Ch.3 GDP/EconomicGrowth

Question 1

4 Economic Resources

Answer 1

1. Labour
   Human mental & physical effort
2. Land
   Natural resource to produce goods & services
3. Capital
   Plant/Equipment/Building/Tools for production
4. Enterprise
   Human to innovate and take risks

Question 2

Payments for Economic Resources

Answer 2

1. Labour → Wages
2. Land → Rent
3. Capital → Interest
4. Enterprise → Profit

Question 3

The Concept of
Circular Flow of Goods
from producer to consumer
is known as ___

Answer 3

Say’s Law

Supply creates its own Demand

Question 4

A simple economy model of 3 industries paying $10 to one another

Total Prod Value = ?
Total Spending = Total Income = ?
All activities were financed by ?
Stock of Money = ?
(money supply)
Flow of Income = ?
(total income)

Answer 4

Total Prod Value = $30
Total Spending = Total Income = $30
All activities were financed by $10
Stock of Money = $10
Flow of Income = $30

Question 5

The Number of Times
a unit of Currency is used
is known as ___

& calculation

Answer 5

Velocity of Money
velocity of circulation
. Flow of Income (GDP)
Vₘ = ———————————-
. Stock of Money (Supply)

Question 6

Income received
WITHIN Circular Flow
& NOT flowing back

Answer 6

Leakage

e.g. saving/ import/ tax
tims

Question 7

Spending flow received by business that is
NOT dependent on current level of Income/ household consumption

Answer 7

Injection

e.g. invest/ export/ gov spending
gix

Question 8

Spending for increasing plant / equipment / capital goods

in economics

Answer 8

Investment

autonomous, NOT determined by income

Question 9

One-way transactions that Gov pays for no G/S in return

Answer 9

Transfer Payment

Question 10

Net Tax Revenue =

Answer 10

Tax - TP

= Total Tax Rev
- Transfer Payment

Question 11

Personal & Disposable
Income =

Answer 11

Yp = Yd + Tax
Yd = Saving + Consumption

Question 12

3 Leakages vs
3 Injections

Answer 12

Leakage Injection
Saving ↔ Invest
Tax ↔ Gov Spending
Import ↔ Export

Question 13

Total Receipts of ALL Producers

總收入

Answer 13

Value of Production

ALL sales revenues

Question 14

Total Spending in the economy

總支出

Answer 14

Aggregate Expenditures

spendings of 4 sectors
C+G+Ig+(X-IM)

Question 15

___ occurs when
∑ 3 Leakages = ∑ 3 Injections &
Aggregate Exp = Value of Prod
= Cost of Prod (inc. Profits)
= Total Income

Answer 15

National Income Equilibrium

Question 16

Total Value of the
Final G/S produced
in an economy in a period

Answer 16

GDP
Gross Domestic Product

Question 17

Income Approach

Total Income Received
by 3 major sectors
(Household/ Business/ Gov)
in an economy in a period

Answer 17

GDI
Gross Domestic Income

Question 18

Total value of ALL New Capital Goods
both Replacement & Additional capital

& calculation

Answer 18

Gross Investment

= Net Investment + Depreciation
Ig = In + depreciation

Question 19

4 Types of
Consumption

Answer 19

1. Consumer Durables
   life > 1 yr
2. Semi-Durables
   life ≤ 1yr (clothing/shoes)
3. Non-Durables
   use only once
4. Consumer Services
   intangibles (phone bill/ air transport/ repair)

Question 20

In Economics,
Prod. of New Capital Goods to ↑ prod. capacity

Answer 20

Investment

Question 21

The Change in Business Inventory in periods

Answer 21

Unplanned Investment

Question 22

Total Prod Value
-) Depreciation
-) Indirect Tax (Sales Tax) =

Answer 22

Net Domestic Product
NDP

Question 23

xxx @ Market Prices
vs
xxx @ Basic Prices

Answer 23

Market Prices: w/ Taxes

Basic Prices: w/o Taxes

Question 24

Net Domestic Product
+/-) Foreign Factor Y

Answer 24

Net National Product
NNP

= National Income

both @basic prices
($ excl tax)

Question 25

5 Source Categories of **GDI** *Gross Domestic Income*

Answer 25

1) **Compensation of EE** *wages+tips+benefits* 2) **Gross Operating Surplus** *corp. gross profits* 3) **Gross Mixed Income** *non-corp. gross profits* 4) **Taxes (net of subsidies) on Prod** *property tax* 5) **Indirect Taxes (net of subsidies)** *sales tax*

Question 26

Personal Income =

Answer 26

= NNP or National Income +) Gov Trans Pmt -) Undistributed Corp. Profits -) Corp. Profit Taxes -) Other Income Not Paid Out *or* = Disposable Income +) Personal Income Taxes

Question 27

Relations of GDP→ NDP→ NNP→ Personal Y→ Disposable Y

Answer 27

**GDP** *-) depreciation -) indirect taxes* = **NDP** *+/-) foreign factor Y* = **NNP** *+) Gov TP -) undistributed corp π -) corp π taxes -) other Y not paid out* = **Personal Income** *-) income taxes* = **Disposable Income**

Question 28

Long-term Economic Growth is dependent on Improvement of ___

Answer 28

**Labour Productivity** *output/period* *output/units of labour*

Question 29

4 Major Sources of Long-term Economic Growth

Answer 29

1. Qty/Qlty of Labour Productivity (Human Capital) 2. Physical Capital 3. Tech change % 4. Natural Resources

Question 30

5 Reasons why Economic Growth Does NOT mean ppl are better off

Answer 30

1) Include ***Prev Excluded*** 2) ***Qlty***/Desirability of Goods? 3) Increased ***Leisure***→ bad for economy 4) ***Fairly distributed***? 5) Costs of ***Environment*** & Society