Flashcards
Approaches to measuring GDP include all of the following except the: (a) cost approach. (b) product or value‐added approach. (c) income approach. (d) expenditure approach. (e) all of the above are valid approaches.
(a) cost approach
If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP, that variable is said to be:
countercyclical
We assume that the representative consumer’s preferences exhibit the properties that:
consumption and leasure are both normal goods and the consumer likes diversity in his or her consumption bundle
The vertical intercept of the consumer’s budget line is equal to:
wh + pi - T
As the quantity of labor increases, the marginal product of labor…
decreases
The first fundamental theorem of welfare economics states that:
under certain conditions, a competitive equilibrium is Pareto optimal
What are the three approaches to measuring GDP?
product approach (aka Value Added approach): sum of the value added to goods and services and subtract all intermediate goods; Expenditure Approach: total spending on all final goods and services produced C+I+G+NX; The Income Approach: sum of all income r
Income-expenditure identity
Y= C+I+G+NX the product approach, expenditure approach, and income approach all yield the same GDP measure
GNP =
GNP = GDP + NFP
What does aggregate GDP leave out?
income distribution, all nonmarket activity (working from home)
Problems with measuring GDP?
Underground activity, government expenses
Define price index
weighted average of the prices of a set of goods and services produced in the economy over a period of time
nominal change in GDP is caused by:
change in price level
real ghance in GDP is caused by:
increase in the actual quantity of goods and services
Name the two commonly used measures of the price level
implicit GDP price deflator; consumer price index (CPI)
