GDP and GNP

Question 1

closed economy

Answer 1

does not engage in international trade

Question 2

capital expenditure vs current expenditure

Answer 2

capital expenditure is the investment of capital goods (long term) (development expenditure)

current expenditure is the spending on goods for current consumption (wages & salaries) (short term)

Question 3

Transfer payment

Answer 3

monies given to one group by another for which no productive activity took place. (social security)

Question 4

real flows

Answer 4

the flow of goods & services and factor services

Question 5

money flows

Answer 5

the flow of factor incomes from firms to households. And the flow of expenditure from households to firms.

Question 6

leakages

Answer 6

savings, tax, and expenditure on import are leakages, or withdraws from the circular flow of money.

Question 7

savings

Answer 7

consists of all income that is not consumed

Question 8

disposable income

Answer 8

total personal income minus taxes

Question 9

investment

Answer 9

the purchase of capital goods (goods used to produce other goods)

Question 10

injections

Answer 10

additions to the circular flow of income (exports)

Question 11

national income

Answer 11

a measure of economic activity in an economy over a given period, usually one year

Question 12

Gross domestic product

Answer 12

a measure of output produced in a country over a given period, irrespective of whether the factors of production are locally owned or foreign owned

Question 13

Gross national product

Answer 13

a measure of output over a given period, usually 1 yr, produced by the nationals of a country, irrespective if they are located in the country or not.

Question 14

formula for market price

Answer 14

C + I +G (X-M)

Question 15

plant defintion

Answer 15

firms are made up of plants. A plant is a production unit.

Question 16

International sector

Answer 16

The international or foreign trade sector is made up domestic firms which purchase imports, and other domestic consumer of imports.

Question 17

nominal output vs real output

Answer 17

nominal output is the level of output produced in a country for a given year, measured in prices for that year.

Real output is the level of output produced in a country for a given year, measured in prices for a BASE year.

Question 18

potential output

Answer 18

the level of output that a country is capable of producing when all it factors of production are fully employed.

Question 19

balanced budget

Answer 19

expenditure is EQUAL to revenue

Question 20

budget deficit

Answer 20

expenditure EXCEEDS revenue, also called fiscal deficit

Question 21

national DEBT

Answer 21

the SUM of government borrowing over the years that exceeds revenue

Question 22

national BUDGET

Answer 22

a statement of government’s estimated revenue and expenditure for a country for the coming year.

Question 23

budget surplus

Answer 23

revenue EXCEEDS expenditure