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Macroeconomics > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

What is macroeconomics?

A

The study of the performance of the national economy and the global economy.

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2
Q

What is GDP?

A

The market value of all final goods and services produced within a country in a year.

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3
Q

What is GDP per capita and what does it measure?

A

GDP divided by the population of a country. GDP per capita gives us a way to measure changes in economic output and standard of living.

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4
Q

What are intermediate goods?

A

Goods and services that are sold to firms and then bundled or processed with other goods or services for sale at a later stage.

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5
Q

GDP is estimated as the market value of all
intermediate and final goods and services
produced by citizens of a country in a given
period of time.

True or False?

A

False;

Intermediate goods are not counted in GDP.

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6
Q

What are goods?

A

Physical objects that people value and produce to satisfy

human wants

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7
Q

What are services?

A

Services are tasks performed for people who value them .

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8
Q

GDP is meant to measure production, so sales of _________ goods are not included in GDP.

A

Used

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9
Q

The sale of an old house does not add to GDP because the house was not produced in the year that it was sold.

True or False?

A

True.

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10
Q

GDP is the market value of the goods and services produced by labor and capital located within the United States regardless of the _________ of the workers or the property owners.

A

Nationality

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11
Q

GDP is typically estimated over what period of time?

A

Annually

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12
Q

What does GDP stand for?

A

Gross Domestic Product

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13
Q

Sales of financial assets are included in GDP.

True or False?

A

False

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14
Q

What is GNP or Gross National Product?

A

Market value of all final goods and services produced by the labor and property supplied by U.S. permanent residents wherever in the world that labor and capital is located.

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15
Q

What does national wealth refer to?

A

The value of a nation’s entire stock of assets.

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16
Q

Who calculates GDP?

A

Bureau of Economic Analysis (BEA), which is part of the Department of Commerce.

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17
Q

What does the GDP growth rate tell us?

A

How rapidly the country’s production is rising or falling over time.

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18
Q

How do you compute the nominal GDP growth rate?

A

GR = [(GDP new – GDP old) / GDP old] * 100

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19
Q

What is nominal GDP?

A

It is the rate of growth without adjusting for price changes and interest rates

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20
Q

Only increases in production are true increases in standard of living.

True or False?

A

True

21
Q

What is real GDP?

A

GDP measure that has been adjusted for changes in prices by using the same set of prices in all time periods. It corrects for inflation.

22
Q

What is the GDP Deflator?

A

A price index that can be used to measure inflation.

23
Q

How do we calculate the GDP Deflator?

A

GDP Deflator= [Nominal GDP / Real GDP] x100

24
Q

Real GDP does not account for population changes.

True or False?

A

True

25
Q

How do we calculate Real GDP per capita?

A

Real GDP / population

26
Q

Growth in real GDP per capita is usually the best reflection of changing___________.

A

standards of living

27
Q

How we calculate real GDP growth per capita?

A

Real GDP growth / population

28
Q

What is a recession?

A

Decline in real income and employment lasting more than a few months

29
Q

A recession is widespread not only geographically but also across different sectors of the ___________.

A

economy

30
Q

What are business fluctuations?

A

The short run movements in real GDP around its long term trend

31
Q

What two ways do economists split the production of goods and services in many different ways?

A
  1. The National Spending Approach

2. The Factor Income Approach

32
Q

What are the 4 spending categories that GDP is divided into?

A
  1. Consumption
  2. Investment
  3. Government Purchases
  4. Exports minus Imports
33
Q

Formula for National Spending Approach to GDP

A

Y = C + I + G + NX

34
Q

Formula for Factor Income Approach to GDP

A

Y = Wages + Rent + Interest + Profit

35
Q

What does the National Spending Approach do?

A

It sums up the amount spent on final goods and services.

36
Q

Imported goods are part of U.S. GDP

True or False?

A

False

37
Q

What is consumption spending?

A

Private spending on final goods and services.

38
Q

What is investment spending?

A

Private spending on tools, plant, and equipment used to produce future output. This is also viewed as capital.

39
Q

What is government spending?

A

Spending by all levels of government on final goods and services not including transfers.

40
Q

What are net exports?

A

The value of exports minus the value of imports.

41
Q

When a consumer spends money, the money is received by workers, landlords, owners of capital, and businesses. This highlights which approach?

A

The Factor Income Approach

42
Q

Which approach needs to be adjusted for sales tax?

A

The Factor Income Approach

43
Q

What do business fluctuations consist of?

A

Recessions and expansions

44
Q

What is the largest payment in GDP?

A

Labor

45
Q

What are 5 problems with GDP?

A
  1. It does not count underground economy, non-priced production, leisure, pollution, distribution of income
46
Q

When a worker is paid under the table, this is an example of what problem with GDP?

A

The underground economy

47
Q

What is non-priced production?

A

Occurs when valuable goods and services are produced but no explicit monetary payment is made.

48
Q

What is leisure?

A

Time spent not working

Macroeconomics (16 decks)

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