Chapter 1/4 - GDP

Question 1

A choice is a __

Answer 1

Trade off

Question 2

How do people make rational decisions?

Answer 2

comparing cost and benefit

Question 3

A constraint that involves giving up one thing to get something else

Answer 3

tradeoff

Question 4

the development of new goods and of better ways of producing goods and services.

Answer 4

Technological change

Question 5

inability to satisfy all our needs is called

Answer 5

scarcity

Question 6

difference between micro and macro economics

Answer 6

micro is choices surrounding people and firms which includes the demand and supply model.
the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

Question 7

distinguish how prices and production affect micro and macro.

Answer 7

micro = price of particular product/production of a particular firm

macro = price of average of all products/production of the whole economy.

Question 8

distinguish taxes on micro and macro

Answer 8

micro = a firm is taxed

macro = government is taxed.

Question 9

what are the resources used for an economy (also known as economic resources).

Answer 9

Labour - mental and physical effort.
land - natural resources used to produce goods and services.
capital - equipment, tools, factories
entrepreneurship - people who take risks and innovate.

Question 10

what are the two types of economies? how would a country use them?

Answer 10

1. command
2. competition

a country would use a hybrid

Question 11

what are the two types of analysis used? and describe them!

Answer 11

positive analysis - describes the world as it is.

and normative analysis - describes the world as it should be.

Question 12

give examples of both positive and normative analysis

Answer 12

Positive - people buy more when prices goes down.

normative - the government should cut taxes for schools.

Question 13

to make it simple, what are words that can be used for positive analysis and normative analysis

Answer 13

P - objective, not opinion

N - subjective. more opinionated.

Question 14

Does macroeconomics care about the market of cars market?

Answer 14

no. It does not care about indiviudal markets

Question 15

what does GDP measure?

Answer 15

the standard of living in an economy/ how well off we are

Question 16

what are the main variables when determining the state of an economy?

Answer 16

1. GDP
2. Unemployment
3. inflation

Question 17

what is the purpose of having variables?

Answer 17

they are used to measure the state of the country by comparing results from different time periods.

Question 18

the definition of gdp means…

Answer 18

is the market value of all final goods and services produced in a country in a given time period

Question 19

what does market value mean in regards to GDP?

Answer 19

it is the market price sold of all the quantities of products in a country

Question 20

what do final goods and services mean in regards to gdp?

Answer 20

final goods and services mean the products and services that are ready to be enjoyed/used.

Question 21

give some examples of final goods and services

Answer 21

-a sandwhich, coffee, a haircut

Question 22

if it is not a final good, it is a ___

Answer 22

intermediate good

Question 23

what is an intermediate good?

Answer 23

they are inputs used to create final goods and services bought from one firm by another firm

Question 24

why do you not include the intermediate costs of goods in the calculation of GDP?

Answer 24

because the final goods already include the costs of intermediate costs. So including intermediate costs would lead to an overvaluation.

Question 25

what is the general time period used when calculating gdp?

Answer 25

a year.

Question 26

what model would you use to estimate the value of gdp?

Answer 26

circular flow of income expenditure model

Question 27

which group is the most important of an economy in the circular flow of income and expenditure model?

Answer 27

households - individuals that buy stuff to meet their desires.

Question 28

what roles do firms play in the circular flow of income and expenditure model?

Answer 28

firms create goods and services to sell to households

Question 29

what does consumption expenditure mean in the circular flow of income and expenditure model?

Answer 29

the amount of money spent by households on goods and services.

Question 30

what does G represent in the circular flow of income and expenditure model?

Answer 30

government expenditure - how much governments spent on goods and services.

Question 31

is unemployment benefit included in the G?

Answer 31

no

Question 32

when firms buy from other firms in the circular flow of income and expenditure model, what is this called?

Answer 32

investment expenditure

Question 33

what does investment expenditure mean in the circular flow of income and expenditure model?

Answer 33

it is when firms buy goods and services from other firms to produce goods and services.

Question 34

what is the denotation for net export?

