ECON 1010 Chapter Notes - Chapter 20: Potential Output, Final Good, Intermediate Good

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28 Dec 2019

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Macroeconomics chapter 20: define gdp and distinguish between a final good and an intermediate good. Gdp the market value of the final good or service produced within a country during a given period. Final good item that is bought by its final user. Intermediate good - is an item that is produced by one firm, bought by another firm, and used as a component of a final good. National considers net income receipts from abroad. Gross before subtracting the depreciation of capital. Nominal gdp uses the current year as the reference year. Quantity x price of the year = expenditure. Review questions 20. 3: distinguish between real gdp and potential gdp and describe how each grows over time. Real gdp how much good and services that are produced. Real gdp is a better measure of the standard of living than nominal gdp. A country that produces a lot will be able to pay higher wages.

Related Questions

Calculate the missing data.

Calculate missing data from the table.

Income/Expenditure Flows	Amount (in billions)
Consumption expenditure	$7
Government expenditure	$5
Depreciation	$3
Net taxes	$2
Investment	$4
Net exports	$1
Expenditures
Income
GDP

Calculate the following.

Using the data from a partial set of national income and expenditure data, address the following:

Calculate gross domestic product (GDP) using the expenditure approach.

Determine net domestic product, gross national product (GNP), and statistical discrepancy.

Item	Amount in 2010 (in billions)
Government expenditure (G) =	$8
Consumption expenditure (C) =	$20
Investment (I) =	$5
Net exports (NX) =	$1.5
GDP (expenditure approach)=
Total wages =	$21
Net operating surplus =	$11
Net domestic product =
Indirect taxes minus subsidies =	$3.5
Capital consumption =	$2
GDP (income approach)=
Statistical discrepancy =
Net factor income from abroad =	$5.5
GNP =

Consider the tables.

Given production and price data below, address the following:

Calculate an economy's nominal GDP and real GDP.

In 2000:

Item	Quantity (millions)	Price ($/unit)	Expenditure (millions of $)
Socks	15	5	75
SIM cards	20	2	40
Defense Budget	9	5	45

Real/Nominal GDP = 160

In 2003:

Item	Quantity (millions)	Price ($/unit)	Expenditure (millions of $)
Socks	15	5	75
SIM cards	20	5	100
Defense Budget	20	10	200

Nominal GDP =

2003 Quantities valued at 2000 prices:

Item	Quantity (millions)	Price ($/unit)	Expenditure (millions of $)
Socks
SIM cards
Defense Budget

Real GDP =

Answer the following questions.

How do you measure GDP?

How do you measure real and nominal GDP?

How do you determine Consumer Price Index and what are its limitations?

Which of the following expenditures will be included in GDP which will be excluded from the calculation? Explain your answers.

Spare tires bought by Across America, a car rental company

Textbooks bought by college students

Cabinets purchased by a furniture store

A new car purchased by an NFL player

A cruise ship bought by Carnival

MACROECONOMIC PRINCIPLES Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a given period of time.

A) Name the contents of the four components of expenditure.

B) What is meant by nominal GDP; how does it differ from real GDP and how is the latter calculated?

C) The government portion of expenditures in the GDP does not include spending on transfer payments such as Social Security. Why are they excluded? (See page 202 in the textbook, 7th edition; 8th edition page196)

D) Give reasons as to why a higher GDP can be assumed to engender greater well-being in the people whose endeavors attained this elevation. Alternatively, explain why a larger GDP appears not to make people any happier.

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Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.

ECON 1010 Chapter Notes - Chapter 20: Potential Output, Final Good, Intermediate Good

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