Chapter 2

Question 1

What is GDP

Answer 1

The total value of all final goods and services produced within the boarders of a country with in a specific period of time

Question 2

What is measures of economic activity used for

Answer 2

-Compare prosperity levels between countries
-Measure economic growth on a year to year bases
-Determine the standard of living

Question 3

What is GNI

Answer 3

The total value of all income earned by permanent residents of a country within a specific period of time

Question 4

What is GNP

Answer 4

The total value of all final goods and services produced by permanent citizens of a country within a specific period of time

Question 5

What are the three divisions of government expenditure

Answer 5

Functional division
Administrative division
Financial division

Question 6

What is the importance of final consumprion expenditure by governemnt

Answer 6

Government provides a legal framework for the economy to operate efficiently and much of its spending Is on enforcing laws that entrench private ownership of property

Question 7

What is the importance of fixed capital formation

Answer 7

-Important for economic growth
-An increase will expand production
-Government can help increase it by lowering interest rates
-SA exports raw materials and imports finished product because we cant produce it ourselves etc.
-Reduce unemloyment
Improved infrastructure and distribution of wealth