Chapter 2

Question 1

GDP

Answer 1

1. TOTAL EXPENDITURE on domestically produced final goods and services.
2. TOTAL INCOME earned by domestically located factors of production.
3. TOTAL OUTPUT - value of all final goods produced.
4. Sum of value-added at all stages in the production of final goods.

Question 2

Expenditure Components of GDP

Answer 2

1. Consumption (C)
2. Investment (I)
3. Government Spending (G)
4. Net Exports (NX)

Question 3

Investment (I)

Answer 3

1. Spending on Capital
2. Spending on Goods for Future Use
3. Business Fixed Investment
4. Residential Fixed Investment
5. Inventory Investment

Question 4

Government Spending (G)

Answer 4

Excludes Transfer Payments - They do no represent spending on goods and services.

Question 5

Net Exports (NX)

Answer 5

Exports- Imports

Trade Balance