Exam 5: Measuring the Economys Performance

A farmer buys seed for 15 cents that is used to grow wheat.The farmer sells the wheat to the miller for 30 cents,who makes flour.The flour is sold to the baker for 60 cents and the baker makes bread,which is sold to the grocer for 90 cents.The grocer sells the bread for $1.25.What is the value added for the miller?

Explain the two main methods used to measure GDP.

The term "value added" refers to the dollar value of

If households pay $100 in interest payments and receive $120 in interest,wages equal $400,rental receipts on land are $100 and royalties are $100,profits are $150,depreciation is $50,and indirect business taxes are $50,then gross domestic income is

The problem with using foreign exchange rates to convert one country's GDP into dollars is that

In the simple circular flow model the money received by a car maker when it sells a car goes to

A valid criticism of the decision not to include non-remunerated housework in GDP calculations is

If all other factors are held constant,an increase in imports

Wheat used for producing bread is

Suppose the government changed the law so that the employer had to pay the entire amount of the social security tax.Furthermore,government interest payments increased and other changes in the law induced many sole proprietorships to incorporate.The net effect of these changes on gross domestic income would be

To determine how well an economy is doing,it is better to use

Define and explain gross domestic product.

In the simple circular flow model,

How is interest measured when used in deriving GDP?

A firm produces a good and generates $5 million in receipts.Wages are $3 million,rent is $500,000,and interest payments are $1 million.Then

Social Security payments are

If nominal GDP in 1987 was $1 trillion,nominal GDP in 1997 was $2 trillion,and the 1987 and 1997 price indexes were 100 and 250 respectively,

GDP figures may understate the value of goods and services due to

A family sells the house they have lived in for two years to a friend.They received $150,000 and paid $120,000 two years ago.This transaction

If households receive $100 in interest payments and pay out $110,wages equal $500,rental receipts are $200,royalties are $100,profits are $200,depreciation is $50,and indirect business taxes are $50,then gross domestic income is