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ECON 2 Study Guide - Midterm Guide: Dry Cleaning, Government Budget Balance, Gdp Deflator

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School
UCLA
Department
Economics
Course
ECON 2
Professor
Randall Rojas

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Document Summary

Circular-flow diagram : illustrates gdp as spending, revenue, factor payments, and income (a simple depiction of the macroeconomy) Factors of production - include inputs (ex. labor, land, capital, and natural. Factor payments - payments to the factors of production (ex. wages, rent) resources) However, this diagram does not provide the full picture and omits the following: The government - collects taxes and buys goods/services. The financial system - matches savers" supply of funds with borrowers" demand. The foreign sector - trades goods/services, financial assets, and currencies with for loans the country"s residents. Gdp = the market value of all final goods & services produced within a country in a given period of time. Goods are valued at their market prices so: All goods are measured in the same units (ex. dollars in the u. s. ) Things that do not have a market value are excluded (ex. housework you do for yourself) Final goods - intended for the end user.

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Related Questions

What is the market for factors of production?

  1. 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. 

  2. 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.

  3. 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.

  4. 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.

  5. 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.