ECON 1000 Study Guide - Gross Domestic Product, Potential Output, Arthur Melvin Okun

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ECON 1000 Full Course Notes

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Why measure performance: helps government decide on tax policies and how efficient those policies are, allows us to compare our economy to the economy of other countries, help individuals and businesses to make economic decisions. Performance indicators: gdp = output of g/s, unemployment. Exaggerates when counting everything before final product: used as a main measurement of performance- the annual or monthly economic growth of a nation. Monday, april 28, 2014: gdp = c+g+i+ (x-m, c = consumptions: what households spend on g/s, g = government purchases: value of expenditures on g/s by all levels of. I = investment : purchase of new capital goods for use in production process iv. (x-m) = (exports imports): value of net exports. Why calculate gdp: to measure economic growth, to compare economic standards of living. Black market- exchanging of goods that may have shady past (illegal smuggling) Gambling (loan sharks: estimated to be 15% of the gdp and is believed to be growing.

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 9. The series of ups and downs that tend to move the economy is known as __________. a. The economic cycle (business) b. recession c. depression d. economic growth 11. In the Circular Flow Model, consumption expenditures are the expenses of __________. a. The signatures by the factors of production. b. The government in the financial markets. c. The rest of the world in the goods market d. Families in the goods market. 12. GDP is a measure of the total value of __________. a. Sales in an economy over a period of time b. The consumer's income in an economy over a period of time. c. The accumulation of capital in an economy over a period of time. d. The final goods and services produced in an economy over a period of time.

 13. In calculating GDP, double counting (counting the same twice) is avoided, not including __________. a.. Net exports b. Intermediate goods c. Illegal activities d. The depreciation

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

51. Gross national product equals:
A) the aggregate output of the citizens & businesses of aneconomy in a 1-year period.
B) the aggregate final output of the citizens & businesses ofan economy in a 1-year period.
C) the total market value of all goods & services produced inan economy in a 1-year period.
D) the total market value of all final goods & servicesproduced in an economy in a 1-year period.

52. Which of the following is not included in GNP but is includedin GDP?
A) The value of a Portuguese company's production in the UnitedStates.
B) The income of a U.S. citizen working in Portugal.
C) The value of a U.S. company's production in Portugal.
D) The sales of a U.S. company to U.S. citizens.

53. To calculate GDP, multiply the __________ of each final goodand service produced in an economy in a year by its __________ andthen sum the result.
A) quantity; share in total output C) price, share in totaloutput
B) quantity; price D) price, quality

54. Counting both the value of the flour used to make a loaf ofbread and the value of the loaf of bread as part of GDP:
A) is necessary to accurately compute GDP.
B) is incorrect because bread is an intermediate product.
C) is incorrect because flour is an intermediate good.
D) is incorrect because flour is a final good.

55. Suppose the value of your home increases from $100,000 to$125,000. If you continue to live in your home, the increase in itsvalue:
A) adds nothing to GDP. C) increases GDP by $100,000.
B) increases GDP by $25,000. D) increases GDP by $125,000.

56. If a used car dealer buys a car for $6000 and resells it for$6500, how much has been added to GDP?
A) nothing. B) $500. C) $6000. D) $6500

57. Which of the following is not a part of this year's GDP?
A) The value of a product produced last year but sold thisyear.
B) The value of a haircut.
C) The value of a new car produced and purchased during theyear.
D) The value of new homes built this year, regardless of whetherthey are sold.

58. Which of the following would not increase this year'sGDP?
A) Home repairs performed by the owner.
B) A commission charged by your broker when you sold 100 shares ofBorden stock.
C) The sales of a corporation.
D) The value of a doctor's services to his or her patients.

59. The circular flow model shows:
A) the movement of expenditures and factor payments through theeconomy.
B) how national income is distributed to individuals.
C) how national income changes over time.
D) the movement of goods from one business to another.

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ECON 1000 Study Guide - Gross Domestic Product, Potential Output, Arthur Melvin Okun

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