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ECON 1BB3 Chapter 5: Chapter 5 - Measuring a Nation's Income

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silvergerbil904
11 Feb 2012
School
McMaster University
Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy

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ECON 1BB3 Full Course Notes
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Document Summary

Microeconomics: the study of how households and firms make decisions and how they interact in markets. Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment, and economic growth. The goal of macroeconomics is to explain the economic changes that affect many households, firms and markets simultaneously. Gross domestic product measures the total income of a nation. It is the most closely watched economic statistic because it is thought to be the best single measure of a society s economic well being. Gdp measures: y the total income of everyone in the economy y the total expenditure on the economy s output of goods and services. For an economy as a whole, income must equal expenditure. Look at circular flow diagram in textbook pg. Households buy goods and services from firms, and firms use their revenue from sales to pay wages to workers, rent to landowners and profit to firm owners.

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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.

Β Microeconomics is defined as that part of economic analysis that
A) studies the behavior of the economy as a whole.
B) includes the problems of inflation and unemployment.
C) studies individual decision making by households and firms.
D) concerns aggregate production and consumption.

If an economy's GDP falls, then it must be the case that the economy's

A. Income and saving fall

B. Income and market value of all products both fall.

C. Income falls and the market value of all production rises.

d.Income rises and the market value of all production falls.

2. Gross Domestic product measures

a. Income and expenditure.

B. Income

c. Expenditure.

d. Neither.

3. If all quantities produced in the united states rise by 13.4% and all prices fall by 13.4% which of the following occurs?

Does Real GDP rise or fall? Does the nominal GDP rise or fall?

4. Which of the following does not add to US GDP?

a. The federal gov. Sends a social security check to your grandmother.

b. CIty of new york pays a salary to policemen.

c. Air France buys a plane from Boeing, the US aircraft manufacturer.

5. IS the best single measure of a society's economic well-being the unemployment rate or the GDP?

6. Keynesian economics was developed by John Keynes in response to:

A. The great recession.

b. The great depression.

C. Out of control gov. spending.

17. For an economy as a whole,

a. Wages must equal profit.

b. consumption must equal income.

c. Income must equal expenditure.

d. Consumption must equal saving.

8. As in the case f Ireland, Keynesian economics does not tend to work in countries that:

a. Are large and self-sustaining.

b. Are small and insulated.

c. Are medium-sized with good governments.

d. Are smaller and are open to free (ish) trade.

e. Are large and have free trade.

Thanks! Please be as detailed as you can.!