Chaper 5 Flashcards
(8 cards)
Which of the following is included in the economist’s definition of investment?
a)The purchase of a share of stock
b)The purchase of new machines, factories, or houses
c) The purchase of new services
d) The purchase of a rare coin or a deposit in a savings account
How does Statistics Canada measure GDP?
a) By adding the value in dollar terms of all the final goods and services produced domestically
By adding the quantities of all the final goods and services produced domestically
By adding the value in dollar terms of all the final goods and services sold in the country
By adding the quantities of all the final goods and services sold in the country
a) By adding the value in dollar terms of all the final goods and services produced domestically
- When we measure total production in the economy, we cannot simply add the quantities of every good and service produced because the result would be meaningless. Instead, we measure production by taking the value in dollar terms of all goods and services produced. This approach converts all production to a common unit of measurement - dollars.
- Counting only final goods keeps us from double-counting output. For example, looking solely at the value of the car keeps us from counting the value of the tires twice.
All of these statements reflect a shortcoming of GDP as a measure of welfare, EXCEPT?
a) It only counts final goods and services and not intermediate goods
b) It does not include the value of leisure.
c) It does not count the underground economy.
d) It is not adjusted for crime and other problems.
a) It only counts final goods and services and not intermediate goods
define intermediate goods
Intermediate goods are those goods which are used in the production of final goods.
ex. wheat, soil, crude oil, steel, sugar
The GDP is a measure of the:
a) total dollar value of all goods and services produced within the borders of a country
b) welfare or well-being of the citizens of a country
c) total dollar value of all goods and services produced by the citizens of a country
d) welfare or well-being of the people in a country
a) total dollar value of all goods and services produced within the borders of a country
- The total dollar value of all goods and services produced by the citizens of a country is called the gross national product (GNP). The GNP is not as good a measure of a country’s economic health as the GDP.
Per capita GDP does give us some indication of standard of living or well-being. As per capital GDP increases so does standard of living.
Which of the following are not counted as final goods and omitted in the GDP calculation?
a) Exports
b)Investment goods
c) Intermediate goods
d) Consumption goods
c) intermediate goods
- Consumption goods and exports are both considered final goods in the GDP computation.
National income accounting focuses on the relationship between income and:
a) nominal GDP in the short run
b) nominal GDP in the long run
c) real GDP in the short run
d) real GDP in the long run
c) real GDP in the short run
- The basic premise of the model is that in any given year the level of real GDP will be equal to total income in the economy.
- The model only focuses on the short run and assumes the price level is constant.
Both the CPI and the GDP deflator are measures of the average prices for the economy, yet they differ in several ways. Which of these statements is correct?
a) The GDP deflator only computes changes in used goods prices.
b) The GDP deflator includes goods produced in prior years, as well as imported goods, which the CPI does not.
c) The CPI includes goods produced in prior years, as well as imported goods, which the GDP deflator does not.
d) The CPI only computes changes in used goods prices.
c) The CPI includes goods produced in prior years, as well as imported goods, which the GDP deflator does not.
-The GDP deflator only focused on new goods produced within Canadian boundaries, while the CPI factors in both used goods and imports. The CPI also uses fixed weights and does not account for substitutions.
