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Chapter 9: Problem 23

\(\mathrm{C}+\mathrm{I}+\mathrm{G}+\mathrm{X}_{\mathrm{n}}\) is approach(es) to GDP. (LO1,2) a) the flow-of-income b) the expenditures c) both the expenditures and the flow-of-income d) neither the expenditures nor the flow-of-income

Short Answer

Expert verified
b) the expenditures

Step by step solution

01

Recall the approaches to GDP calculation

There are three main approaches to calculating GDP - the output (production) approach, the income approach (flow-of-income), and the expenditure approach (expenditures).
02

Analyze the components given>

The question provides the components C (Consumer consumption), I (Investments), G (Government spending), and (X_n) Net exports. We can notice that these components represent spending of different economic agents, hinting towards an expenditure approach.
03

Evaluate the Expenditure Approach

The Expenditure Approach calculates GDP as the sum of all final spending in an economy, which includes consumer spending (C), investment (I), government spending (G), and net exports (X_n). Therefore, the given components correspond to the expenditure approach method for calculating GDP.
04

Review the Income Approach

In the Income Approach (flow-of-income), GDP is calculated as the sum of all income earned by individuals, businesses, and governments, which includes wages, rent, interest, profit, and taxes. As the given components do not represent income sources, they don't correspond to the flow-of-income approach. Therefore, based on our analysis and understanding of different GDP calculation approaches, the correct answer is: b) the expenditures

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Most popular questions from this chapter

Which would be the most valid statement? (LO7, 8) a) The American standard of living is, by far, the highest in the world. b) The standard of living of the average American is about twice that of the average Russian. c) GDP per person in the United States in 2009 was almost half of that in Luxembourg. d) If the underground economy, illegal production, and household production were accurately measured and added to GDP, our GDP would probably rise by less than 1 percent.

Which one of these goes into the investment sector of GDP? \((\mathrm{LO} 2)\) a) The purchase of a new factory b) The purchase of 100 shares of Intel stock c) The purchase of a 10-year-old office building d) The purchase of a U.S. savings bond

Which would be the most accurate statement? (LO8) a) There is almost no underground economy in the United States. b) Nearly half the goods and services that Americans consume are produced by the underground economy. c) Most of our lawn maintenance and domestic help is supplied by the underground economy. d) The production of the underground economy is included in our GDP.

Per capita real GDP is found by (LO7) a) dividing population by real GDP b) dividing real GDP by population c) adding population to real GDP d) multiplying real GDP by population

We would like to compare per capita real GDP. Which would be the most valid comparison? (LO6, 7) a) China in 2004 and Thailand in 2004 b) Germany in 2002 and 2004 c) The United States in 1980 and 2004 d) Nigeria in 1960 and the United Kingdom in 1990
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