chapter 2: the operation of an eco

Question 1

what are the four questions in the production of goods and services

Answer 1

What to produce?
How much to produce?
How to produce?
Whom to distribute?

Question 2

identify and briefly describe the factors of production. state the financial gains of each

Answer 2

land (natural resources) (rent) - natural gas, all natural resources used in the production process
labour (human resources) (wages) - no# of ppl we have to work
capital (interest) - manmade goods to produce other goods eg machinery and technology
enterprise (profit) - people who are willing to take risks to make businesses for profit

Question 3

How can govs influence economic activity

Answer 3

Governments can influence the eco activity by increasing or decreasing tax and gov revenue therefore manipulating the total leakages/injections and overall level of eco activity. It possible for the gov to offset any unfavourable outcome (stimulate or dampen eco)

Question 4

define equilibrium and disequilibrium in relation to the circular flow

Answer 4

Equilibrium in the circular flow is when leakes and injections are equal. dis is when there is an inequality in leakages and injections (in general: when demand is equal to supply)

Question 5

describe how the different stages of the business cycle influence the eco

Answer 5

booms - increasing production of goods, increased spending, increased employment, rising income levels and rising QoL
recession - decreasing production, falling consumption and investment, increasing unemployment, decreasing income levels, and falling QoL