Chap 5

Question 1

National income accounting

Answer 1

The technique used to measure overall production of the economy and other related variables for the nation as a whole

Question 2

Gross Domestic Product

Answer 2

The total market value of all the final goods and services produced in a given period of time

Question 3

Intermediate goods

Answer 3

Products purchased for resale or further processing or manufacturing

Question 4

Multiple counting

Answer 4

Wrongly including the value of intermediate good in the GDP

Question 5

Value Added

Answer 5

The value of a product sold by a firm less the value of the product purchased and used by the firm to produce the product

Question 6

Expenditure approach to GDP

Answer 6

The method to measure GDP that adds up all the expenditures made for all final goods and services

Question 7

Income approach to GDP

Answer 7

The methode to measure GDP that adds up all the income generated bythe production of final goods and services

Question 8

Expenditure approach: formula

Answer 8

C+Ig+G+Xn

Question 9

Personal Consumption Expenditure

Answer 9

The expenditure of household for durable and nondurable customer goods and services

Question 10

Gross Investment

Answer 10

Include:

• all final purchase of machinery
• all constructions
• changes in inventory

Question 11

Non-investment transaction

Answer 11

An expenditure for stock, bonds, or second hand capital goods

Question 12

Net Investment

Answer 12

Includes only investment of added capital

Net investment = Gross investment - depreciation

Question 13

Capital consumption allowance
Consumption of Fixed Capital
(Depreciation)

Answer 13

Estimate of the amount of capital worn out of used up in producing GDP

Question 14

Capital Stock

Answer 14

The total available capital in a nation

Question 15

Government purchases

Answer 15

The expenditure of all governments in the economy for final goods and services

Question 16

Government transfer payment

Answer 16

The disbursement of money by the government for which government receives no currently produced good or service in return

Question 17

Net exports

Answer 17

Net exports = Exports - imports

Question 18

National Income

Answer 18

Total income earned by resource supplier for their contribution
To gross national product

Question 19

Profit of corporation and government enterprise before taxes

Answer 19

• corporate income taxes
• dividends
• undistributed corporate profit

Question 20

Corporate income taxes

Answer 20

A tax levied on the net income of corporations

Question 21

Undistributed corporate profits

Answer 21

After-tax corporate profits not distributed as dividends to shareholders; also called retained earnings

Question 22

Interest income

Answer 22

Payment of income to those who supply the economy with capital

Question 23

Disposable income

Answer 23

Personal income less personal taxes

Question 24

Personal income

Answer 24

The earned and unearned income available to resource suppliers and others before the payment of personal income taxes

Question 25

Nominal GDP

Answer 25

GDP measured in terms of the price level at the time of measurement (unadjusted for inflation)

Question 26

Real GDP

Answer 26

Nominal GDP adjusted for inflation

Question 27

Price index

Answer 27

An index number that shows how the weighted average price of a “market basket” of goods and services changes through time
Price index=[price of a market basket in a specific year]/[ price of the same market basket in a base year] * 100

Question 28

Base year

Answer 28

Year with which other years are compared when an index is constructed

Question 29

GDP deflator

Answer 29

GDP deflator = [nominal GDP]/[real GDP] *100