Exam 2 Chapter 7 Flashcards
The term “business cycle” most closely refers to the
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accounting period used by firms.
fiscal year.
alternating periods of expansions and recessions.
fluctuating profits of firms
alternating periods of expansions and recessions.
If depreciation is less than gross investment, then net investment is
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positive.
zero.
negative.
This situation could never occur because it is impossible for depreciation to be less than gross investment.
positive.
The word “final” in the definition of GDP refers to
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the time period when production took place.
valuing production at market prices.
not counting intermediate goods or services.
counting the intermediate goods and services used to produce GDP.
not counting intermediate goods or services.
Two methods of measuring GDP are
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the income approach and the receipts approach.
the income approach and the expenditure approach.
the goods approach and the services approach.
the saving approach and the investment approach.
the income approach and the expenditure approach.
Which of the following is NOT included in real GDP?
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production of services, such as the services of doctors
production of goods that last more than one year, such as television sets
production in the home
production of goods that do not last more than one year, such as gasoline
production in the home
Nominal GDP is the value of final goods and services
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produced in foreign countries but consumed in the domestic country.
at the prices of a base year.
at the prices of the immediately previous year.
at the prices of that year.
at the prices of that year.
GDP equals Answers: the value of the aggregate production in a country during a given time period. aggregate income. aggregate expenditure. all of the above.
all of the above.
Gross domestic product is a measure of the total value of all
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consumer income in an economy over a period of time.
sales in an economy over a period of time.
final goods and services produced in an economy over a period of time.
capital accumulation in an economy over a period of time.
final goods and services produced in an economy over a period of time.
Which of the following is NOT part of the expenditure approach to measuring GDP? Answers: gross private domestic investment net interest personal consumption expenditures net exports of goods and services
net interest
Gross investment is equal to Answers: depreciation plus net investment. net investment plus capital stock. depreciation minus net investment. net investment minus capital stock.
depreciation plus net investment.
GDP equals
C + I + G + (X - M).
The use of purchasing power parity prices
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increases the amount by which U.S. GDP is larger than that of any other nation.
weakens the validity of cross country comparisons of economic welfare.
decreases the real GDP per person statistics published by the International Monetary Fund.
accounts for differences in the prices of the same goods in different countries when measuring real GDP.
accounts for differences in the prices of the same goods in different countries when measuring real GDP.
Depreciation is defined as the
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increase in the stock of capital due to investment by firms.
decrease in the stock of capital due to investment by firms.
increase in the stock of capital due to wear and tear.
decrease in the stock of capital due to wear and tear.
decrease in the stock of capital due to wear and tear.
In the expenditure approach to GDP, the largest component is
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gross private domestic investment.
government expenditure on goods and services.
net exports.
personal consumption expenditures.
personal consumption expenditures.
Intermediate goods are excluded from GDP because
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the premise of the question is incorrect because intermediate goods are directly included in calculating GDP.
their inclusion would involve double counting.
their inclusion would understate GDP.
they represent goods that have never been purchased so they cannot be counted.
their inclusion would involve double counting.
