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Econ 222 Chapter 5 Flashcards
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Econ 222 Chapter 5 Flashcards

Created by
@ProfoundPearTree

Questions and Answers

A measure of a country's production is its _____.

  • Guessed domestic product
  • Great domestic product
  • General daily product
  • Gross domestic product (correct)

    • For the purpose of calculating GDP, investment is spending on _____.

  • Capital equipment, inventories, and structures, excluding household purchases of new housing
  • Durable goods, nondurable goods, services, stocks, bonds, and other financial assets
  • Real estate and financial assets such as stocks and bonds
  • Capital equipment, inventories, and structures, including household purchases of new housing (correct)

    • GDP is defined as _____.

  • The market value of all goods and services produced within a country in a given period of time
  • The market value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time
  • The market value of all final goods and services produced within a country in a given period of time (correct)
  • The market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time

    • If a price index such as GDP deflator changes from 120 to 125 between December 2007 and December 2008, the ____.

    <p>Inflation rate for 2008 is 4.2%</p> Signup and view all the answers

    In the circular-flow diagram, ____.

    <p>Households are sellers in the markets for the factors of production</p> Signup and view all the answers

    Spending on financial assets ________ counted as part of GDP ________.

    <p>Are not; because their purchase is not spending on goods or services</p> Signup and view all the answers

    The economy's inflation rate is the _____.

    <p>Percentage change in the price level from the previous period</p> Signup and view all the answers

    Which of the following statements is not correct?

    <p>The total flow of money out of households equals the total flow of money into households</p> Signup and view all the answers

    What is the value of C?

    <p>$2,674.8</p> Signup and view all the answers

    What is the value of GDP?

    <p>$13,807.6</p> Signup and view all the answers

    Which of the following is not correct?

    <p>Net exports as a percentage of imports = 80.1%</p> Signup and view all the answers

    Which of the following is correct?

    <p>Nominal GDP in 2015 = $800</p> Signup and view all the answers

    From 2013 to 2014, Dachsland's real GDP grew _____.

    <p>100%</p> Signup and view all the answers

    In 2013, Dachsland's GDP deflator was ____.

    <p>100</p> Signup and view all the answers

    In 2015, Dachsland's GDP deflator was ___.

    <p>None of the above</p> Signup and view all the answers

    Dachsland's inflation rate from 2014 to 2015 was ____.

    <p>100%</p> Signup and view all the answers

    What is the value of G?

    <p>$2,674.8</p> Signup and view all the answers

    What is the value of I?

    <p>$2,130.4</p> Signup and view all the answers

    What two things does GDP measure?

    <p>The total income of households in the economy and the total expenditure on the economy's output of goods and services</p> Signup and view all the answers

    When economists talk about growth in the economy, they measure that growth as the _____.

    <p>Percentage change in real GDP from one period to another</p> Signup and view all the answers

    Which one of the following is true regarding the measurement of GDP?

    <p>Wages and profit income are used in the income approach to GDP</p> Signup and view all the answers

    Which of the following statements about GDP is correct?

    <p>Nominal GDP values production at current prices, whereas real GDP values production at constant prices</p> Signup and view all the answers

    Which of the following statements is correct?

    <p>The purchase of a new home is treated as investment</p> Signup and view all the answers

    Which one of the following transactions is included in a current year's GDP as investment spending?

    <p>Justin and Julia purchased a play-gym set for their day-care business</p> Signup and view all the answers

    Study Notes

    Gross Domestic Product (GDP)

    • GDP measures a country's production and economic health.
    • Defined as the market value of all final goods and services produced within a country during a specific time period.
    • Key components of GDP include consumption, investment, government spending, and net exports.

    Investment in GDP

    • Investment spending refers to capital equipment, inventories, and structures, including residential housing.
    • Purchases of financial assets like stocks and bonds do not count as GDP spending.

    Inflation and Price Indexes

    • Inflation rate measures the percentage change in the price level from one period to another.
    • The GDP deflator is an important index to calculate inflation, showing price changes for goods and services.

    Circular-Flow Model

    • Households act as sellers in the markets for factors of production.
    • Firms are buyers in markets for goods and services, creating a cyclical exchange of money.

    Nominal vs. Real GDP

    • Nominal GDP is valued at current prices, while real GDP is adjusted for inflation and valued at constant prices.
    • The base year serves as a reference point for calculating real GDP.

    Economic Growth Measurement

    • Growth is measured by the percentage change in real GDP, indicating the economy's performance over time.

    GDP Deflator

    • The GDP deflator reflects the average price change of all goods and services included in GDP.
    • A deflator of 100 indicates that prices have remained the same as the base year.

    Expenditure Approach vs. Income Approach

    • GDP can be measured via the expenditure approach, which focuses on spending by households and firms, and the income approach, which focuses on wages and profits.
    • Both methods should yield the same GDP value.

    Investment Purchases

    • Certain purchases, such as new homes and equipment for businesses, are classified as investment spending when calculating GDP.

    Economic Transactions and GDP

    • Only new goods and services contribute to GDP; transactions such as buying used items or financial shares do not count.
    • Household spending reflects both consumption and investment, impacting GDP measurements directly.

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    Description

    Test your knowledge on key terms and definitions from Economics 222, Chapter 5. This quiz covers important concepts such as Gross Domestic Product and the components of investment. Sharpen your understanding and prepare for your exams with these flashcards.

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