ECN 301 Study Guide - Quiz Guide: Government Budget Balance, Gross Domestic Product, Real Wages

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ECN301

Assignment 1

Question1:

a. 3 approaches to measuring aggregate economic activity in Canada are:

The product approach- easues out’s eooi atiit  suig up the total alue of

all produced final goods and services, yet it excludes any intermediate goods and services that

were used in the final goods/services production. Second approach to measuring economic

atiit is the Ioe appoah that easues a out’s eooi atiit  suig up all

income of a country that includes :wages , goeet’s ioe e ta eeues ad pofits of

private companies after tax. The third approach that is used to measure economic activity in

Canada is the expenditure approach . An expenditure based approach measures economic

activity by summing up the total amount of spending by ultimate users of output in the

economy . ex: sum of total household spending.

b. 2 main measures of aggregate economic activity are the GDP (Gross Domestic Product )and GNP

(Gross National Product). GDP only measures the market value of final goods and services

produced in a country during a period of time. GNP measures the market value of the final

goods and services produced by domestic factors of production during a specific period of time

,even by domestic factors abroad.

c. Real GDP in Canada for 2015 using expenditure approach was as follows (in millions of $):

2,975,237 of which : consumption = 998,173 , Investment = 1,565,942, government

expenditure =411,735 and Net exports= (-613) .

d. Real GDP for Canada in 2015 using Income approach was as follows : (in millions of $): 1,991,612

Of which : Labour income = 1,031,976 , corporate Profit = 218,428, interest and

investment income =1 648 016 , unincorporated business income = 57,656, indirect

taxes less subsidies = 134,032 , capital consumption allowances= 343, 596 ( 20.8 % )

Question 2:

a. Uses of private savings identify is an important macroeconomic identity that states 3

ways in which an economy’s private saving is being used. These include: Investment (

firms borrow from private accounts in order to fund purchases of new capital) ,

Government budget deficit ( Government may borrow money from private accounts to

finance its deficit). The current account balance ( foreigners borrowing from Canadian

private savers if Current Account balance is positive and foreigner’s receipts of payments

from Canada are not sufficient to cover the payments they make to Canada) .

Private savings identity is used to fund capital investment, provide resources for

government and public administration and lend money to foreigners or acquire assets

from foreigners.

b. The Current account is the sum of Net exports and Net factor payments.

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2010.5

2011

2011.5

2012

2012.5

2013

2013.5

2014

2014.5

-40,000 -35,000 -30,000 -25,000 -20,000 -15,000 -10,000 -5,000 0

Time (years)

Millions of $

Net Exports

2010.5

2011

2011.5

2012

2012.5

2013

2013.5

2014

2014.5

2015

2015.5

-70000 -60000 -50000 -40000 -30000 -20000 -10000 0

Time

millions of $

Net Factor Payments from abroad

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Document Summary

Assignment 1: 3 approaches to measuring aggregate economic activity in canada are: The product approach- (cid:373)easu(cid:396)es (cid:272)ou(cid:374)t(cid:396)(cid:455)"s e(cid:272)o(cid:374)o(cid:373)i(cid:272) a(cid:272)ti(cid:448)it(cid:455) (cid:271)(cid:455) su(cid:373)(cid:373)i(cid:374)g up the total (cid:448)alue of all produced final goods and services, yet it excludes any intermediate goods and services that were used in the final goods/services production. The third approach that is used to measure economic activity in. Gdp only measures the market value of final goods and services produced in a country during a period of time. Gnp measures the market value of the final goods and services produced by domestic factors of production during a specific period of time. ,even by domestic factors abroad: real gdp in canada for 2015 using expenditure approach was as follows (in millions of $): 2,975,237 of which : consumption = 998,173 , investment = 1,565,942, government expenditure =411,735 and net exports= (-613) : real gdp for canada in 2015 using income approach was as follows : (in millions of $): 1,991,612.

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.

Question 1

Which of the following describes the relationship between the change in inventories and aggregate expenditure?

