Chapter 14A Measuring the Performance of the Economy

Question 1

Gross Domestic Product

Answer 1

market value of final goods and services produced by labor and property located in the economy over a given year
Located in Economy

Question 2

Gross National Product

Answer 2

market value of final goods and services produced by labor and property owned by the economy over a given year
Owned by Economy

Question 3

Consumption

Answer 3

household spending on durable and nondurable goods and services

Question 4

Investment

Answer 4

purchases of capital by firms and changes in inventories and purchases of new homes
Gross Private investment = net investment + consumption of fixed capital

Question 5

Government

Answer 5

gov’t purchases at all levels of gov;t

Question 6

net exports

Answer 6

imports greater than net exports. net exports are generally negative

Question 7

limitations of GDP

Answer 7

gdp excludes transactions where no money changes hands
excludes transactions in the “underground economy”
doesn’t account for cost of “externalities”

Question 8

Nominal GDP

Answer 8

measured in current dollars

Question 9

Real GDP

Answer 9

measured using constant dollars (current quantity times old prices)

Question 10

Reasons GDP changes

Answer 10

changes in output levels

changes in price