ECON102 Chapter Notes - Chapter 20: Final Good, Environmental Quality

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lemonbeetle804

15 Jun 2018

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Maria Viola

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Chapter 20:

GDP - The market value of the final goods and services produced within a

country in a given time period. GDP equals aggregate income and

aggregate expenditure.

Final Good (or service): Is an item that is bought by its final user during a

specified time period.

Intermediate Good (or service): Is an item that is produced by one firm,

bought by another firm, and used as a component of a final good or

service.

Productivity: Higher productivity increases production and increases

income.

Aggregate Income: Total culmination of wages, interest, rent, and profit.

Returns on FOPs:

• Land (rent)

• Labour (wages)

• Capital (interest)

• Entrepreneurship (profit)

Consumption Expenditure: Total payment for consumer goods and

services.

Aggregate Income equals Aggregate Expenditure equals GDP

Investment: Goods and services firms buy and keep.

Government Expenditure: Total payment for government bought goods

and services.

Taxes, financial transfers payments, and subsidies are not part of the

circular flow of income and expenditure.

Aggregate Expenditure: Equals the sum of consumption expenditure,

plus gross investment, plus government expenditure, plus net exports.

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ECON102 Full Course Notes

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Document Summary

Gdp - the market value of the final goods and services produced within a country in a given time period. Final good (or service): is an item that is bought by its final user during a specified time period. Intermediate good (or service): is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service. Productivity: higher productivity increases production and increases income. Aggregate income: total culmination of wages, interest, rent, and profit. Returns on fops: land (rent, labour (wages, capital (interest, entrepreneurship (profit) Consumption expenditure: total payment for consumer goods and services. Investment: goods and services firms buy and keep. Government expenditure: total payment for government bought goods and services. Taxes, financial transfers payments, and subsidies are not part of the circular flow of income and expenditure. Aggregate expenditure: equals the sum of consumption expenditure, plus gross investment, plus government expenditure, plus net exports.

Related Questions

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

_____ good is an item that is bought by its final user during a specified time period. ____good is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.

A. A finished; An incomplete

B.A final; An intermediate

C. A specified; A component

D.A specific; A nonspecific

burgundyserval986

An improvement in technology causes the production possibilities frontier (PPF) to

	shift to the right.
	pivot upward.
	shift to the left.
	pivot downward.

(7)

Which of the following is not shown by the circular flow model?

	The flow of resources in one direction and money in the other
	The equality of aggregate spending and aggregate income
	The interaction of households, firms, and the government
	The total amount of goods and services the economy can produce

(8)

Gross domestic product (GDP) is defined as

	the market value of all final goods and services produced in an economy in a given period of time.
	the market value of all consumption goods and services produced in an economy in a given period of time.
	the market value of all investment goods and services produced in an economy in a given period of time.
	the real value of all investment goods and services produced in an economy in a given period of time.

(9)

Real GDP

	includes all domestic and foreign transactions.
	includes the dollar value of domestic transactions only.
	tries to isolate the effect of changing output, holding prices constant.
	measures GDP in terms of prices of goods and services produced.

(10)

When economists talk about economic growth, they are usually referring to

	the percentage change in nominal GDP.
	the percentage change in real GDP.
	the percentage change in nominal investment.
	the percentage change in real investment.

chocolateant769

ECON102 Chapter Notes - Chapter 20: Final Good, Environmental Quality

ECON102 Full Course Notes

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