Chapter 2 Macroeconomics p1

Gross domestic product measures

• income and expenditures.

• income but not expenditures.

• expenditures but not income.

• neither income nor expenditures.

For an economy as a whole,

• wages must equal profit.

• consumption must equal saving.

• income must equal expenditure.

• the number of buyers must equal the number of sellers.

Which of the following statements about GDP is correct?

• GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services.

• Money continuously flows from households to firms and then back to households, and GDP measures this flow of money.

• GDP is generally regarded as the best single measure of a society's economic well-being.

• All of the above are correct.

For an economy as a whole, income must equal expenditure because

• the number of firms is equal to the number of households in an economy.

• individuals can only spend what they earn each period.

• every dollar of spending by some buyer is a dollar of income for some seller.

• every dollar of saving by some consumer is a dollar of spending by some other consumer.

Which of the following statements about GDP is correct?

• GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force.

• Money continuously flows from households to government and then back to households, and GDP measures this flow of money.

• GDP is to a nation's economy as household income is to a household.

• All of the above are correct.

In a simple circular-flow diagram, total income and total expenditure are

• never equal because total income always exceeds total expenditure.

• seldom equal because of the ongoing changes in an economy's unemployment rate.

• equal only when the government purchases no goods or services.

• always equal because every transaction has a buyer and a seller.

In the actual economy, households

• spend all of their income.

• divide their income among spending, taxes, and saving.

• buy all goods and services produced in the economy.

• Both (a) and (c) are correct.

Total income from the domestic production of final goods and services equals

• only household expenditures for these goods.

• only household and business expenditures for these goods.

• only household and government expenditures for these goods.

• the expenditures for these goods whoever buys them.

In the actual economy, goods and services are purchased by

• households, but not firms or the government.

• households and firms, but not the government.

• households and the government, but not firms.

• households, firms, and the government.

GDP is defined as the

• value of all goods and services produced within a country in a given period of time.

• value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

• value of all final goods and services produced within a country in a given period of time.

• value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.