Macroeconomics HW 2 Flashcards

Questions and Answers

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of?

output of a specific firm.

output of a specific industry.

employment in the economy. (correct)

employment in a specific industry.

Suppose in 2014, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2014?

the value of the house in 2014

the value of the services of the real estate agent (correct)

the value of the house in 2003

the value of the house in 2014 minus depreciation

Which of the following goods is directly counted in GDP?

the lettuce that Subway purchases for its sandwiches

the bread that Subway purchases for its sandwiches

a 12-inch Subway sandwich purchased by a student (correct)

the plastic bags that Subway purchases to wrap its sandwiches

Which of the following is not a durable good?

clothing Signup and view all the answers

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm. Signup and view all the answers

The purchase of a new house is included in

investment expenditures. Signup and view all the answers

In 2012, which component of GDP had a negative value?

net exports Signup and view all the answers

Gross domestic product understates the total production of final goods and services because of the omission of

household production. Signup and view all the answers

Legalizing all forms of illegal activities

increases GDP and reduces the size of the underground economy. Signup and view all the answers

The U.S. work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours

decreases U.S. GDP and increases the well-being of a typical working person in the U.S. Signup and view all the answers

Increases in real GDP would understate the well-being of a country over time if, over that time period, the

amount of pollution decreased. Signup and view all the answers

Which of the following transactions would take place in the 'underground economy'?

John makes chain-link belts and necklaces and sells them at a local flea market for cash to avoid paying taxes. Signup and view all the answers

Which of the following could cause nominal GDP to increase, but real GDP to decrease?

The price level rises and the quantity of final goods and services produced falls. Signup and view all the answers

The GDP deflator is the

ratio of nominal GDP to real GDP multiplied by 100. Signup and view all the answers

The output of Mexican citizens who work in Texas would be included in the

gross national product of the United States. Signup and view all the answers

What is the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices?

Microeconomics Signup and view all the answers

What is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth?

Macroeconomics Signup and view all the answers

What is the percentage increase in the price level from one year to the next?

Inflation Rate Signup and view all the answers

What is the market value of all final goods and services produced in a country during a period of time, typically one year?

GDP Signup and view all the answers

What are the 4 major categories of GDP?

Consumption, Investment, Government Purchases, Net Exports Signup and view all the answers

What is the equation to calculate GDP?

Y = C + I + G + NX Signup and view all the answers

Is the value of leisure included in GDP?

False Signup and view all the answers

What is nominal GDP?

The value of final goods and services evaluated at current-year prices. Signup and view all the answers

What is real GDP?

The value of final goods and services evaluated at base-year prices. Signup and view all the answers

What is price level?

A measure of the average prices of goods and services in the economy. Signup and view all the answers

Study Notes

Macroeconomics Study Notes

Definition of Macroeconomics

Macroeconomics is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.

Gross Domestic Product (GDP)

GDP is the market value of all final goods and services produced in a country during a period of time, typically one year.
The 4 major categories of GDP are: Consumption, Investment, Government Purchases, and Net Exports.
The equation to calculate GDP is: Y = C + I + G + NX.
GDP can be divided into nominal GDP and real GDP:
- Nominal GDP: the value of final goods and services evaluated at current-year prices.
- Real GDP: the value of final goods and services evaluated at base-year prices.

Gross Domestic Product Components

Consumption Expenditures: include the purchase of a 12-inch Subway sandwich.
Investment Expenditures: include the purchase of a new house and a computer by an accounting firm.
Government Purchases: include government spending on goods and services.
Net Exports: can have a negative value, meaning a country imports more than it exports.

National Income Accounting

Gross National Product (GNP) is different from GDP, as GNP includes the output of citizens who work abroad.
The GDP deflator is the ratio of nominal GDP to real GDP multiplied by 100.

Inflation and Price Level

The inflation rate is the percentage increase in the price level from one year to the next.
Price level is a measure of the average prices of goods and services in the economy.

Other Important Concepts

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of employment in the economy.
Household production and the underground economy are not included in GDP.
Legalizing illegal activities would increase GDP and reduce the size of the underground economy.
A decrease in working hours would decrease GDP but increase the well-being of a typical working person.
Increases in real GDP would understate the well-being of a country over time if the amount of pollution decreased or the average hours worked per week decreased.

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Description

Macroeconomics flashcards covering topics such as levels of employment and output in the economy, and gross domestic product. Practice for your homework or exam.