EC140 Study Guide - Midterm Guide: Net Domestic Product

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EC140 Full Course Notes

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The market value of all goods and services produced in a country in a given time period. 4 parts: market value, final goods and services, produced in a country, given time period. Households and firms: households sell factors of production to firms, they receive income for these services from firms, total income received by households is called aggregate income, households buy good/services from firms. The total payment for these goods/services is called consumption expenditure. Governments: they buy goods/services, called government expenditure, from firms, net taxes are equal to taxes paid to the government minus transfer payments. Transfer payments is the cash transfers from government to households/firms, such as security social benefits, unemployment compensation, etc. Rest of the world: firms sell to the world, exports. Firms buy from the world, imports: exports-imports= net exports, the total expenditure, aggregate expenditure, is the sum of consumption expenditure, investment, government expenditures, and net exports. Gross means before accounting for the depreciation of capital.

Related Questions

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

Gross domestic product is best defined as
a. the total quantity of goods and services produced in a country during a period of time
b. the total value of all goods that can be found in a country.
c. the market value of all final goods and services produced in a country during a period of time.
d. the amount of all income earned by all citizens of a country, including those living overseas.

viridianmole204

What is the market for factors of production?

What is the market for factors of production?
1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages.
What is the money market?
1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.
Who are the three economic actors in the circular flow model?
1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.
How is the national income of an economy determined?
1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.
What is GDP?
1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

EC140 Study Guide - Midterm Guide: Net Domestic Product

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