Ch 17 - Output & Income 1

Question 1

Define GDP (Gross Domestic Product)

Answer 1

Total market value of all final goods/services produced in time, in country

Question 2

What’s Final Goods & Services?

Answer 2

The end products

Question 3

What Income Approach? (GDP)

Answer 3

Counts income derived from production / EX: Wages, rental & interest income

Question 4

What’s Expendure Approach (GDP)

Answer 4

All money spent buying the final goods / Who buys goods?

Question 5

To check ______, you measure the ____

Answer 5

Economy / GDP

Question 6

What does Circular Flow Diagram exclude

Answer 6

Gov / Financial System / Foreign Sector

Question 7

4 factors of Expenditure? (GDP)

Answer 7

Consumption by Households / Investment by Business / Gov purchases / Exp by Foreign

Question 7

GDP means… (simpler)

Answer 7

Total income of everyone in economy / Total expenditure on economy’s output of goods/services

Question 8

Why do Expenditure = income?

Answer 8

Every transaction, the buyer’s Exp becomes the seller’s income. / Sum of all exp = sum of all income.

Question 9

5 factors of Income? (GDP)

Answer 9

wages / rents / intrest / profits / stat adjustments

Question 10

Things that don’t have a ___________ are ______ from ____.

Answer 10

Market Value / excluded / GDP

Question 11

Examples of things w/ no market value & don’t count to GDP?

Answer 11

Cooking at home or doing the laundry (no transaction –> no MV

Question 12

GDP includes all _________ and sold ____ in the _____.

Answer 12

items produced in the economy / legally / Market

Question 13

Things excluded from GDP are..?

Answer 13

Items produced/sold illicitly / Stuff produced/consumed at home

Question 14

GDP includes Final or Intermediate goods?

Answer 14

Final

Question 15

FInal Goods?

Answer 15

Goods dat is ready to use. That’s the end

Question 16

Intermediate Goods?

Answer 16

Goods as parts or ingredients in production of other goods / Excluding avoids double counting

Question 17

Final Goods already ______ value of ________ goods in their ___________

Answer 17

embody / Intermediate / production

Question 18

GDP includes goods/services ______ produced not ones produced in the _____

Answer 18

currently / past

Question 19

GDP measure value of ______ within a _____ in a given _____. Either a yr or____

Answer 19

production / country / period // quarter

Question 20

Flashy Car Company sold a used car. / Included in GDP? (Explain)

Answer 20

NO / Car was not sold officially this yr - not within a yr/qtr

Question 21

Juanita Jones cooked meals for her family. / Included in GDP? (Explain)

Answer 21

NO / There’s no Market Value (price)

Question 22

Air and water pollution increase. / Included in GDP? (Explain)

Answer 22

NO / There’s no Market Value on pollution

Question 23

Define Consumption

Answer 23

Expenditures made by households on goods/services (clothing, food, electronics, etc) during time period.

Question 24

Consumption includes....

Answer 24

Consumer Durables & Nondurables / Services

Question 25

Define Consumer Durables (+ Examples)

Answer 25

Goods w/ avg life of more than 3 yrs / Cars, House

Question 26

Define Consumer Nondurables (+ Examples)

Answer 26

Goods w/ avg life of less than 3 yrs / Food, clothes

Question 27

Define Services (+ EXs)

Answer 27

Outputs, direct actives of another person / Doctor, haircut

Question 28

Lucy goes out to a local restaurant for lunch. Her purchased lunch represents...? (What consumption?)

Answer 28

A service / Because she's is at an restaurant

Question 29

Define Investment

Answer 29

Dollar value of all new capital purchased & expansion of inventories in an economy.

Question 30

3 investments are?

Answer 30

Business Fixed, Residential & Inventory Investment

Question 31

Business Fixed Investment is...

Answer 31

Purchases by firms of new capital goods. (offices, factories, tools, etc)

Question 32

Residential Investment is...

Answer 32

Purchases of new homes (like home improvements)

Question 33

Inventory Investment is...

Answer 33

Changes in inventories from one year to the next - If firms positive produce > sell / Negative if sell > produce

Question 34

Positive & Negative net Investment mean

Answer 34

P - Capital stock growing / N - Capital stock shrinking

Question 35

What are Gov Purchases

Answer 35

Spending on goods/services by local, state, & federal Govs

Question 36

How to find Net Exports?

Answer 36

Exports – Imports = NX (Net E)

Question 37

Define Exports

Answer 37

Foreigners buy from us & we ship to them

Question 38

Define Imports

Answer 38

We buy from foreigners & they ship to us

Question 39

Positive & Negative Net Export Value

Answer 39

P - Ex > Im / N - Im > Ex

Question 40

When using the expenditures approach, the largest sector of GDP is usually the..?

Answer 40

Consumer Sector

Question 41

Jolie spends $300 to buy her husband dinner at the finest restaurant in Dallas. (effect on GDP & components)

Answer 41

C rise by $300 / GDP rise by $300.

Question 42

Jose spends $800 on a tablet to use in his business. He got last year’s model on sale for a great price from a local manufacturer. (effect on GDP & components)

Answer 42

I & GDP unchanged / I (Jose's business) rise by $800 / I (inventories) fall by $800

Question 43

Kylie spends $1,200 on a new smartphone to use in her business. The smartphone was built in China. (effect on GDP & components)

Answer 43

I rise by $1,200 / NX fall by $1,200 (cuz Imports rise by $1,200) / GDP unchanged