chap 12

Question 1

national income accounting

Answer 1

is a way of evaluating a country’s economy using statistical measures of its income, spending, and output.

Question 2

Gross domestic product (GDP)

Answer 2

is the market value of all final goods and services produced within a nation in a given time period

Question 3

nominal GDP

Answer 3

states GDP in terms of the current value of goods and services

Question 4

real GDP

Answer 4

states GDP corrected for changes in prices from year to year.

Question 5

nonmarket activities

Answer 5

are services that have potential economic value but are performed without charge.

Question 6

underground economy

Answer 6

describes market activities that go unreported because they are illegal or because those involved want to avoid taxation.

Question 7

gross national product (GNP)

Answer 7

is the market value of all final goods and services produced by a country

Question 8

net national product NNP

Answer 8

is the value of final goods and services less the value of capital goods that have become worn out

Question 9

national income (NI)

Answer 9

is the total income earned in a nation from the production of goods and services.

Question 10

personal income (PI)

Answer 10

is the income received by a country’s people from all sources

Question 11

disposable personal income (DPI)

Answer 11

is personal income minus taxes

Question 12

business cycle

Answer 12

is the series of growing and shrinking periods of economic activity, measured by increases or decreases in real GDP.

Question 13

economic growth

Answer 13

is the increase in a nation’s real GDP over a period of time.

Question 14

recession

Answer 14

is a prolonged economic contraction lasting two or more quarters (six months or more)

Question 15

depression

Answer 15

is an extended period of high unemployment and reduced business activity.

Question 16

stagflation

Answer 16

describes periods during which prices rise at the same time that there is a slowdown in business activity.

Question 17

aggregate demand

Answer 17

is the sum of all the demand in the economy.

Question 18

aggregate supply

Answer 18

is the sum of all the supply in the economy.

Question 19

macroeconomic equilibrium

Answer 19

is the point where the quantity of aggregate demand equals the quantity of aggregate supply

Question 20

leading indicators

Answer 20

are measures of economic performance that usually change before real GDP changes.

Question 21

coincident indicators

Answer 21

are measures of economic performance that usually change at the same time as real GDP changes.

Question 22

lagging indicators

Answer 22

are measures of economic performance that usually change after real GDP changes.

Question 23

real GDP per capita

Answer 23

is real GDP divided by total population.

Question 24

labor input

Answer 24

is the size of the labor force multiplied by the length of the workweek

Question 25

capital deepening

Answer 25

is an increase in the ratio of capital to labor.

Question 26

productivity

Answer 26

is the ratio of the amount of output produced to the amount of input.

Question 27

multifactor productivity

Answer 27

is the ratio between the amount of output produced by an industry or business sector and the amount of inputs used.