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ECON 105 Chapter Notes - Chapter 5: Root Mean Square

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School
Simon Fraser University
Department
Economics
Course
ECON 105
Professor
Junjie Liu

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ECON 105 Full Course Notes
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Document Summary

Microeconomics: the study of how individual households and rms make decisions and how they interact with one another in markets. Macroeconomics: the study of economy as a whole. Gdp measures two things at once: the total income of everyone in the economy, the total expenditure on the economy"s output of goods and services. For an economy as a whole, income must equal expenditure. Includes the market value of the housing services provided by the economy"s stock of housing. Excludes: items produced and sold illicitly, items that are produced and consumed at home: final: gdp only includes the value of nal goods, goods and services: gdp includes tangible goods, and services. Monday, september 26, 2016: produced: gdp includes goods and services currently produced - does not. Include transactions involving items produced in the past: within a country: measure the value of production within the geographic con nes of a country.

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Related Questions

Which of the following statements about GDP is correct

A) Money continuously flows from households to firms and then back to households, and GDP measures this flow of money

B) GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services.

C) While not perfect, GDP is generally regarded as the best single measure of a society’s economic well-being.

D) All of the above are correct.

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

Gross Domestic Product (GDP) only measures the value of marketed goods and services for a country during a given period of time.

Is the GDP measure underestimating or overestimating national production and total income in the economy? Why?

What are the limitations of the GDP in measuring total output and national welfare? What products (services) are excluded from the GDP computation?