Chapter 4 - Measuring Total Production and Income

Question 1

Microeconomics

Answer 1

Study of how housesholds & firms make choices;
how they interact in markets;
how the gov attempts to influence their choices

Question 2

Macroeconomics

Answer 2

Study of the economy as a whole

Question 3

What is the

Business Cycle

Answer 3

The alternating periods of expansion and recession that Canadian economy has experienced since Canada became a country

Question 4

What happens during

Expansion

Answer 4

Period during which total production and total employment are increasing

Question 5

What happens during

Recession

Answer 5

Period during which total production and total employment are decreasing

Question 6

Economic growth

Answer 6

The ability of an economy to produce increasing quantities of goods & services

Question 7

Inflation rate :

Answer 7

The % increase in the price level from 1 yr to the next

Question 8

Gross Domestic Product (GDP) :

Answer 8

The market value of all final goods/services produced in a geographic area during a period of time

Measured using market values
Only includes the value of final goods & services
Includes only current production

Question 9

Final good or service :

Answer 9

One that is purchased by its final user and isn’t included in the production of any other good/service

Question 10

Intermediate goods :

Answer 10

A good/service that’s an input into another good/service, such as car seats

Question 11

Transfer payments :

Answer 11

Social program payments

Question 12

What are the 2 ways to measure GDP?

Answer 12

• Expenditure approach
• Income approach

Question 13

Expenditure approach

Answer 13

Measuring GDP by adding up all the diff types of expenditure in the economy

Question 14

Income approach :

Answer 14

Measuring GDP by adding up all the income received by the owners of factors of production

Question 15

Gross operating surplus :

Answer 15

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

Question 16

Net operating surplus :

Answer 16

The payments to the owners of capital over and above compensation for the consumption of their capital

Question 17

Consumption of capital :

Answer 17

The amt of capital that wears out (depreciates) during use

Question 18

Gross mixed income :

Answer 18

The income generated by small businesses

Question 19

Taxes less subsidies :

Answer 19

The payment to gov that mimics income received by the owners of other inputs

Question 20

Final consumption expenditure :

Answer 20

Purchases of goods/services that will be used to satisfy individual or community needs & wants

Question 21

Gross fixed capital formation:

Answer 21

Purchases of capital by firms, Govs, and households

Question 22

Net exports :

Answer 22

The value of a country’s total exports minus its imports

Question 23

Statistical discrepancy :

Answer 23

1/2 of the diff between the estimates of GDP generated by the expenditure approach and the income approach

Question 24

Value added :

Answer 24

The market value a firm adds to a product

Question 25

Household Production :

Answer 25

Goods/services ppl produce for themselves

Question 26

Informal economy :

Answer 26

Buying and selling of goods/services that is concealed from the gov to avoid taxes or regulations or bc the goods/services are illegal

Question 27

Nominal GDP :

Answer 27

The value of final goods/services evaluated at current yr prices

Question 28

Real GDP :

Answer 28

The value of final goods/services evaluated at base year prices

Question 29

Price level :

Answer 29

A measure of the average prices of goods/services in the economy

Question 30

Gross National Income :

Answer 30

The value of incomes received by Canadians for the use of their factors of production no matter where in the world those factors of production are used