Chapter 5

Question 1

In factor markets

Answer 1

Households supply labor to firms.

Households provide capital to firms (land, buildings, equipment) to produce output

Question 1

In factor markets

Answer 1

Households supply labor to firms.

Households provide capital to firms (land, buildings, equipment) to produce output

Question 2

Production markets

Answer 2

Firms sell goods and services to customers

Question 2

Production markets

Answer 2

Firms sell goods and services to customers

Question 3

Output & Input markets

Answer 3

Firms supply products on the output market, yet demand inputs on the factor market. And consumers demand products on the output market, and supply the input of labor on the factor market.

Question 3

Output & Input markets

Answer 3

Firms supply products on the output market, yet demand inputs on the factor market. And consumers demand products on the output market, and supply the input of labor on the factor market.

Question 4

Nominal GDP

Answer 4

the market value of FINAL goods and services produced per time period; can increase because prices go up and/or output goes up.

Question 4

Nominal GDP

Answer 4

the market value of FINAL goods and services produced per time period; can increase because prices go up and/or output goes up.

Question 5

Real GDP

Answer 5

Real GDP is nominal GDP after holding price changes constant, and can only increase if output goes up

Question 5

Real GDP

Answer 5

Real GDP is nominal GDP after holding price changes constant, and can only increase if output goes up

Question 6

GDP is sum of

Answer 6

consumption, investment, government spending, and net exports.

Question 6

GDP is sum of

Answer 6

consumption, investment, government spending, and net exports.

Question 7

Trade Surplus

Answer 7

excess of exports over imports, and vice versa for a trade deficit.

Question 7

Trade Surplus

Answer 7

excess of exports over imports, and vice versa for a trade deficit.

Question 8

Whichofthefollowingwouldnotbeconsideredamacroeconomicquestion? a. Why do some economies grow faster than do others? b. What are the factors that determine unemployment? c. What factors determine the price of computers?
d. How does the exchange rate affect international trade? e. What are the effects of inflation on the economy?

Answer 8

c. What factors determine the price of computers?

Question 8

Whichofthefollowingwouldnotbeconsideredamacroeconomicquestion? a. Why do some economies grow faster than do others? b. What are the factors that determine unemployment? c. What factors determine the price of computers?
d. How does the exchange rate affect international trade? e. What are the effects of inflation on the economy?

Answer 8

c. What factors determine the price of computers?

Question 9

Macroeconomics involves the study of economics from the standpoint of:

Answer 9

e. the aggregate economy.

Question 9

Macroeconomics involves the study of economics from the standpoint of:

Answer 9

e. the aggregate economy.

Question 10

Infactormarkets: a. households demand resources which firms supply. b. households supply inputs which firms demand. c. households supply goods and services which businesses demand. d. firms supply products which households demand. e. households demand inputs which firms supply.

Answer 10

b. households supply inputs which firms demand.

Question 10

Infactormarkets: a. households demand resources which firms supply. b. households supply inputs which firms demand. c. households supply goods and services which businesses demand. d. firms supply products which households demand. e. households demand inputs which firms supply.

Answer 10

b. households supply inputs which firms demand.

Question 11

A nation’s gross domestic product:

Answer 11

reflects the total market value of all final goods and services
produced within an economy in a given year.

Question 11

A nation’s gross domestic product:

Answer 11

reflects the total market value of all final goods and services
produced within an economy in a given year.

Question 12

Wemeasuregrossdomesticproductbymultiplyingthequantitiesofgoods by their prices because it allows us to

Answer 12

express the values of products in a common unit of measurement.

Question 12

Wemeasuregrossdomesticproductbymultiplyingthequantitiesofgoods by their prices because it allows us to

Answer 12

express the values of products in a common unit of measurement.

Question 13

How does real gross domestic product(GDP) differ from nominal GDP?

Answer 13

Real GDP controls for price changes, while nominal GDP does not.

Question 13

How does real gross domestic product(GDP) differ from nominal GDP?

Answer 13

Real GDP controls for price changes, while nominal GDP does not.

Question 14

For the purpose of GDP accounting, consumption expenditures include:

Answer 14

durable goods, non-durable goods, and services.

Question 14

For the purpose of GDP accounting, consumption expenditures include:

Answer 14

durable goods, non-durable goods, and services.

Question 15

When a country runs a trade deficit it must:

Answer 15

must sell assets to individuals or governments in foreign countries.

Question 15

When a country runs a trade deficit it must:

Answer 15

must sell assets to individuals or governments in foreign countries.

Question 16

GDP understates the value of output produced by an economy because ite

Answer 16

excludes transactions that do not take place in organized markets,
such as home-cooked meals.

Question 16

GDP understates the value of output produced by an economy because ite

Answer 16

excludes transactions that do not take place in organized markets,
such as home-cooked meals.