he equation for net investment is written as:
Net Investment = Gross Investment – Depreciation
Net Investment = Nominal GDP – Gross Investment
Net Investment = Consumption – Gross Investment
Net Investment = Depreciation – Gross Investment
The major difference between nominal GDP and real GDP is:
nominal GDP measures the value of output with constant output levels, while real GDP measures output using current-year output levels.
nominal GDP measures the value of output in constant prices, while real GDP measures output using current-year prices.
nominal GDP measures the value of output with current-year output levels, while real GDP measures output using constant output levels.
nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.
Which of the following correctly describes GDP using the income approach?
GDP = Wages + Rents + Interest + Profits and Losses
GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income
GDP = Wages + Rents + Interest + Profits and Losses + National Income
GDP = Consumption + Gross Investment + Net Exports + Government Purchases
Which of the following scenarios would be included in GDP?
Darius unclogs the drain in his sink using the plunger he owns.
Pam buys a new 40-inch television at Walmart.
Sandra is a waitress at Morton’s Steakhouse. She receives a cash tip of $50 that she pockets and does not report.
Miguel won $100 in his office fantasy football league.
Determine whether each of the following examples would be included in Gross Domestic Product (GDP).
a. When Judy went to the grocery store yesterday, she bought three pounds of potatoes.
Judy’s purchase of potatoes would be included in GDP as a consumption expenditure.
b. Ford Motor Company buys four tires to put on a new Ford Mustang.
The purchase of the tires would not be included in GDP.
c. The U.S. Air Force purchases two new fighter jets from Boeing.
The purchase of the two fighter jets would be included in GDP as a government purchase.
d. When Joey had his birthday last week, his grandmother sent him a $100 bill that he could spend.
Joey’s birthday gift of $100 would not be included in GDP
Real GDP refers to _____.
GDP data that embodies changes in the price level but not changes in physical output
the value of the domestic output after adjustments have been made for environmental pollution and changes in the distribution of income
GDP data that does not reflect changes in both physical output and the price level
GDP data that has been adjusted for changes in the price level
The gross domestic product (GDP) concept accounts for society’s valuation of the relative worth of goods and services by using a _____.
measure of volume
measure of physical weight
“Net foreign factor income” in the national income accounts refers to the difference between the _____.
value of products sold by Americans to other nations and the value of products bought by Americans from other nations.
income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S.
income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.
value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
Personal consumption expenditures consist of _____.
foreign investments in the United States
foreign plus domestic investments
household and individual purchases of services and durable and nondurable goods
A distinguishing characteristic of public transfer payments is that they _____.
include wages to government workers
are counted as part of government purchases in the calculation of the gross domestic product
involve no contribution to current production in return for the payment
include the cost of maintaining public parks
Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.
Units of Output
Price per Unit
In year 4, nominal GDP would be _____.
GDP excludes most nonmarket transactions. Therefore, GDP tends to _____.
underestimate the rate of inflation in the economy
overestimate the rate of inflation in the economy
underestimate the amount of production in the economy
overestimate the amount of production of the economy
In the treatment of U.S. exports and imports, national income accountants _____.
subtract exports but add imports in calculating GDP
add both exports and imports in calculating GDP
subtract both exports and imports in calculating GDP
add exports but subtract imports in calculating GDP
GDP measured using base year prices is called _____.
Which of the following is not an example of an intermediate good?
gasoline bought by a trucking company
an oven bought by a homeowner
flour bought by a bakery
office supplies bought by an accounting firm
Suppose that real GDP per capita in the United States is $49,000. If the long-term growth rate of real GDP per capita is 1.6% per year, how many years will it take for real GDP per capita to reach $98,000?
Instructions: Enter your answer as a whole number.
44 Numeric Response Edit Unavailable. 45. Years
Suppose that Italy can produce either goods or services with its resources, and that its PPF curve is shown on the graph as PPF1.
Using the graph, for each of the following situations, determine whether the PPF curve shifts.
a. Suppose that Italy increases its spending on education, which increases the amount of human capital in Italy.
Italy’s PPF curve would increase and move to PPF3.
b. A recession causes Italy’s unemployment rate to increase above the natural rate of unemployment.
Italy’s PPF curve would remain the same at PPF1.
c. Italy experiences an influx of immigrants from surrounding countries, which causes the population of Italy to increase.
Italy’s PPF curve would increase and move to PPF3.
The table below shows real GDP per capita for the United States between the years 1950–2016.
Real GDP per Capita over Time
Real GDP per Capita (dollars)
Instructions: Round your answers to one decimal place.
a. What is the growth rate in the standard of living from 1950 to 1975?
3.1 Numeric Response 1. Edit Unavailable. 3.1 incorrect. %
b. What is the growth rate in the standard of living from 1975 to 2000?
3.1 Numeric Response 2. Edit Unavailable. 3.1 incorrect. %
c. What is the growth rate in the standard of living from 2000 to 2016?
1.2 Numeric Response 3. Edit Unavailable. 1.2 incorrect. %
Correct answers should be:
Providing a constant number of workers with additional capital with which to work will ______ labor productivity at a(n) ______ rate.
Use the following diagram to answer the next question.
The most likely cause for a shift in the production possibilities frontier from AB to CD is
an increase in government purchase of the economy’s output.
the use of the economy’s resources in a less efficient way.
an increase in the quantity and quality of labor resources.
an increase in the spending of business and consumers.
The application of new technologies to the production process will increase
the quantity of human capital.
the unemployment rate.
the share of the population employed.
The key variable in determining changes in a country’s standard of living is the
long-run rate of economic growth.
Given the annual rate of economic growth, the “rule of 72” allows one to
determine the accompanying rate of inflation.
calculate the size of the GDP gap.
determine the growth rate of per capita GDP.
calculate the number of years required for real GDP to double.
Before the Industrial Revolution, living standards in the world
were relatively stagnant for long periods of time.
were already rising significantly for many decades.
were declining because of rapid increases in population.
are not known, for lack of reliable records from that period.
the two countries are the same. According to the principle of diminishing returns to capital, an additional unit of capital will ______ in Alpha compared to Beta, holding other factors constant.
increase output by the same amount
have no effect on output
increase output less
increase output more
When a firm builds a new factory, this is an example of an investment in
research and development.
Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ labor productivity.
increase; not changing
To increase future living standards by pursuing higher current rates of investment spending, an economy must
reduce current rates of consumption spending.
allow higher rates of current consumption.
reduce the current capital stock.
decrease the amount of future research and development spending.
Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause
the U.S.’s production possibilities frontier to shift inward faster than Nepal’s.
Nepal’s production possibilities frontier to shift outward faster than the U.S.’s.
Nepal’s production possibilities frontier to shift inward faster than the U.S.’s.
the U.S.’s production possibilities frontier to shift outward faster than Nepal’s.
Which of the following will not increase a nation’s real GDP?
number of workers
average price level