MACROeconomics Chapt. 2

Question 1

the plural of “anecdote” is

Answer 1

“data”

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 2

Gross Domestic Product, GDP

Answer 2

is the market value of all final goods and services produced within an economy in a given period of time

nation’s total income

computed every 3 months by the Bureau of Economic Analysis

considered best measure of how well the economy is performing

1. total income of everyone in the country
2. total expenditure on the economy output of goods and services

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 3

consumer price index, CPI

Answer 3

measure the levels of prices

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 4

unemployment rate

Answer 4

the fraction of workers who are unemployed

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 5

how can GDP measure both the economy’s income and its expenditure on output?

Answer 5

for the economy as a whole, income must equal expenditure

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 6

national income accounting

Answer 6

accounting system used to measure GDP and many related statistics

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 7

the circular flow

Answer 7

GDP is both total expenditure and total income

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 8

2 ways of computing GDP

Answer 8

1. total income
2. total expenditure

circular flow

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 9

stock

Answer 9

a quantity measured at a given point in time

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 10

flow

Answer 10

is a quantity measured per unit of time

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 11

a persons wealth is a stock

Answer 11

her income and expenditures are flows
Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 12

of unemployed people is a stock

Answer 12

of people losing their jobs is a flow

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 13

amount of capital in the economy is a stock

Answer 13

amount of investment is a flow

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 14

government debt is a stock

Answer 14

government budget deficit is a flow

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 15

used goods

Answer 15

arenot calculated in the GDP, only currently produced goods & services

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 16

the treatment of inventories

Answer 16

1. when a firm increases its inventory = expenditure = increase GDP = to production for final sale.
2. a sale out of inventory = positive spending & negative spending combo = does not affect GDP

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 17

intermediate goods

Answer 17

GDP includes only the value of final goods

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 18

value added

Answer 18

the value of the firm’s output less the value of the intermediate goods that the firm purchases

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 19

imputed value

Answer 19

an assumed value given to an item when the actual value is not known or available

housing
government services
underground market
drug trade
under the table

https://www.google.com/search?q=define+imputed+value&rlz=1C1CHBD_enAT894AT894&oq=define+imputed+value&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIICAEQABgWGB4yCAgCEAAYFhgeMggIAxAAGBYYHjIKCAQQABgPGBYYHjIKCAUQABgPGBYYHjINCAYQABiGAxiABBiKBTINCAcQABiGAxiABBiKBdIBCTUxNjBqMGoxNagCALACAA&sourceid=chrome&ie=UTF-8

Question 20

nominal GDP

Answer 20

value of goods and services measured at current prices

can raise GDP due to price and or quantity rises

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 21

real GDP

Answer 21

value of goods and services measured using a constant set of prices

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 22

GDP deflator

Answer 22

measures the price of output relative to its price in the base-year

page 25

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 23

chain-weighted measures of real GDP

Answer 23

year-to-year growth rates put together to form a chain that can be used to compare the output of goods and services between any two dates

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 24

the components of expenditure

Answer 24

consumption (C)
investment (I)
government purchases (G)
net exports (NX)

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 25

national income accounts identity

Answer 25

GDP = Y

Y=C+I+G+NX

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 26

identity

Answer 26

an equation that must hold because of the way the variables are defined

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 27

consumption

Answer 27

consists of goods and services bought by households

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 28

3 consumption catagories

Answer 28

1. nondurable goods
2. durable goods
3. services

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 29

investment

Answer 29

goods bought for future use

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 30

government purchases

Answer 30

goods and services bought by federal, state, and local governments

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 31

net exports

Answer 31

value of goods and services sold to other countries (exports) minus the value of goods and services that foreigners sell us (imports)

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 32

GNP

Answer 32

= GDP + factor payment s from abroad minus factor payments to abroad

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 33

NNP

Answer 33

net national product
NNP=GNP - Depreciation

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 34

national income accounts divide national income into 6 catagories

Answer 34

1. compensation of employees
2. proprietors income
3. rental income
4. corporate profits
5. net interest
6. indirect business taxes

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 35

personal income =

Answer 35

= national income
- indirect business taxes
- corporate profits
- social insurance contributions
- net interest
+ dividends
+govenments transfers to individuals
+ personal interest income

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 36

disposable personal income =

Answer 36

= personal income - personal tax and nontax payments

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 37

seasonal adjustment

Answer 37

the output of the economy rises during the year, reaching the peak in the fourth quarter, then falling in the next first quarter

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 38

seasonally adjusted

Answer 38

data have been adjusted to remove the regular seasonal fluctuations

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 39

measuring the cost of living

Answer 39

the consumer price index

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 40

inflation

Answer 40

increase in the overall level of prices

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 41

CPI, consumer price index

Answer 41

turns the price of many goods and services into a single index measuring the overall level of prices

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 42

core inflation

Answer 42

measures the increase in price of a consumer basket that excludes food and energy products

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.

Question 43

why measure “core inflation”

Answer 43

bc food and energy prices = short-term volatility, core inflation is sometimes viewed as a better gauge of ongoing inflation trends

Mankiw, N. (January 1, 2014). Macroeconomics (7th edition, 17-42). Cengage Learning.