Chapter 6 Econ Assignment Answers Study Guide Graded A

Chapter 6 Econ Assignment Answers Study Guide Graded A+ The value of an economy's total output of goods and services is called _____. A) consumption B) investment C) gross domestic product D) exports The gross domestic product of a nation can be measured: A) as the total value of consumer expenditures on goods and services. B) as the total value of income generated in producing total output. C) as the total cost of producing of that output excluding profit D) as the total value of inputs used to produce a nation's output. Of the following, which statistic do economists use to measure the business cycle? A) Changes in the inflation rate B) Changes in real gross domestic product C) Changes in the value of imports D) Changes in the implicit price deflator In the long run, a country's material standard of living is determined by: A) the difference between its exports and imports. B) the average level of prices and the average income of its population. C) its output relative to its population. D) the amount of money supply relative to its population. Let C = consumption, I = private investment, G = government purchases, and Xn = net exports. Which of the following best represents the equation for GDP? A) GDP = C+ I + G − Xn B) GDP = C + I + G + Xn C) GDP = C + I + G + net imports D) GDP = C + I + G + tax revenues + Xn GDP is the sum of: A) personal consumption, private investment, government purchases, and imports. B) personal consumption, private investment, government purchases, and net exports. C) personal consumption, private investment, government purchases, and net imports. D) personal consumption, private investment, government purchases, and foreign remittances. What is the difference between a flow variable and a stock variable? A) A stock variable is a variable that is measured over a specific period of time while a flow variable is a variable that is independent of time. B) A flow variable is a variable that is measured in units of current prices while a stock variable is measured using prices from a base period. C) A flow variable is a variable that is measured over a specific period of time while a stock variable is a variable that is independent of time. D) A stock variable is a variable that is measured in units of current prices while a flow variable is measured using prices from a base period Which of the following is an example of a flow variable? A) The balance in your checking account B) The value of your stock portfolio C) The amount of cash you have in your safe D) The interest amount you pay on your auto loan Which of the following is an example of a stock variable? A) Your monthly utilities bill B) The value of your stock portfolio C) Your annual salary D) The interest amount you pay on a mortgage The gross domestic product of a nation: A) is a flow variable. B) is a stock variable. C) could either be a flow variable or a stock variable depending on the time period considered. D) could either be a flow variable or a stock variable depending on the share of personal consumption. All of the following items are a flow variable EXCEPT _____. A) a savings account balance B) consumption expenditure C) government purchases D) gross private investment Which of the following items is a stock variable? A) Expenditure on consumer goods B) Private investment C) Labor wage D) Government debt The value of goods and services purchased by households during a particular period is called: A) personal consumption. B) private investment. C) gross domestic purchases. D) net imports. Which of the following is counted as consumption expenditure? A) A person buying a government bond B) A person buying a toaster from your neighbor in a garage sale C) A firm renting a two-storied building D) A person buying a new car Which of the following is NOT true of the circular model of the economy? A) Personal consumption spending flows from households to firms. B) The production of goods and services generates income for households. C) Consumers finance their personal consumption spending by supplying factors of production to firms. D) Payments to factors of production flows from households to firms. The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "A" represents the flow of: A) personal consumption expenditures. B) consumer goods and services. C) factors of production. D) factor incomes. (Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "B" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services. (Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "C" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services. (Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. The arrow marked "D" represents the flow of: A) factors of production. B) factor incomes. C) personal consumption expenditures. D) consumer goods and services. (Exhibit: Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. Which two flows represent your purchase of groceries from Safeway? A) A and B B) B and C C) A and D D) C and D (Exhibit Circular Flow Model) The exhibit shows a simplified circular flow model where only consumption goods are being produced. Suppose you have been hired by an electronics store as a salesperson. Which of the following flows represents this transaction? A) A and B B) B and C C) A and D D) C and D In the circular flow model for an economy that produces only consumption goods: A) factor incomes flow from households to firms. B) factors of production flow from households to firms. C) factor incomes flow from households to firms and to the government. D) factors of production flow from firms to households. For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called: A) personal investment expenditure. B) a capital consumption allowance. C) a transfer payment. D) gross private domestic investment. Which of the following items would NOT be a part of private investment in the computation of GDP? A) A new factory building B) New factory equipment C) A rise in inventory levels at a firm D) An old shopping center acquired by a firm Which of the following is included in gross private domestic investment in the computation of GDP? A) The sale of some Safeway stocks to another company B) Safeway's purchase of three new delivery trucks C) Your purchase of groceries at Safeway D) An annual bonus given to Safeway employees Gross private domestic investment includes purchases of: A) government T-bills. B) existing residential housing. C) company stocks. D) new factory equipment. Which of the following items is included in gross private domestic investment? A) An increase in the level of government spending on new schools B) The purchase of medical equipment by the Marines for use in its field hospitals C) An increase in business inventories D) An increase in the value of corporate stocks sold during the year Goods that are produced in a particular period but not sold in the current period: A) are included in consumption estimates. B) are called inventories and are included in gross private investment. C) are excluded from the current year's GDP and included in GDP in the year they are sold. D) are classified as intermediate goods. Thames Patio Solutions is a manufacturer of patio umbrellas. In 2007, its inventory increases by 170 umbrellas. In 2008, it sells all the 170 umbrellas. Which of the following can be inferred in this case? A) The value of the increased inventory will be counted as part of GDP in 2007, and the value of the 170 umbrellas sold in 2008 will not cause GDP in 2008 to increase. B) The value of the increased inventory will not affect GDP in 2007, but the sale of the umbrellas will cause GDP in 2008 to increase. C) The value of the increased inventory will be counted as part of GDP in 2007 and the value of the 170 umbrellas sold in 2008 will cause GDP in 2008 to increase. D) Since the umbrellas were not sold in 2007, they will not be included as part of GDP in 2007, and since they were not produced in 2008, they will not be included as part of GDP in 2008. This is a shortcoming of GDP computations. Suppose the clothing manufacturer, Eddie Bauer, produced 10,000 pairs of jeans in 2005 but sold only 9,200 pairs. How will this be recorded in GDP accounts? A) The 9,200 pairs that were sold will be counted under the consumption component of GDP in 2005 and the 800 pairs that were not sold will not be included in GDP. B) The 10,000 pairs of jeans produced would be counted as investment and will be included in GDP in 2005. C) The 9,200 pairs sold will be counted as consumption and the 800 pairs that were not sold will counted as investment and both items will be included in GDP in 2005. D) The 9,200 pairs sold will be counted under the consumption component of GDP in 2005 and the 800 pairs that were not sold will be included in GDP in 2006.