AGEC 105 Lecture Notes - Lecture 15: Gross Domestic Product, Intermediate Good, Economic Equilibrium

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salmonshark98

11 Apr 2017

School

Texas A&M University

Department

Agricultural Economics

Course

AGEC 105

Professor

Ariun Ishdorj

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Document Summary

Topics of discussion: circular flow of payments, composition and measurement of gross domestic product, consumption, saving, and investment, equilibrium national income and output. We can measure macroeconomic activity in either resource markets or product markets: result is the same. There are four major sectors in this economy: government. Government receives net inflows of taxes from businesses and households and are a net borrower in financial markets. Business and net borrowers in financial markets while households are net savers. Receive funds from total expenditures in product markets: financial markets, households. Households, who own businesses, receive wages, rents, interest, and business profits in resource markets where they provide labor and capital services. In a closed economy: gdp = c + i + g. Types of investment expenditures: change in business inventories. Unsold crop production: producer durable equipment. Items not included in gdp: government transfer payments. Social security, welfare, unemployment benefits: private intermediate good. Wheat, iron ore, crude petroleum: purchases of used assets.

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.

 9. The series of ups and downs that tend to move the economy is known as __________. a. The economic cycle (business) b. recession c. depression d. economic growth 11. In the Circular Flow Model, consumption expenditures are the expenses of __________. a. The signatures by the factors of production. b. The government in the financial markets. c. The rest of the world in the goods market d. Families in the goods market. 12. GDP is a measure of the total value of __________. a. Sales in an economy over a period of time b. The consumer's income in an economy over a period of time. c. The accumulation of capital in an economy over a period of time. d. The final goods and services produced in an economy over a period of time.

 13. In calculating GDP, double counting (counting the same twice) is avoided, not including __________. a.. Net exports b. Intermediate goods c. Illegal activities d. The depreciation

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.

AGEC 105 Lecture Notes - Lecture 15: Gross Domestic Product, Intermediate Good, Economic Equilibrium

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