Macroeconomics Chapter 7 Questions Flashcards
What is gross domestic product (GDP)?
The total value of all final goods and services produced within a country during a given year.
How is GDP calculated?
By adding the total factor income earned by households from firms in the economy, the domestically produced final goods and services and by adding the value of all final goods and services produced.
What is the difference between real GDP and nominal GDP?
Real GDP is the appropriate measure of real economic activity and measures economic output adjusted for price changes and inflation while nominal GDP measures economic output at current prices.
What are imports?
Goods and services purchased from other countries.
Which of the following is included in the Canadian GDP?
Only the price paid by a German tourist when staying at a Montreal hotel is included in the Canadian GDP.
What does GDP represent in an economy?
The size of the economy.
How is the aggregate expenditure calculated in GDP?
By adding consumer spending, investment spending, government purchases, and exports minus imports.
Which statement about value-added in production is correct?
We count only each producer’s value added.
What is inflation rate based on?
The yearly percentage change in a price index.
What does the Consumer Price Index (CPI) measure?
The cost of the market basket of a typical urban family.
What is the formula for calculating GDP?
GDP = C + I + G + X - IM.
What is meant by real GDP?
GDP adjusted for inflation and price changes.
Which of the following is NOT included in GDP?
Household production.
What is the GDP deflator?
A measure of the price level calculated as the ratio of nominal GDP to real GDP.
Which of the following statements is true regarding intermediate goods?
They are not counted in GDP.
