Chapter 7

Question 1

what is the expenditure approach of measuring the sum GDP?

Answer 1

consumption + Investment + Government purchases + net exports

Question 2

GDP is computed by using ______ prices

Answer 2

current year

Question 3

Real GDP is computed by using ______ prices

Answer 3

base year

Question 4

what are the three approaches for calculating GDP?

Answer 4

Expenditure, Income, and added value

Question 5

investment is the sum of

Answer 5

= purchases of newly produced capital goods + changes in business inventories + purchases of new residential housing

Question 6

GDP is _____ products produced. (sold and held in inventory)

Answer 6

ALL

Question 7

Real GDP is GPD in ______ year prices

Answer 7

base year

Question 8

what is economic growth?

Answer 8

Real GDP this year exceeds the REAL GDP last year

Question 9

equation for real GDP =

Answer 9

(current year quantities)x(base year prices)

Question 10

government purchases consists of dollars spent by

Answer 10

federal, state and local governments

Question 11

consumption is the sum of

Answer 11

durable goods + nondurable goods + services

Question 12

net exports is equal to

Answer 12

exports - imports

Question 13

fixed investment =

Answer 13

business purchasing capital goods (machinery, facroties) + new residential housing

Question 14

Rule of 72 equation

Answer 14

years to double = 72/growth rate per year

Question 14

Gross domestic product = total market value of all final ____________ and ______________ produced ANNUALLY with the country’s borders

Answer 14

Goods; services

Question 15

Expenditure approach

GDP = __________ + __________ + ___________ + (___________-___________)

Answer 15

Consumption + investment + government purchases + (exports - imports)

Question 16

Investment consists of

Answer 16

New capital, residential housing, inventories

Question 17

Social Security Payments are

Answer 17

Government transfer payments and are not included in the GDP

Question 18

Why do economists take final foods and services into account when calculating GDP?

Answer 18

To avoid double-counting

Question 19

What are the two approaches to measuring GDP

Answer 19

1. Expenditure approach
2. Income approach
3. Added value approach

Question 21

Investment is equal to all purchases of newly produced capital goods +

Answer 21

Changes in business inventories+ purchases of new residential housing

Question 22

Depreciation refers to a decrease in the value of a good caused by

Answer 22

“wear and tear” of capital goods over time.

Question 23

net domestic product =

Answer 23

GDP - capital consumption allowance (depreciation)