Chapter 9

Question 1

Final Goods

Answer 1

Those sold to a final user

Question 2

Intermediate Goods

Answer 2

Those not sold to a final user

Question 3

Gross Domestic Product (GDP)

Answer 3

Current market value of all final goods and services produced within country’s borders in one year (How big an economy is)

Question 4

Transfer Payments

Answer 4

Taking from one person and giving to another, but not in return for any good or service (social security, unemployment insurance, and food stamps)

Question 5

Bads

Answer 5

Unwanted phenomena such as disease, crime, and garbage

Question 6

Keynesians says bad may increase GDP because…

Answer 6

we pay to lessen their effects (such as hiring policemen to combat new crime wave)

Question 7

The Expenditure Approach

Answer 7

Add up current market values of all final goods and services

Question 8

Income Approach

Answer 8

Adds up all payments to factors of production (wages, interest, rent, and profits generated by production)

Question 9

Income =

Answer 9

Output

Question 10

Consumption

Answer 10

Spending by consumers on nondurable goods, durable goods, and services

Question 11

Investment

Answer 11

Spending by business on capital, changes in business inventories, and spending on new residential housing

Question 12

Government Purchases

Answer 12

Spending by all levels of gvt on goods and services

Question 13

Net Exports

Answer 13

Exports-imports

Question 14

Government purchases is

Answer 14

second largest component

Question 15

In calculating GDP

Answer 15

we use current market prices

Question 16

Real GDP

Answer 16

What GDP would be if prices had remained the same as they were in the base year

Question 17

Real GDP only reflects

Answer 17

quantity changes, not price changes

Question 18

To see how well economy is doing, we use

Answer 18

real GDP to remove effects of inflation and only look at number of goods and services we are producing.

Question 19

Economic Growth

Answer 19

percentage change in real GDP

Question 20

Recession

Answer 20

Two successive quarters (3 month periods) of negative economic growth

Question 21

Business Cycle

Answer 21

Describes ups and downs of the economy

Question 22

Expansion

Answer 22

Increase in real GDP

Question 23

at PEAK of business cycle,

Answer 23

real GDP is at temporary high

Question 24

when real GDP falls,

Answer 24

economy is suffering a CONTRACTION

Question 25

Trough

Answer 25

real GDP is at temporary low

Question 26

as real GDP grows from trough,

Answer 26

RECOVERY is occurring

Question 27

Per Capita GDP

Answer 27

GDP divided by the population; illustrates wellbeing of ppl in an economy

Question 28

Best measure available, but not perfect

Answer 28

per capita gdp

Question 29

In evaluating measure of economic health,

Answer 29

level of economic achievement and economic growth must be considered.

Question 30

economic growth is related to

Answer 30

change in economic freedom