ECON 1100 Chapter Notes - Chapter 4: Gross Domestic Product, Intermediate Good, Final Good
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28 Jan 2016
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Microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. Macroeconomics is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth. The business cycle refers to the alternating periods of expansion and recession that the canadian economy has experienced since canada became a country. A business cycle expansion is a period during which total production and total employment are increasing. A business cycle recession is a period during which total production and total employment are decreasing. Economic growth refers to the ability of an economy to produce increasing quantities of goods and services. Inflation rate is the percentage increase in the average level of prices from one year to the next. This is affected by the business cycle and by other long-run factors. Economists measure total production by gross domestic product (gdp).
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According to classical economists, which one of the following is the correct (recommended) sequence of occurrences?
A. | The economy is in a recession, production falls and unemployment rises ==> the government increases spending, the money supply, and lowers taxes ==> total spending rises ==> employment rises ==> GDP rises |
B. | The economy is in a recession, production falls and unemployment rises ==> prices, wages, and interest rates decrease ==> business costs fall, profits rise, borrowing and consumer spending rise ==> employment and production rise ==> GDP rises |
C. | The economy is in an expansion, incomes are rising and production increases ==> the government decreases spending ==> less inflation ==> the economy continues to expand |
D. | The economy is in a recession, production falls and unemployment rises ==> spending falls ==> more layoffs ==> less production ==> more layoffs ==> deeper recession |
E. | The economy is in an expansion ==> prices rise ==> consumer spending falls ==> production falls ==> the economy contracts (recession) |