Chapter 6 GDP And Its Cycles

Question 1

Flow Variables

Answer 1

Economic variables measured over time

Question 2

Stock variables

Answer 2

Economic variables measured at an instant of time

Question 3

What are the uses of income by households

Answer 3

Consumption (domestic and foreign), savings and taxes are the uses of income by households.
These are leakages.

Question 4

How is income generated?

Answer 4

Income is generated by consumption, exports, investment and government spending.
These are injections.

Question 5

Where are leakages and injections documented

Answer 5

They are documented in the circular flow of income, which shows the value of expenditure, which is Gross Domestic Product. GDP

Question 6

GDP=

Answer 6

Consumption plus savings plus taxes and consumption plus investment plus government spending plus net exports
C+S+T and C+I+G+Net Exports

Question 7

GDP considers

Answer 7

Only the market value of all goods produced in a year.

Each good is counted only in its final form.

Question 8

Per capita GDP

Answer 8

GDP per person is called Per capita GDP

Question 9

Real GDP

Answer 9

GDP adjusted for prices is called real GDP

Question 10

GDP is part of an accounting system called the

Answer 10

National Income and Products Accounts. (NIPA)

The NIPA includes personal income which is calculated for states and cities

Question 11

Business cycle

Answer 11

The economic experiences cycles of up and down called the business cycle

Question 12

What are the four phases of the business cycle?

Answer 12

Peak
contraction
trough
and expansion

Question 13

The history of business cycles in the United States shows a

Answer 13

Decline in their severity after World War II.

Question 14

The three longest expansions in the US history are in

Answer 14

1960s, 1980s, and 1990s.

Question 15

Income wealth

Answer 15

-Income -Inflow of all forms of money over a certain period of time to a person, all persons in a family, or in a household
Income is flow

Wealth is stock.
Net worth of everything you own at a point in time (I.e. Home, car, retirement accounts, bank accounts, stocks, land, real estate)

Question 16

Stock

Answer 16

Anything measured at an instant of time.

Question 17

Flow

Answer 17

-anything measured over a period of time.

Question 18

Consumption

Answer 18

-is the purchase of goods and services.

Question 19

Savings

Answer 19

-any income not consumed.

Question 20

Taxes

Answer 20

-taxes go into the hands of various governmental units and are not available for spending by households.

Question 21

Imports

Answer 21

Imports are consumption, but when imports are purchased, that income leaves the domestic economy.

Question 22

Investment

Answer 22

-saving in a way that earns income

focuses on increasing net worth and achieving long-term financial goals

Question 23

Exports

Answer 23

-are spending in the domestic economy by people from other countries.

Question 24

Leakages

Answer 24

-Savings, Taxation and Imports

Question 25

Injections

Answer 25

-Investment, Government Expenditure and Exports

Question 26

Final goods

Answer 26

-final goods and services means that we add up the value of everything in the last condition it was in during the year.

Question 27

Personal income

Answer 27

-is the income of households, ignoring the business and government sectors.