Ch 4 Spending, Income, and GDP

Question 1

Gross domestic product (GDP)

Answer 1

the market value of the final goods and services produced in a country during a given period

Question 2

Final goods or services

Answer 2

good or services consumed by the ultimate user; because they are the end products of the production process, they are counted as part of GDP

Question 3

Intermediate goods or services

Answer 3

goods or services used up in the production of final goods and services and therefore not counted as part of GDP

Question 4

Capital good

Answer 4

a long-lived good that is used in the production of other goods and services

Question 5

Value added

Answer 5

for any firm, the market value of its product or service minus the cost of inputs purchased from other firms

Question 6

Consumption expenditure (or consumption)

Answer 6

spending by households on goods and services such as food, clothing, and entertainment

Question 7

Investment

Answer 7

spending by firms on final goods and services, primarily capital goods

Question 8

Government purchases

Answer 8

purchases by federal, state, and local governments of final goods and services; government purchases do NOT include TRANSFER PAYMENTS, which are payments made by the government in return for which no current goods or services are received, nor do they include interest paid on the government debt

Question 9

Net exports

Answer 9

exports minus imports

Question 10

Real GDP

Answer 10

a measure of GDP in which the quantities produced are valued at the prices in a base year rather than at current prices; real GDP measures the actual PHYSICAL VOLUME of production

Question 11

Nominal GDP

Answer 11

a measure of GDP in which the quantities produced are valued at current-year prices; nominal GDP measures the CURRENT DOLLAR VALUE of production