ECON 102 Lecture Notes - Lecture 16: Autarky, Investment Goods

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2 Apr 2020

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What defines the demand for goods and services: we have seen what defines the level of production and how the profit from production is allocated to employees and owners of property. We are now continuing our tour of the circular flow diagram, figure 3-1, and exploring how production output is used. Just the first three elements are in the circular flow diagram. For now, we presume a closed economy to simplify the analysis a country that does not trade with other nations (part5 discusses the macroeconomics of the open economies) A closed economy has three uses for the goods and services it produces. These three components of gdp are reflected in the identity of the national income accounts. Households use some of the output from the economy; companies and households use some of the output to invest; and the government purchases some of the output for public purposes. We want to see how all three applications divide gdp.

Related Questions

What is the market for factors of production?

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.
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.
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.
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.
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.

21. The English word that comes from the Greek word for "one who manages a household" is

A- market
B- consumer
C- producer
D- economy

Question 22. 22. For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A- should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B- should be counted only to the extent that they are more expensive at college than elsewhere.
C- usually exceed the opportunity cost of going to college.
D- plus the cost of tuition, equals the opportunity cost of going to college.

Question 23. 23. The phenomenon of scarcity stems from the fact that

A- most economies' production methods are not very good.
B- in most economies, wealthy people consume disproportionate quantities of goods and services.
C- governments restrict the production of too many goods and services.
D- resources are limited.

Question 24. 24. Central planning refers to

A- markets guiding economic activity. Today many countries that had this system have abandoned it.
B- markets guiding economic activity. Today many countries that did not have this system have implemented it.
C- government guiding economic activity. Today many countries that had this system have abandoned it.
D- government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 25. 25. Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

A- we should agree with Senator Brown.
B- we should agree with Senator Johnson.
C- a good decision requires that we recognize both viewpoints.
D- there are no tradeoffs between equity and efficiency.

Question 26. 26. Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information, it follows that

A- they should leave the price at $10.
B- it does not matter if they charge $10 or $15.
C- they would do better charging $15 than $10.
D- they should raise the price even more.

Question 27. 27. A circular flow diagram is a model that

A- helps to explain how participants in the economy interact with one another.
B- helps to explain how the economy is organized.
C- incorporates all aspects of the real economy.
D- Both (a) and (b) are correct.

Question 28. 28. In the markets for goods and services in the circular-flow diagram,

A- households provide firms with savings for investment.
B- households provide firms with labor, land, and capital.
C- firms provide households with output.
D- firms provide households with profit.

Question 29. 29. Incomes of U.S. households in the 1970s and 1980s

A- grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.
B- grew rapidly, due to several increases in the minimum wage during those decades.
C- grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.
D- grew slowly, due to the slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 30. 30. For economists, statements about the world are of two types:

A- assumptions and theories.
B- true statements and false statements.
C- specific statements and general statements.
D- positive statements and normative statements.

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2. Which one of the following statements does not indicate an important difference between traditional economics and ecological economics?

Ecological economics places greater emphasis on the importance of energy resources

Ecological economics places greater emphasis on the carrying capacity of the environment

Ecological economics places greater emphasis on the scale of economic activity

Ecological economics places greater emphasis on the importance of natural laws

Ecological economics places greater emphasis on the flow of goods between households and firms

3. The ability of the environment to absorb and render harmless the by-products of human activity is called ...

Carrying capacity

The sink function

Depletion

Throughput

The source function

4. Which of the following is an example of the source function of the environment?

Trees absorb some of the carbon dioxide emitted by human activity

Wetlands reduce the pollution levels in water

Winds carry air pollution away from a city

Humans harvest fish from the oceans

Bacteria break down discarded wastes

5. Which one of the following relationships is not included in the standard circular flow model?

The flow of goods and services from firms to households

The flow of labor from households to firms

The flow of pollution from firms to households

The flow of money from households to firms

The flow of wages from firms to households

6. What statement below best describes how the environment is incorporated into the standard circular flow model?

The long-term availability of natural resources is considered

The pollution generated by firms and households is considered

The input of solar energy is considered

Natural resources are considered as inputs into the production process

The build-up of waste heat is considered

7. What is the primary external input into the broader ecological circular flow model?

Pollution

Solar energy

Fossil fuels

Geophysical cycles

Factors of production

8. What is the only net output of the broader ecological circular flow model?

Goods and services

Solar energy

Factors of production

Geophysical cycles

Waste heat

9. What is the standard economic technique used to compare present and future benefits and

costs?

Property rights

Microeconomics

Externalities

Macroeconomics

Discounting

10. Human activity is producing changes in which cycle that may lead to significant changes in the global climate?

Carbon cycle

Nitrogen cycle

Water cycle

Phosphorus cycle

Organic cycle

11. The Malthusian hypothesis ...

Has proven to be remarkably accurate

Is irrelevant for studying modern environmental problems

Has continuing implications for the debate on current environmental issues

Applies only to developing countries

Applies only to developed countries

12. What is the key to escaping the Malthusian trap?

Increasing productivity per capita

Increasing population

Increasing natural capital

Increasing population density

Definition of property rights

13. Real GNP per capita is defined as ...

GNP divided by population

GNP adjusted for inflation

GNP adjusted for capital depletion divided by population

GNP adjusted for inflation divided by population

GNP adjusted for depreciation divided by population

14. What two factors do standard economics consider as the most important in explaining productivity increases?

Increasing energy supplies and technological progress

Increasing capital stock and technological progress

Increasing energy supplies and increasing natural resources

Increasing capital stock and increasing energy supplies

Increasing capital stock and increasing natural resources

15. Which one of the following statements about sustainable development is false?

Sustainable development requires all energy to be derived from solar energy

Sustainable development considers the scale of the macro-economy

Sustainable development requires a population level below carrying capacity

Sustainable development combines modern and traditional agricultural techniques

Sustainable development requires some type of population policy

16. Which one of the following statements about sustainable development is false?

Some people have complained that sustainable development is a term devoid of specific content

Some people consider sustainable development just a slightly modified form of traditional economic growth

Sustainable development should provide for human needs without undermining the global ecosystem

Sustainable development would redefine economic goals

Sustainable development will require increased resource consumption

17. Which one of the following is an example of demand-side management?

Building a new nuclear power plant

Increasing oil exploration in the Arctic

Building a new solar energy plant

Replacing incandescent with compact fluorescent light bulbs

Increasing reliance on domestic oil sources rather than imports

18. The standard economic approach to pollution control

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ECON 102 Lecture Notes - Lecture 16: Autarky, Investment Goods

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