Objective 1

Question 1

Circular Flow of Income

Answer 1

A model that illustrates the flow of expenditures, revenue, costs and income in the acquisition of inputs for production and selling of goods and services.

Question 2

Capital

Answer 2

The stock of assets, such as equipment, factories and other resources that have a useful life of greater than year used to produce goods and services.

Question 3

Net Investments

Answer 3

The increase in capital assets, less depreciation.

Question 4

Final goods

Answer 4

Products, capital goods, and services that have been purchased for final use and not for resale or further processing or manufacturing (not intermediate goods).

Question 5

Gross Domestic Product

Answer 5

The total market value of all final goods and services produced annually within a nation’s borders whether by domestic or foreign-supplied resources.

Question 6

Expenditures approach algebraic formula (Y= ?)

Answer 6

Y = C + I + G + NX

Question 7

Nominal GDP

Answer 7

Gross domestic product measured in terms of the price level at the time of measurement (i.e., GDP that is unadjusted for inflation).

Question 8

Real GDP

Answer 8

Gross domestic product measured in terms of the price level in a base period (i.e., GDP that is adjusted for inflation).

Question 9

Net Exports

Answer 9

Total Exports minus Total Imports, often referred to as “NX.”