ECN 204 Chapter 5: ECN204 - Chapter 5 Notes.doc

55 views3 pages

jadegnat800

22 Apr 2012

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Ecn204 chapter 5: micro vs. macro. Factors of production are inputs like labour, land, capital, and natural resources. Factor payments are payments to the factors of production (e. g. , wages, rent, etc. : households, firms. Own the factors of production, sell/rent item to firms for income. Buy/hire factors of production, use them to produce goods and services. Sell goods and services: what the circular diagram omits, the government, the financial system, the foreign sector. Matches savers" supply of funds with borrowers" demand for loans. All goods measured in the same units (e. g. , dollars in canada) Things that don"t have a market value are excluded (e. g. , housework you do for yourself: final goods: intended for the end user, intermediate goods: used as components or ingredients in the production of other goods. And spending takes many forms: four components: borders, whether done by its own citizens or by foreigners located there. Net exports (nx: these components add up to gdp (denoted y):

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.

The economy's income and expenditure The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.

Based on this model, households earn income when ________ purchase _________ in markets for factors of production.

(i) firms; labor and capital

(ii) households; goods and services

viridianjackal166

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.

emeraldmarten620

ECN 204 Chapter 5: ECN204 - Chapter 5 Notes.doc

Document Summary

Get access

Related Documents

ECN 204 Study Guide - Midterm Guide: Opportunity Cost, Michael Kremer, Virtuous Circle And Vicious Circle

ECN 204 Chapter Notes - Chapter 5: Unemployment Benefits, Canada Pension Plan, Gdp Deflator

ECN 204 Lecture Notes - Lecture 3: Canada Pension Plan, Ryerson University, Dry Cleaning

Related Questions