chapter 9

Question 1

how much value is created in a year=

Answer 1

how much income is earned in a year

Question 2

True False: wealth and income are the same thing

Answer 2

F income reflects value creation, wealth is a stock of what you own

Question 3

True False: we measure income as the social gain from production

Answer 3

F we measure how much is paid for output that is produced

Question 4

GDP is

Answer 4

market value of all goods and services produced within country’s borders in one year

Question 5

what is a final good

Answer 5

one that is sold to a final consumer

Question 6

True False: sales of used goods are not counted in GDP

Answer 6

T since they have already been counted once this would cause double counting

Question 7

True False: value of a newly issued share of stock is counted in GDP

Answer 7

F the money that comes from the stock sale will purchase capital and to count both transactions would be double counting

Question 8

2 approaches to calculating GDP

Answer 8

income approach, expenditure approach

Question 9

government uses _ to calculate GDP

Answer 9

income approach, because tax records give information about income and because they gather this data as people pay taxes

Question 10

four components of the expenditure approach

Answer 10

consumption, government purchases, investment, net exports

Question 11

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

Answer 11

spending by businesses on capital, changes in business inventories, and spending on new residential housing

Question 12

real GDP is

Answer 12

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

Question 13

economic growth is

Answer 13

the percentage change in real GDP over a years time

Question 14

strong growth rate is

Answer 14

3.5%

Question 15

if we are at the peak of economic activity _ is coming in the future

Answer 15

contracting

Question 16

1982 recession compared to recent recession

Answer 16

both just as bad but 1982 recovery was much stronger

Question 17

per capita GDP is

Answer 17

GDP/population= how well off people in the economy are

Question 18

US GDP compared to canada GDP

Answer 18

US is 20% bigger

Question 19

US in terms of economic freedom

Answer 19

not highest ranking and continues to fall

Question 20

most recent quarterly US economic growth

Answer 20

1/10 of 1%

Question 21

US GDP in the most recent quarter

Answer 21

15.9 trillion

Question 22

intermediate goods—

Answer 22

those

not sold to a final user.

Question 23

transfer payments—

Answer 23

taking from one person and giving to another,but not in return for any good or service

Question 24

bads—

Answer 24

unwanted phenomena such as disease, crime, and garbage.

Question 25

Consumption—

Answer 25

spending by consumers on nondurable goods, durable goods, and services. Durable goods are those which last for at least a year

Question 26

Investment—

Answer 26

spending by business on capital (plant, equipment, tools, etc.), changes in business inventories, and spending on new residential housing. Note, this does not mention stocks or bonds.

Question 27

Government Purchases—

Answer 27

spending by all levels of government on goods and services. Note that transfer payments do not fit this definition

Question 28

Net Exports =

Answer 28

Net Exports = Exports - Imports. Note that this makes it seem as if “Exports, good. Imports bad,” which is contrary to what we learned in the trade chapter. However, both imports and exports are done by those who are making the economy better off

Question 29

recession

Answer 29

Two successive quarters (three month periods) of negative economic growth

Question 30

The business cycle

Answer 30

describes the ups and downs of the economy.