Answer 34

NX

Question 35

what is entailed in net export?

Answer 35

it is exporting minus importing

Question 36

True or false - Nx can only be positive

Answer 36

false it can be negative

Question 37

what is aggregate expenditure?

Answer 37

it is all the expenditures - investment, consumption, government, and NX

Question 38

when an import is higher than exports, is it a negative or positive net export?

Answer 38

negative

Question 39

the amount of investment into goods and services is less than export, T/F

Answer 39

False, the firms must have equal to or greater than the export

Question 40

what is another term for aggregate expenditure

Answer 40

GDP

Question 41

Aggregate expenditure = income = ___

Answer 41

GDP

Question 42

list the three ways to calculate GDP and explain them

Answer 42

1. Aggregate expenditure 2. Income 3 GDP - market value price sold of all products x quantity

Question 43

how can you determine the income in an economy

Answer 43

gdp

Question 44

standard of living can also mean___

Answer 44

how much we earn

Question 45

give an example of market value where there are 50 oranges sold at 10 c each, and 100 apples sold at 10 c each

Answer 45

oranges = $5 in total plus apples which sell at $10, giving a total market value of $15

Question 46

give an example of an intermediate good in relation to a final good

Answer 46

ipad is final good, whereas the chip is an intermediate good

Question 47

ignore

Answer 47

ignore

Question 48

what is the first part (households and firms) of the circular flow model

Answer 48

households sell and firms services. For these services firms pay income to households

Question 49

what does a factor market mean?

Answer 49

factor market is a market in which companies buy the factors of production or the resources they need to produce their goods and services

Question 50

what are the types of income that a firm pays to a household?

Answer 50

wages (labour), rent (land), interest (capital), profit (entrepreneurship)

Question 51

what is the main goal for gdp?

Answer 51

to see how much goods and services are being produced

Question 52

when nominal gdp goes up, why is this not the best indicator that gdp is actually going up?

Answer 52

because nominal gdp does not account for inflation

Question 53

what is the difference between nominal and real gdp

Answer 53

former does not account for inflation. Latter accounts for inflation

Question 54

in the situation of a question asking whether an individual product counts as the gdp? what do you respond?

Answer 54

it is false, because gdp is all the given products (P x Q X amount of products).

Question 55

given columns of nominal gdp and real gdp - the question asks how to calculate real gdp. What do you do?

Answer 55

use the production or quantity in the current year, but use the prices in the base year.

Question 56

In your base year, is the nominal gdp the same as real gdp

Answer 56

yes

Question 57

What is the MAIN purpose in calculating the real gdp

Answer 57

since you are using a base years price, you are simply measuring the increase or decrease in production.

Question 58

how to calculate real gdp per capita?

Answer 58

take the population and divide it by real gdp

Question 59

dispite india not being so wealthy, why is their gdp higher than Canada?

Answer 59

higher population

Question 60

in order to properly compare real gdp, what are the steps you must take?

Answer 60

u must find real gdp per capita (real gdp divide by population)

Question 61

how do u calculate growth rate in real gdp?

Answer 61

take the current year's (year you're trying to find) real gdp per capita then subtract it from the base years per capita gdp, then divided by former gdp per capita then multiply by 100. Ie: 50 - 30 divide by 50 x 100.

Question 62

if the question asks you how long it will take to double its income, how would you approach it?

Answer 62

you would use the rule of 70. Meaning you would divide 70 by whatever the current GDP per capita is.

Question 63

what gdp per capita mean?

Answer 63

the amount of gdp per person on average

Question 64

T/F real GDP is always lower than nominal gdp

Answer 64

false, nominal GDP is GENERALLY larger, but not always

Question 65

Net exports increase when..

Answer 65

Exports increase more than imports

Question 66

total expenditure also is referred to as

Answer 66

aggregate expenditure

Question 67

explain the income part about the circular flow model

Answer 67

..

Question 68

what are two reasons why economist measure gdp

Answer 68

- to compare the standard of living over time | to compare the standard of living to other countries

Question 69

when a graph of gdp is increasing, what is that indicating?

