GDP💸
What does GDP stand for?
Gross Domestic Product
What is shown in the circular flow diagram?
The diagram is a simplified representation of the macroeconomy. It shows the flows of money, goods and services and factors of production through the economy.
fill in the blank:
Some household, derive additional income from their indirect ownership of the physical capital, used by firms, mainly in the form of ____
Stocks
Definition of : Macroeconomics
Macroeconomics is the study of an entire economy as a WHOLE, focusing on factors like overall economic output, employment, inflation, and government policies, rather than individual markets or specific businesses.
What are the participants of aggregate demand? (*hint there’s 4)
Households, firms, government, foreign consumers
What is the definition of gdp?
gdp is the total value of all final goods and services produced in an economy during one year.
What is the Expanded Circular Flow Diagram?
Shows how the government is involved in flows between the households and firms in the economy
Why is economic growth important?
Jobs,
More goods and services
A greater variety of goods and services
Definition of: government transfers
payments that the government makes to individuals without expecting a good or service in return
The primary emphasis in macroeconomics is on: (
(A) how firms set prices.
(B) the national economy.
(C) marginal analysis.
(D) bits and pieces of the economy.
(E) the employment of individual workers.
B. The National economy
What is the formula to calculate the GDP? (Expenditure approach)
C+I+G+(X-IM)
c= consumer spending
I= investment spending
G= government spending
X= exports
IM= imports
What are factor markets?
Factor markets are where resources, especially capital and labor are bought and sold. It’s where the firms buy the resources they need to produce goods and services.
Are illegal businesses transactions counted in the GDP? and why?
They are not counted and it’s because GDP does not include transfer payments since they are not part of current production
Definition of: factor payments
payment for the factors of production, namely rent, wages, interest, and profit
A period of falling real gross domestic product is an indicator of a(n)...? peak? expansion? recession? recovery? trough?
Recession
Why are intermediate goods and services excluded from the calculation of the GDP?
Intermediate goods and services are excluded from the calculation, because if they would be counted it would cause us to count the same items several times, and artificially inflate the calculation of GDP
What is a product market?
Product markets are we’re good and services are bought and sold
Why are imports not counted as part of the GDP?
The GDP is the calculation including the total value of all goods and services produced DOMESTICALLY- and imports are goods produced in another country.
The value of imports must be subtracted to ensure that only spending on domestic goods is measured in GDP
Definition of Aggregate Demand
The total demand within an economy
Which of the following transactions would increase a country's Gross Domestic Product (GDP) according to the circular flow model?
A) A consumer purchases a used car from another consumer. B) A company imports machinery from a foreign supplier. C) The government increases its spending on defense. D) A bank lends money to a small business.
C) The government increases its spending on defense.
This transaction would increase a country's Gross Domestic Product (GDP) because government spending is one of the components of GDP, and an increase in government spending contributes to higher GDP.
Which of the following is NOT included in GDP?
a. Capital goods such as machinery.
b. Imports
c. The value of domestically produced services.
d. Government purchases of goods and services.
e. The construction of structures.
B. Imports
Which of the following is true? The simple, circular flow diagram.
I. Includes only the product markets
II. Includes only the factor markets
III. Is a simplified representation of the macro economy
only III is correct
List at least 2 things that aren’t included in the GDP:
intermediate goods, second hand sales, purely financial transactions, transfer payment, unreported legal business activity, illegal business activity, non-market transactions, imports
Explain the: income approach
calculating GDP: add up the total factor income earned by household firms in the economy, including rent, wages, interests, and profit
Which of the following best illustrates the concept of "circular flow" in the context of measuring Gross Domestic Product (GDP)?
A) A household purchases a new car from a local dealership, and the dealership pays its employees with the revenue earned from the sale.
B) The government levies taxes on businesses, reducing their profits, and then uses those tax revenues to fund public infrastructure projects.
C) A factory produces goods that are exported to foreign countries, and the revenue from these exports contributes to the country's trade surplus.
D) A bank lends money to small businesses, enabling them to expand their operations and hire more workers, leading to increased consumer spending.
E) A consumer spends money on imported electronic goods, which adds to the trade deficit but does not directly impact the domestic economy.
A) A household purchases a new car from a local dealership, and the dealership pays its employees with the revenue earned from the sale.