ECN 204 Lecture Notes - Lecture 9: Price Level, Factor Cost, Fixed Capital

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26 Jun 2016

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Gross investment: machinery, equipment, tools, construction (residential and industrial, changes in inventories (unsold goods, must include increases in inventories. Includes al materials/ equipment used in production e. g. machinery, buildings, raw material, semi finished products = productive capacity. Gross investment: total expenditure spends on adding new capital goods and/or replacing old capital goods. Gdp as the sum of all factor payments. Value of factors outputs= value of incomes. Profits of corporations and government enterprises before taxes. Profits can be divided into three categories: 1) corporate income taxes, 2) Income from farms and unincorporated businesses: a mixture of income from labor, capital, and entrepreneurship, Net domestic product at factor cost (basic prices): sum of all income earned by factors of production as wages, interest, rent, and profit. Rich and poor economies have different price levels. The lower the price level, the greater the purchasing power. Purchasing power will be more in poor countries.

Related Questions

Question 1 Gross domestic product (GDP) measures the economy's production of

A) final goods and services.

B) intermediate goods.

C) consumer goods and services.

D) capital goods.

Question 2 Because GDP is measured in dollars per year, GDP is called a

A) stock.

B) flow.

C) cycle.

D) chain.

Question 3 Which of the following would not be included in the gross private domestic investment (I) category of GDP?

A) A retailer's additions to its inventories.

B) A bakery's purchase of a new oven.

C) A trader's purchase on NASDAQ stocks.

D) Newly built residential construction.

Question 4 Which of the following government payments would be included in the government consumption expenditures and gross investment (G) category of GDP?

A) A firefighter's monthly paycheck.

B) A retired grandmother's Social Security check.

C) A retired colonel's veteran's benefits.

D) A laid-off auto worker's unemployment conpensation check.

Question 5 The largest component in the income approach to measuring GDP is

A) compensation of employees.

B) rents.

C) profits.

D) net interest.

Question 6 Which approach to calculating GDP attempts to measure employee compensation, rents, profits, and net interest?

A) The circular-flow approach.

B) The product-market approach.

C) The income approach.

D) The expenditure approach.

Question 7 In recent years, people have benefited from greater amounts of leisure time. This trend

A) has caused GDP to rise.

B) has caused GDP to fall.

C) made GDP fluctuate randomly.

D) is not accounted for in the GDP statistic.

Question 8 National income (NI) is calculated by adjusting GDP for

A) depreciation of capital.

B) investment and net exports.

C) Social Security insurance contributions and transfer payments.

D) corporate and personal income taxes.

Question 9 If an economy's real GDP has increased, we can conclude that the economy

A) is inflationary.

B) has increased its production.

C) suffers from recession.

D) needs a tax cut.

Question 10 In the circular flow model, investment, government spending, and exports are classified as

A) injections.

B) leakages.

C) transfers.

D) consumption expenditures.

ECN 204 Lecture Notes - Lecture 9: Price Level, Factor Cost, Fixed Capital

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