Module 10

Question 1

How economists use aggregate measures to track the performance of the economy

Answer 1

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Question 2

The circular flow diagram of the economy

Answer 2

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Question 3

What gross domestic product, or GDP , is and the three ways of calculating it

Answer 3

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Question 4

National Accounts

Answer 4

National income and product accounts, or national accounts: keep track of the flows of money between different sectors of the economy.

Question 5

household

Answer 5

A household is a person or group of people who share income

Question 6

firm

Answer 6

A firm is an organization that produces goods and services for sale

Question 7

Product markets

Answer 7

are where goods and services are bought and sold.

Question 8

Factor markets

Answer 8

are where resources, especially capital and labor, are bought and sold.

Question 9

Consumer spending

Answer 9

is household spending on goods and services.

Question 10

stock

Answer 10

A stock is a share in the ownership of a company held by a shareholder.

Question 11

bond

Answer 11

A bond is a loan in the form of an IOU that pays interest.

Question 12

Government transfers

Answer 12

re payments that the government makes to individuals without expecting a good or service in return.

Question 13

Disposable income

Answer 13

equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save.

Question 14

Private savings

Answer 14

equal to disposable income minus consumer spending, is disposable income that is not spent on consumption.

Question 15

financial markets

Answer 15

The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending,government borrowing, and foreign borrowing, are known as the financial markets.

Question 16

Government borrowing

Answer 16

is the amount of funds borrowed by the government in the financial markets.

Question 17

Government purchases of goods and services

Answer 17

are total expenditures on goods and services by federal, state, and local governments.

Question 18

Exports

Answer 18

Goods and services sold to other countries are exports.

Question 19

Imports

Answer 19

Goods and services purchased from other countries are imports.

Question 20

Inventories

Answer 20

Inventories are stocks of goods and raw materials held to facilitate business operations.

Question 21

Investment spending

Answer 21

is spending on new productive physical capital, such as machinery and structures, and on changes in inventories.

Question 22

Final goods and services

Answer 22

are goods and services sold to the final, or end, user.

Question 23

Intermediate goods and services are goods and services

Answer 23

bought from one firm by another firm to be used as inputs into the production of final goods and services.

Question 24

Gross domestic product

Answer 24

or GDP , is the total value of all final goods and services produced in the economy during a given year.

Question 25

Aggregate spending

Answer 25

the total spending on domestically produced final goods and services in the economy—is the sum of consumer spending (C), investment spending (I), government purchases of goods and services (G), and exports minus imports (X−IM).

Question 26

value added

Answer 26

The value added of a producer is the value of its sales minus the value of its purchases of inputs.

Question 27

Net exports

Answer 27

Net exports are the difference between the value of exports and the value of imports (X−IM).

Question 28

Summary of what’s included and not included in GDP

Answer 28

Included:
Domesitcally produced final g/s
Capital goods
New construction of structures
Changes to inventories

Not Included
Intermediate G/S
Inputs
Used goods
Financial assets (stocks/bonds)
Foreign produced goods and services