LM3: Aggregate Output, Price and Economic Growth

Question 1

What is the formula for GDP under the Expenditure approach?

Answer 1

GDP = C + I + G + (X – M)

Question 2

What is the formula for GDP under the Income approach?

Answer 2

GDP = Net domestic income + consumption of fixed capital + Statistical discrepancy

Question 3

What is the formula for GDP under the Value Added approach?

Answer 3

= Gross Value of Output - Value of Intermediate Consumption

Question 4

What is the general formula for CAGR?

Answer 4

Question 5

Are transfer payments a component of GDP?

Answer 5

No, because although they are expenditure by the government and income to the recipients, they are not directly associated with any element of production or output

Question 6

What is the equation for the Fiscal balance?

Answer 6

(G-T) = (S-I) – (X-M)

G-T = Fiscal balance
S-I = Savings - domestic investments
X-M = Trade balance

Question 7

Which factors cause a shift in AD?

Answer 7

Question 8

Which factors cause a shift in AS?

Answer 8