ECON PRELIM 2

Question 1

the value of the goods and services produced within the country. In equilibrium, the amount of output produced equals the amount demanded

Answer 1

Gross Domestic Product

Question 2

provides structure for our macroeconomic theory models

Answer 2

National Income Accounting

Question 3

Measures total income of everyone in the
economy.
Also measures total expenditure on the economy’s output of goods and services

Answer 3

GDP

Question 4

For the economy as a whole
Because every peso a buyer spends is a peso of income for the seller.

Answer 4

income equals expenditure

Question 5

A mathematical expression that shows the relationship of inputs (land, labor, capital) and outputs (goods or services)

Answer 5

production function
output = f(land,labor,capital)

Question 6

Production side: output = payments to workers in wages,
capital in interest and dividends

Answer 6

Demand side: output = purchases by different sectors of the economy

Question 7

the market value of all final goods & services produced within a country in a given period of time

Answer 7

GDP

Question 8

Goods are valued at their market prices, so:
▪All goods measured in the same units (e.g., peso in the Philippines)
▪Things that don’t have a market value are excluded, e.g., housework you do for yourself

Question 9

intended for the end user

Answer 9

final goods, GDP only includes FINAL GOODS

Question 10

used as components
or ingredients in the production of other goods

Answer 10

intermediate goods

Question 11

GDP INCLUDES:
-only final goods
-tangible and intangible goods
-currently produced goods, not produced from the past
-measures the value of production that occurs within a country’s borders, whether done by its own citizens or by foreigners located there.

Answer 11

GDP 4 components:
government purchases
investment
consumption
net export

Question 12

Total spending by households on goods and
services

Answer 12

consumption

include:
rent payments
imputed rental value of house

not included:
purchase price/mortgage payment
purchases of new housing

Question 13

Total spending on goods that will be used in the
future to produce more goods

Answer 13

investment

Business capital: business structures, equipment, and intellectual property products
Residential capital: landlord’s apartment building; a homeowner’s personal residence
Inventory accumulations: goods produced but not yet sold
“Investment” does not mean the purchase of financial
assets like stocks and bonds

Question 14

All spending on the goods and services purchased by the government
At the nati onal, state, and local levels.
Excludes transfer payments
Such as Social Security or unemployment
insurance benefits.
They are not purchases of goods and services

Answer 14

government purchases (not included SSS or unemployment insurance benefits

Question 15

represent foreign spending on the economy’s g&s.

Answer 15

export

Question 16

a statistical framework of the economy’s production, expenditures and income, and records the annual flow of goods and services in the economy during a given time period

Answer 16

national income account

Question 17

 It provides information on the performance of the economy using the following macroeconomic indicators:

Answer 17

national income account

Question 18

the total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of WHERE the output is produced.
 is equal to GDP + net primary income

Answer 18

GNP

Question 19

measures the difference between the earnings of Phil. residents in other countries and the earnings of foreigners in the Philippines.

Answer 19

Net Factor Income (Payments from) Abroad/ Net Primary
Income

Question 20

Accounts the value of all final goods and services within a county given a period of time.

Answer 20

GDP

Question 21

Adding factor payments include receipts from abroad made to GDP
GNP = GDP + Net Factor Payments from abroad

Answer 21

GNP

Question 22

Total amount of money earned by a nation’s people and businesses
 The same with GNP but this involves accounting indirect business taxes

Answer 22

GNI

Question 23

-refers to expenditure of households on durable and non -durable goods/services.

Answer 23

personal consumption expenditure

Question 24

includes expenditures on construction of residential and non-residential buildings, plants, equipment and machineries.

Answer 24

gross private domestic investment

Question 25

what is left when allowance for depreciation is deducted from

Answer 25

net private domestic investment

Question 26

are those purchases of goods for social services such as on education, health, defense, transportation, roads and bridges etc.

Answer 26

government purchases

Question 27

is the difference between the value of goods and services sold to other countries
(exports) and (imports), the value of goods and services bought from a foreign country (Exports-Imports).

Answer 27

net exports

Question 28

the aggregate or total earnings of the factors of production as a result of the productive activities during the given period.

Answer 28

national income

Question 29

the market value of new goods that are produced during the given period after deducting that part of the current output that are used to replace the worn-out capital goods.

Answer 29

net national product

Question 30

the payment for the use land, buildings, equipment and other properties.

Answer 30

rent income

Question 31

received as compensation by employees/ workers

Answer 31

salaries

Question 32

are the earnings from deposits and on bonds and other securities and credit instruments.

Answer 32

interest

Question 33

refers to the earnings from the business of sole proprietor or entrepreneur.

Answer 33

proprietor’s income

Question 34

part of the corporate income/ profit that is distributed to stockholders, as their share in the profit of the corporation

Answer 34

dividend

Question 35

part of the income of the corporation that is retained and not distributed to the stockholders. It may be used for expansion and business development.

Answer 35

undistributed corporate income

Question 36

Gross Income that accrues to the household coming from factor payments.

Answer 36

personal income

Question 37

Non-labor income transferred from government to household. Example: 4Ps, pension

Answer 37

transfer payments

Question 38

This is the total income left to households after deducting taxes and other personal charges and adding transfer payments. This is also known as after-tax-income.

Answer 38

personal disposable income

Question 39

This is the allowance for the wear and tear of durable assets. This is added because it is part of income deducted in calculating profit.

Answer 39

depreciation allowance/capital consumption allowance

Question 40

Taxes levied on business. E.g.
* license fees, sales tax, custom duties.

Answer 40

indirect business tax

Question 41

Real GDP per capita is the main indicator of the average person’s standard of living.

Question 42

measures how much output on income was produced or received on the average by an individual in an economy.

Answer 42

GDP per capita