expenditure approach to GDP?

A

production of capital goods, production of new residential housing, changes in inventories

14
Q

t/f explain: we measure real GDP in order to reflect the fact that though illegal goods may destructive, they have value to those who buy them

A

false; we measure real GDP to adjust for inflation

15
Q

what is real GDP?

A

it is what GDP would be if prices were the same as they had been in the base year

16
Q

since we have real GDP, why would we ever want to use nominal GDP?

A

as long as we are not comparing values of different numbers across time, where inflation could occur, there is nothing to gain from using nominal GDP

17
Q

what is the definition of economic growth?

A

the percentage change in real GDP over a year’s time

18
Q

an examination of a graph of real GDP over 6 decades reveals something about our economy. what does it reveal?

A

our economy generally grows

19
Q

a very strong growth rate for the economy is

A

over 3.5%

20
Q

t/f explain: we would be pleased to find out we are at a peak of economic activity

A

false; that means we are about to contract

21
Q

what is the definition of a recession?

A

two successive quarterly declines in real GDP

22
Q

compare the 1982 recession and recovery to the latest recession and recovery

A

the 1982 recession was as bad or worse than the latest recessions, but the recovery in 1982 was much stronger

23
Q

what is the definition of per capita GDP? if we know this number, what does it tell us about the economy (other than the definition)?

A

GDP/population. it tells us how well off the people in the economy are

24
Q

what does GDP tell us about the economy?

A

how big it is

25
Q

t/f explain: when we look at a graph of five decades of GDP per capita we see that the average person is now worse off than before

A

false; wellbeing generally improves over time

26
Q

which is bigger, US GDP per capita or canadian GDP per capita? by how much?

A

f