Answer 69

that potential gdp is increasing

Question 70

why are there fluctuations on a graph of real gdp?

Answer 70

it indicates the business cycle

Question 71

when a country presents its gdp, which currency do they use?

Answer 71

their own

Question 72

what are the two things you must convert when comparing two countries gdp

Answer 72

the exchange rate and the purchasing power parity

Question 73

income = ___ = expenditure

Answer 73

gdp

Question 74

GDP = income = ___

Answer 74

expenditure

Question 75

in regards to gdp, expenditure also equals to __

Answer 75

income

Question 76

why Is Domestic Product “Gross”?

Answer 76

Gross” means before deducting the depreciation of capital

Question 77

what is the relationship between firms and households in regards to the factor markets

Answer 77

firms pay income to households like wages for labour, interest for capital, rent for land, entrepreneurship for profit.

Question 78

what are the limitations of Real GDP?

Answer 78

it only measures the final goods and services that are bought in markets. It does not account for - household production - underground activity - health and life expectancy - leisure time - environmental activity - political freedom

Question 79

what does household production mean?

Answer 79

something that is produced in your own home (not bought in the markets)

Question 80

why does GDP equal aggregate income and also equal aggregate expenditure?

Answer 80

GDP equals aggregate income because one way to value production is by the cost of the factors of production employed -wages, interest, rent, entrepreneurship. Aggregate expenditure is the total amount being spent on buying the production of the market

Question 81

distinguish between real GDP and potential GDP and describe how each grows over time.

Answer 81

Real GDP - accounts for inflation by using the production of that year and multiplying it by the prices of the base year. - actual amount being produced - it fluctuated from year to year Potential GDP -is the max amount of real gdp that can be produced. -is the amount that would be produced if there were full employment of all factors of production.

Question 82

how does the growth rate of real GDP contribute to an improved standard of living?

Answer 82

-increased growth of consumption of goods and services

Question 83

when a questions uses the word investment, DO NOT think of investing in ___, rather think of one firm buying from another __

Answer 83

stocks; firm

Question 84

Imports of goods and services are items that​ _____ in Canada​ _____ the rest of the world.

Answer 84

households, government, firms; buy from

Question 85

The total amount spent​ _____ is called gross investment.

Answer 85

both buying new capital and replacing depreciated capital

Question 86

The amount by which​ _____ is called net investment.

Answer 86

the value of capital increases

Question 87

a final good or service bought by its ___ ___ during a specified time period

Answer 87

final user

Question 88

an intermediate good is produced by whom purchased from whom?

Answer 88

a firm produces it, and another firm buys it.

Question 89

Starting with firms, the left arrow to the factor market means what?

Answer 89

firms buy services

Question 90

From factor market to households, what does the arrow represent?

Answer 90

households sell services

Question 91

What does y represent?

Answer 91

total income payed by firms to households

Question 92

firms buy capital equipment in investment expenditure, T or F

Answer 92

T

Question 93

The arrow that goes from firms to the goods market represent what?

Answer 93

Firms buying goods and services from other firms.

Question 94

Are subsidies included for "G"

Answer 94

no

Question 95

what is a reason why gdp is undervalued?

Answer 95

the underground economy

Question 96

house production means?

Answer 96

the services you do without getting paid. IE: making a sandwich or taking kid to park.

Question 97

what is another reason why an economist cares about GDP.

Answer 97

it wants to see if there is economic growth

Question 98

more production means a higher ___

Answer 98

GDP

Question 99

If there is more consumption, this usually indicates that there is an increase in two what things?

Answer 99

production and GDP

Question 100

Economic growth can be understand as percentage change in __

Answer 100

Real GDP

Question 101

How do you find the growth rate of real GDP

Answer 101

Take the new (most recent real GDP) minus Real GDP of previous year divided by Real GDP of the previous year

Question 102

how do you find the annual growth rate of real gdp? *even if u get this right, mark it as wrong so u can practice more

Answer 102

Final year - Initial year / initial year