ECON 4423 Lecture Notes - Lecture 8: Measures Of National Income And Output, National Income And Product Accounts, Unfair Competition

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amethystgnat297

21 Nov 2018

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The basics of national-income accounting and balance-of-payments accounting. *understanding how economies are linked together at the macroeconomic level. Trade-based stories: big increase in offshoring of production, china entered wto. National income accounts: a measurement of macroeconomic activity. Gne(gross national expenditure): the sum of all expenditures on final goods and services in an economy in a calendar year. Gdp(gross domestic product): the value of all final goods and services produced by home firms. Gdp = all domestic sales - business purchases of intermediate inputs. Gni(gross national income): sum of payments made to all domestic factors of production (labor, capital, land) as income. Gni = total value added in the economy, but this income is what goes back to expenditure in gne. = total national resources available for expenditure from income. A great many flows cross borders, breaking these simple linkages: trade in goods and services, payments for services of labor and capital used abroad, remittances and other transfers, trade in assets.

Related Questions

1. Which of the following cannot be determined using a production possibility table?

What combination of outputs can be produced.
How much less of one output can be produced if more of another output is produced.
What combination of outputs is best.
How much output can be produced from a given level of inputs.

2. Internal government debt is:

debt owed by citizens to their government.
debt owed by one government to another government.
government debt owed to citizens.
government debt owed to foreigners.

3. In general, budget deficits should:

never be run since they slow economic growth over the long run.
never be run since they crowd out investment in the short run.
be run on a temporary basis whenever the economy is below potential output.
be run on a permanent basis since they can always be financed over and over again.

4. If taxes and government outlays were constant and did not vary with income, then:

passive deficits would increase.
passive deficits would not exist.
structural deficits would increase.
structural deficits would not exist.

5. If the debt of the federal government increases by $10 billion in one year, then the budget:

deficit in that year must be $10 billion.
surplus in that year must be $10 billion.
deficit in that year decreased by $10 billion.
surplus in that year increased by $10 billion.

6. Which of the following would make the impending Social Security problem worse?

Raising income taxes when the baby boomers begin to retire.
Reducing the age at which one is eligible to receive payments.
Reducing Social Security retirement benefits.
Introducing means testing.

7. The price mechanism is: (Points : 5)

not affected by social and political forces.
affected by social but not political forces.
affected by political but not social forces.
affected by both political and social forces.

8. Social forces:

affect the price mechanism through cultural norms.
affect the price mechanism, but not the legal system.
affect the price mechanism through scarcity.
do not affect the price mechanism.

9. Opportunity cost is the same as marginal cost.

True
False

10. Which of the following is a characteristic of a market economy?

Private property.
Government ownership of the means of production.
Distribution according to need.
Tradition determines the what, how, and for whom decisions.

11. Mexico has a comparative advantage in producing corn:

if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
regardless of the opportunity cost in other countries.

12. The opportunity cost for a student of attending college for a year is best measured by the:

benefit received by the student.
tuition paid for the year.
value of the next-best activity forgone by attending college.
total money outlays associated with attending college.

13. A passive deficit is the portion of the deficit that exists when:

the economy is at potential income.
the economy is beneath potential income.
inflation is not fully anticipated.
inflation is fully anticipated.

14. An important international lending institution is the:

IMF.
The Group of Eight.
EU.
WTO.

15. Private property rights:

are essential elements of a market economies.
do not need to be enforced in market economies.
must be established before a socialist economy can function properly.
ensure an equitable distribution of income in market economies.

16. If a country has a comparative advantage in the production of a good, then its resources are better suited to the production of that good than the resources of other countries.

True
False

17. As the interest rate rises, debt service:

decreases.
does not change, but debt increases.
increases.
does not change and neither does the debt.

18. Your opportunity cost of taking this course is:

the tuition you paid for the course.
the benefit of the activity you would have chosen if you had not taken the course.
the benefit you get from taking this course.
the cost of the activity you would have chosen if you had not taken the course.

19. One advantage of a corporation over a sole proprietorship is:

greater accountability.
avoidance of double taxation.
ease of formation.
greater ability to obtain funds.

