MacroEconomics: Chapter 5 Questions & Answers 100% Correct!

What is included in GDP and what is not included in GDP - ANSWER-Included= Final Goods (Car), Inventory(Has been produced but not sold yet), Rent(service that is bought), Stock brooking (form of income). Not included= intermediate goods(tires), purely financial transactions (buying and selling stocks), public transfer payments(social security), Private transfer payments(allowance given to a child), second hand sales(ebay), underground/black market, drugs, Know the different between GDP and GNP - ANSWER-GDP (Gross Domestic Product): The total market value of all final goods and services produced within a nation's borders in a given time period. GNP (Gross National product): Refers to the output produced by American-owned factors of production regardless of where they are going. What are some issues of GDP? - ANSWER-GDP measures exclude most goods and services that are produced but not sold in the market. The GDP statistics also fail to capture market activities that aren't reported to tax or census authorities. (working off the book) Know the difference between Real GD and Nominal GDP - ANSWER-Real GDP: The value of final output produced in a given period, adjusted for changing prices. Nominal GDP: The value of final output produced in a given period, measured in the prices of that period (current prices). Be able to calculate GDP, NDP, NI and PI - ANSWER-GDP: private consumption expenditures(C)+ gross private investment(I)+government purchases(G)+ government spending+(exports-imports)(X-M). NDP: GDP-Depreciation NI(Net Income): sales-cost of goods sold PI(Personal Income): Income received by household before payment of taxes. What is income approach and how to calculate it. - ANSWER-IA- all economic expenditures should equal the total income generated by the production of all