A.	Aggregate expenditure equals the change in inventories minus GDP.
B.	The change in inventories equals GDP divided by aggregate expenditures.
C.	Aggregate expenditures equals GDP divided by the change in inventories.
D.	Aggregate expenditures equals GDP minus the change in inventories.
E.	The change in inventories equals GDP multiplied by aggregate expenditure.

1 points

Question 2

Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?

A.	Disposable income and consumption fall by $10 billion
B.	Disposable income and consumption rise by $10 billion
C.	Disposable income rises by $10 billion and consumption rises by $8 billion
D.	Disposable income falls by $10 billion and consumption falls by $8 billion
E.	Disposable income rises by $10 billion and consumption falls by $8 billion

1 points

Question 3

If aggregate expenditure at a particular level of income is less than output,

A.	output will increase
B.	output will decrease
C.	output will remain the same
D.	output will rise slightly and then level off
E.	we cannot determine what will happen to output

1 points

Question 4

The consumption function

A.	illustrates the relationship between real disposable income and real consumption spending
B.	illustrates the relationship between the price level and real consumption spending
C.	is the relationship between productivity and real consumption spending
D.	shows how real consumption increases when real disposable income decreases
E.	illustrates the relationship between real consumption spending and employment

1 points

Question 5

The focus of the short-run macro model is on the role of

A.	spending in explaining economic fluctuations
B.	labor in explaining economic fluctuations
C.	financial markets in explaining economic fluctuations
D.	output in explaining economic fluctuations
E.	resources in explaining economic fluctuations.

1 points

Question 6

If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?

A.	Aggregate expenditure is greater than output, so inventories will increase and output will be raised.
B.	Aggregate expenditure is greater than output, so inventories will decrease and output will be increased.
C.	Aggregate expenditure is less than output, so inventories will decrease and output will be raised.
D.	Aggregate expenditure is less than output, so inventories will increase and output will be lowered.
E.	Aggregate expenditure is greater than output, so inventories will increase and output will be lowered.

1 points

Question 7

If the marginal propensity to consume is 0.7, the expenditure multiplier is

A.	7.0
B.	0.7
C.	3.0
D.	3.3
E.	not determinable without additional information.

1 points

Question 8

Aggregate expenditure is the sum of

A.	all types of spending by households and firms
B.	spending and savings by households
C.	spending by households and governments on final goods and services
D.	spending by households, government, firms, and foreigners on final goods and services
E.	all spending and saving by households, firms, and governments

1 points

Question 9

If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?

A.	$10,000
B.	$500
C.	$50
D.	$5,000
E.	$9,524

1 points

Question 10

When real consumption expenditure is plotted against real disposable income the resulting relationship is

A.	very weak.
B.	virtually flat .
C.	positive and very close to linear.
D.	negative and very close to linear.

indigognu668

The expenditure and resource cost-income approaches to calculating GDP arrive at the same final number, but they calculate that number in different ways. To illustrate, consider the possible effects of the following transactions on GDP:

Ralph pays The Home Station $1,200 to plant a new lawn in his backyard. He's attracted by The Home Station's guarantee that he'll be happy with the new lawn, or he'll get his money back.

The Home Station pays Al's Lawn Care $850 to plant the lawn.

Al's Lawn Care buys grass seed worth $200 from Green Center Nursery.

Compute contributions to GDP, using the expenditure approach. Assume that Green Center Nursery receives the grass seed at no charge and that other costs are zero.

Hint: Add the amount of money spent by buyers of final goods and services.

Which of the following would be included in the expenditure method of calculating GDP? Check all that apply.

-The Home Station spends $850.

-Ralph spends $1,200.

-Al's Lawn Care spends $200.

The total contribution to GDP, measured by the expenditure method, is $______

Now use the following table to compute contributions to GDP, employing the resource cost-income approach. In particular, indicate the costs of intermediate goods and the value-added at each stage of production.

Stage of Production	Sale Value	Cost of Intermediate Goods	Resource Cost-Income
Green Center Nursery	$200	?	?
Al's Lawn Care	$850	?	?
The Home Station	$1,200	?	?

The contribution to GDP that you found using the expenditure approach corresponds to the sum of the _____ at each stage of production.

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ECN 301 Study Guide - Quiz Guide: Government Budget Balance, Gross Domestic Product, Real Wages

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