20. Maintaining objectivity is easiest in:

positive economics.
the art of economics.
normative economics.
it is just as easy in all of the above

byzantiumimpala567

Need help revising, and recommendation for a conclusion.

Throughout this paper is my understanding of what I have learned in class chapters 1-4, expressing my understanding and opinions. Economics is the study of how we deal with scarce resources. Microeconomics specially deals with business in the home country exclusively. This type of economics affects small businesses in the home country only. On the other hand, macroeconomics concerns our national welfare concerning trade and international business.

I believe that many things affect our economy on a microeconomics level. Things such as our understanding of our country in reflection to the world are very important. That is why we study ourselves before we study the macroeconomic principle of the world. Understanding ourselves is what microeconomics teaches us. Working from the inside out. The world is a place where there are differences in our wants and what we get. That is what makes items scarce. That is what positive economics is. Positive economics deals with what is and what we have. The other type of economics is called normative statements. This deals with what we should receive instead of what is and deserved to some extent. It's our scarce resources that determine our allocation of resources and how we use our resources and time. This is where opportunity costs come in, giving up something to do something. A successful business or country never ignores opportunity costs. We must ensure that we have a comparative advantage instead of the absolute advantage. Our resources must be used to achieve maximum output. Comparative is met when we have fewer opportunity costs to make some certain products than the other person or entity.

My initial understanding was scarcity was oil potentially running out, but we have so much of it that you can always find more with techniques such as fracking. Now it's obvious to me, one of our most scarce resources is time. You cannot avoid the 8,760 hours in a year. I understand that people have unlimited wants but limited resources. Everything has a cost and we must make a choice as we don't have unlimited farms, factories workers, etc. scarcity forces choices and this ties in with opportunity cost, for every gun made, a theft from the hungry is made. The opportunity cost not being used to feed the poor, but to make guns. And I find it easy to understand no one can have everything choices must be made on benefits. If I'm going to school, imp giving up making cash, as I'm giving up money for an education, I value education more. Scarcity is also related to the invisible hand. As it's an achievement that leads free markets and capitalism through competition for scarce resources.

My understanding of the invisible hand is a person neither intends to promote public interest and does not know how much he is promoting it. Only intending on his own gain. Without being his intention a person can be lead by the invisible hand to do good for society by pursuing one's own self-interest. Going into equity and efficiency the invisible hand does ensure both equity and efficiency. People work in their selfish ways to maximize profit while also contributing to the economy as a whole. It can also be argued that as the invisible hand wants to ensure efficiency, it cannot guarantee efficiency, because it can fail to produce an efficient allocation of resources, which in turn lead to a market failure. It can also be argued that it can't guarantee equity because not everyone gets a fair price. The way I like to remember efficiency is with a real-life example, like a reduction in the number of workers needed to produce a particular good for a particular amount. Equity refers to the ownership interest in an asset, for example, if a person owns a house with a market value of $800,000 and owes $100,000 on the mortgage leaving a $700,000 equity in the home.

It can be predicted that if the price of beef increases - ceteris paribus-the quantity of beef demanded by buys will decrease. In other words, if the price of beef increases, then the quantity of beef increases, then the quantity of beef demanded will decrease because all things have to be equal. In-class lecture thought me all other things remaining the same. Economists use ceteris paribus to determine the effect of a factor when all other factors have been held the same and helps simplify the study and get a more refined data set.

