revision questions chapter 20 pt1

Question 1

In the expenditure approach to GDP, the largest component is…

Answer 1

consumption expenditure

Question 2

investment refers to the purchase of

Answer 2

new capital

Question 3

net exports of goods and services =

Answer 3

the exports of goods and services - the imports of goods and services

Question 4

what is a flow variable

Answer 4

• quantified variable that is measures over a specified period of time
• e.g. investment

Question 5

In the national accounts, government expenditures on goods and services exclude

Answer 5

transfer payments

Question 6

Because pollution reduces economic welfare, real GDP

Answer 6

overstates economic welfare

Question 7

national saving is defined as

Answer 7

saving by households and government

Question 8

The approach to GDP that sums compensation of employees, gross operating surplus, mixed income, and indirect taxes and subtracts subsidies is the

Answer 8

income approach

Question 9

opportunity cost approach

Answer 9

represents the net benefit lost by rejecting some alternative course of action.

Question 10

income approach

Answer 10

a type of real estate appraisal method that allows investors to estimate the value of a property based on the income the property generates.

Question 11

expenditure approach

Answer 11

takes into account the sum of all final goods and services purchased in an economy over a set period of time.

Question 12

The income approach to measuring GDP sums together

Answer 12

compensation of employees, gross operating surplus, rental income, income from self employment, and indirect taxes paid, and subtracts subsidies paid by the government.

Question 13

what does the chained volume measure method of calculating real GDP compare to

Answer 13

quantities of goods produced in two consecutive years using prices from the first of the two years.