Chapter 4

Question 1

inflation rate

Answer 1

the percentage increase in the average level of prices from one year to the next

Question 2

gross domestic product (GDP)

Answer 2

the market value of all final goods and services in an area over a period of time

Question 3

final good/service

Answer 3

a good/service that is not used in the production of another

Question 4

intermediate good/service

Answer 4

a good/service that is used in the production of another

Question 5

the value of total production is equal to…

Answer 5

the value of total income

Question 6

factors of production

Answer 6

labour, capital, natural resources, and entrepreneurship

Question 7

income categories

Answer 7

wages, interest, rent, and profit

Question 8

transfer payments are…

Answer 8

not included in GDP because it is not exchanged for a good or service

Question 9

investment

Answer 9

the purchase of machinery, factories, and houses

Question 10

expenditure approach

Answer 10

tallies the spending on domestically produced goods and services

Question 11

income approach

Answer 11

tallies the income received by the residents as a result of the production that takes place in the area

Question 12

compensation components

Answer 12

wages/salaries and social contributions

Question 13

gross operating surplus

Answer 13

payments made to the owners of capital by firms and government for the use of their capital in producing goods and services

buying intermediate goods for production

Question 14

net operating surplus

Answer 14

payments made to the owners of capital by firms and government for the use of their capital in producing goods and services

gross operating surplus - depreciation

Question 15

consumption of capital

Answer 15

basically depreciation

Question 16

gross mixed income

Answer 16

income generated by small businesses

Question 17

taxes less subsidies

Answer 17

payments to the government

Question 18

Final consumption expenditure

Answer 18

domestic purchases of goods and services used to satisfy individual or community needs and wants

buying things you or the group want/need

Question 19

gross fixed capital formation

Answer 19

the purchase of fixed assets

Question 20

fixed assets

Answer 20

long term tangible goods with low liquidity

Question 21

the value-added method

Answer 21

the additional market value a firm gives to an intermediate good

Question 22

household production

Answer 22

the goods and services a household produces for itself

Question 23

the informal economy

Answer 23

concealed (illegal) transactions

Question 24

nominal GDP

Answer 24

summing the current values of goods and services

Question 25

real GDP

Answer 25

uses the prices of goods and services from a base year (base-year dollars) to calculate

Question 26

price level

Answer 26

measures the average prices of goods and services in the economy

Question 27

GDP deflator

Answer 27

Nominal GDP/Real GDP x 100

Question 28

Gross national income (GNI)

Answer 28

the value of incomes received by Canadians for the use of their factors of production (local or not)

Question 29

net national income (NNI)

Answer 29

GNI - consumption of fixed capital