Economists deal with many issues that pertain to assuring that both a countries domestic output is efficient and that there is an effective trade balance. This means that there are a balance and limit on the amount of imports. Also, this means home production must be able to meet export demands. There are many factors that affect the production of goods and their effect on shifting the production possibilities frontier. This involves evaluating every detail including knowing the products and any close substitutes and compliments. It also involves knowing how an action or other external force will affect demand. This is called price elasticity; Substitutes are products that can replace any given product or service. An example of this would be Coke and Pepsi. The presence of substitutes affects price elasticity because if there are other options, then any change to the price or quality of the product will cause a shift of the demand curve. O course, price is a huge reason why the demand for a product decreases or increases yet it doesn't shift the curve because of the price only. This price change will cause a domino effect that will end with the shifting of the demand curve because it will cause an increase or decrease in demand of the substitute good if the price change is either lower or higher respectively. This price change serves as a catalyst that will change people's desire to spend more money on a more expensive product and that will instead choose to buy the substitute good for cheaper or buy more of the desired product. The change in the price of actual products will not shift the demand curve yet the change of the price of substitutes will because it serves to change people's purchasing behavior. On the other hand, compliments serve to boost demand when there is a decrease in price. The use of complementary goods is dependent upon another product. An example of this would be hot dogs and buns. If the price of hotdogs decreases then, conversely, the demand for hot dog buns will increase because of this change in price. In this scenario, the decrease in price will cause a positive shift in the demand curve because of people's desire and willingness to buy more buns. This is an example of a demand shifter. There are a few other demand shifters. The shifters of the demand curve are changes in expectations, disposable income, price of substitute goods and complements, tastes and preferences, and population size and composition. Changes in income affect the demand curve because if income is lower then people tend to save any extra income instead of wasting it. Disposable income is minimized and spending is lower. This also causes people to see a perceived value of things and distinguishing between what is necessary and what is a relative luxury. The lower the income, the higher the saving and avoidance to spend. An example of this would be if someone needs to buy some medication and it is relatively expensive, that doesn't mean that someone won't buy the medication just because it is expensive. It is necessary. Other factors that contribute to spending and demand are having a price ceiling and price floor. Having a price ceiling is a limit on the price of the product this is a government-imposed idea that is meant to protect consumers from unfair pricing and other conditions that may be malicious or obscure. This affects demand because if there is a price ceiling there is a limit on profit on a unit-to-unit basis. The other factor is the price floor. This price floor was created to encourage competition and affect consumers' willingness to pay because sometimes this new price may be higher than the original price. This causes a negative impact on a product that has a less than wanted perceived value. Many factors contribute to economic prosperity and certainly do help assure that information is analyzed and implemented into an economic and business plan.

limejellyfish231

Dems, GOP talk up deficit reduction, but don't act

WASHINGTON (AP) â Liberals' loud objections to White House proposals for slowing the growth of huge social programs make it clear that neither political party puts a high priority on reducing the deficit, despite much talk to the contrary.

For years, House Republicans have adamantly refused to raise income taxes, even though U.S. taxes are historically low, and the Bush-era tax cuts were a major cause of the current deficit.

And now, top Democrats are staunchly opposing changes to Medicare and Social Security benefits, despite studies showing the programs' financial paths are unsustainable.

Unless something gives, it's hard to see what will produce the significant compromises needed to tame the federal debt, which is nearing $17 trillion.

"There's not much of an appetite for deficit reduction," said Bob Bixby of the Concord Coalition, which pushes for "responsible fiscal policy."

There might be a few small steps this year, he said, when the government again needs to raise its borrowing limit. But a "grand bargain" involving significant spending cuts and revenue increases seems unlikely, Bixby said.

He added, "It's a little depressing to hear the reactions to the president's budget, from both sides."

There was nothing surprising about Republican denunciations of Obama's proposed tax increases, which he wants to combine with spending cuts to reduce the deficit.

The newer wrinkle was the left's sharp criticism of his proposals to slow the growth in Medicare and Social Security benefits, provided Republicans agree to new revenues. Obama has offered Republicans such a deal before. But this month's budget proposal gave it a new imprimatur.

The group MoveOn.org said Wednesday that supporters "who are outraged at President Obama's proposal to cut Social Security benefits will protest and deliver petitions" this week.

Sen. Bernie Sanders, a liberal independent from Vermont, is leading a similar petition drive, opposing "any benefit cuts to Social Security, Medicare or Medicaid." The deficit, his letter says, "was primarily caused during the Bush years by two unpaid-for wars, huge tax breaks for the rich and a prescription drug program" for Medicare, funded through borrowing. He suggests that higher taxes on the wealthy are the fairest way to tackle the deficit.

