1. Chapter 6 Review Measuring Domestic Output & National Income

2. A nation's GDP: Market value of the total final output produced within the borders of the nation, in a year.

3. A nation's GDP: can be found by summing C + I g + G + X n.

4. What we don’t count: Non-market transactions Used items Stocks/bonds transfers

5. To avoid multiple counting: only counting final goods.

6. Final goods and services: goods and services purchased by ultimate users, rather than for resale or further processing.

7. intermediate good: purchase of taco shells by Taco Bell (Live Mas!)

8. consumption expenditures include: household spending (NOT new home sales)

9. Net exports are negative when: a nation's imports exceed its exports.

10. investment includes: business expenditures, e.g. on machinery and equipment.

11. largest component of total expenditures in the United States is: consumption

12. In the treatment of U.S. exports and imports: add exports, but subtract imports, in calculating GDP.

13. G stands for: government purchases.

14. GDP excludes: the market value of unpaid work in the home.

15. disposable income: income received by households MINUS personal taxes

16. Nominal GDP: the sum of all monetary transactions involving final goods and services that occur in the

17. Real GDP: GDP data that have been adjusted for changes in the price level.

18. Price Index = Nominal x 100 Real

19. If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is: 300

20. If nominal GDP rises: real GDP may either rise or fall.

21. The price index for the base year is always: 100

22. Real GDP = Nominal GDPx 100 Price Index

23. If nominal GDP has risen faster than real GDP: the general price level has risen.

24. The underground economy: understates GDP.

25. GDP: understates economic welfare because it does not take into account increases in leisure. does NOT include environmental pollution

26. Would a hurricane HELP or HARM a country’s GDP? Why?

27. Does fixing your own car add to GDP?

28. Is marrying your housekeeper good for GDP?

29. If an American tourist spends money in Mexico, whose GDP benefits?