Democrats cite several reasons to raise taxes on high-income households. Obama campaigned for such tax increases in 2008 and 2012 but accomplished them only partially with the "fiscal cliff" resolution of Jan. 1.

Major tax cuts in 2001 and 2003 played big roles in turning a federal budget surplus into soaring deficits, according to research by the Congressional Budget Office and others. And by many measures, the U.S. tax burden in near historic lows.

Households earning roughly the national median income paid, on average, 11.1 percent of their income in total federal taxes in 2009, the most recent year for such data. That's the lowest level in more than 30 years, the CBO says.

Nonetheless, House Republicans have placed their highest priority on refusing to raise income tax rates, effectively ranking it above all other goals.

"The president got his tax hikes on Jan. 1," House Speaker John Boehner, R-Ohio, is fond of saying. It's a reference to the $620 billion in new revenues, over 10 years, that Republicans were unable to stop because of the "fiscal cliff" law, resolved on New Year's Day.

If it's easy to make a case for higher revenues, the same is true for slowing the growth of Social Security and Medicare benefits. For decades, studies have warned of approaching trouble in these popular but costly programs, as health care costs rise and baby boomers begin to retire.

"Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers," the Social Security Administration says, summarizing findings by the two programs' trustees.

"The early detection light has been going on for a while, and there has been a failure to act," Social Security trustee Charles P. Blahous recently told a House panel. If lawmakers are to preserve the programs for future retirees, he said, they will have to accept much more "political pain" than officials endured during a 1983 overhaul that included "several extremely controversial measures."

Obama has proposed an often-discussed step, which deals with government accounting in general, not just entitlement programs. If Congress agrees to higher tax revenues, the president said, he would back a slower growth calculation for cost-of-living increases for Social Security benefits, plus higher Medicare premiums for higher-income seniors.

Interest groups have criticized both ideas. AARP calls the slower cost-of-living formula a "harmful change," and urges seniors to oppose it.

American voters can largely blame themselves when Congress is more talk than action on deficit reduction. Americans routinely say they want a smaller federal debt, but not at the cost of programs they hold dear â including Social Security and Medicare.

A CBS News poll in March found that most Americans want to cut spending and raise taxes to reduce the deficit. But 4 in 5 oppose cuts to Social Security or Medicare. And two-thirds are unwilling to have their own taxes raised in the name of deficit reduction.

When Pew Research asked which was more important â reducing the national debt or keeping Social Security and Medicare benefits as they are now â the public sided with safeguarding the benefits programs, 53 percent to 36 percent.

The deficit-spending partisanship continued Wednesday. On a party-line vote, House Ways and Means Committee Republicans passed a bill to protect Social Security recipients and investors in Treasury bonds if the government hits its borrowing limit and can't pay all its bills later this year. Democrats say if the federal government starts reneging on any obligations â even if it pays bondholders â financial markets will lose faith and the economy will tank.

Some Democrats fear a lose-lose situation if they support Obama's proposals. First, they could be attacked from the left for tweaking the programs that many Democrats see as their party's greatest legacy. And second, Republicans might accuse them of "raiding Medicare" in next year's congressional elections. That battle cry proved effective in 2010 after Obama's health care overhaul bill was passed.

Democrats call such tactics shamelessly hypocritical. Republicans, they note, have long called for reining in entitlement spending.

Boehner rebuked a top GOP campaign figure for hinting at a renewal of the "raiding Medicare" attacks. But Reince Priebus, the national Republican Party chairman, seemed eager to revive the question of whether Democratic trims to Medicare's costs amount to an unfair cut in benefits.

9. Read the AP article âDems, GOP talk up deficit reduction, but don't act (Links to an external site.)â by C. Babington (Apr25â13).

a. What are the two basic ways of shrinking a budget deficit?

b. Which of your answers above are Republicans vehemently against? What are the potential negative economic effects of implementing this basic policy?

c. Which of your answers above are Democrats strongly opposed to? What are the potential negative economic effects of implementing this basic policy?

lavenderpug75

ECON 4423 Lecture Notes - Lecture 8: Measures Of National Income And Output, National Income And Product Accounts, Unfair Competition

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