Short-Answer Questions for Tutorial Tests Explain the three different approaches that can be used to calculate GDP. Briefly indicate why all three approaches should give the same estimate for GDP. (3 marks) Is GDP a good measure of a country’s economic welfare? Discuss. (5 marks) Consider the following National Accounts data for the calendar year 2010. $Bill Private Consumption 1200 Imports 600 Government Purchases 600 Gross Taxation Receipts 800 Exports 500 Government Transfer Payments
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economy. * d. both a and b but not c. 143. Expansionary fiscal policy financed by government borrowing can lead to a. higher interest rates and lower private investment under the crowding-out view. b. an increase in aggregate demand under the Keynesian view. c. no change in aggregate demand under the new classical view. * d. all of the above. 144. A balanced budget means that a. aggregate consumption is in balance with aggregate saving. b. government spending is constant from year to year
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been developed based on The Circular Flow of Income. The Circular Flow of Income consists of two parts‚ the inner circular flow and injections and withdrawals. In the inner circular flow there are two basic economic institutions‚ these are firms and households and these have an economic interaction. The following diagram shows the inner circular flow of income: The model shows that firms pay money to households in the form of factor payments. In other words‚ they pay households wages‚ dividends
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1. What is the difference between micro and macroeconomics? Economics covers a large area of economic concerns and is divided into two parts: Microeconomics and Macroeconomics. Microeconomics studies the actions of the individual actors within the economy‚ such as buyers‚ sellers‚ and businesses. Additionally‚ microeconomics allows the actors to differentiate the values from one decision to another. While macroeconomics examines a larger picture of the economy by studying the employment‚ incomes
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growth with equity in the 1960s‚ the different schools of thought have focused on economic modernization as a measure of development. However‚ Ernst F. Schumacher argues that quantitative terms such as GNP‚ investments‚ and savings should not be an indicator of development; instead‚ he demands the return to the actual size of man and concentrate on his real needs because the adherence to the principles of economic modernization will result in self-destruction. In fact‚ modern technology‚ as Schumacher
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Because classical economic thinking provided no insight to the causes or remedy for the economic disparity of the Great Depression‚ John Maynard Keyes’ theory that free markets alone could not effectively lead to full employment was able to gain traction. The idea that government intervention was necessary for an economy to be fully function incited much criticism from classical economists‚ especially in the latter half of the 1900’s. Milton Friedman was a leading economist at the forefront of this
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Conservatism: The Resurgence of Classical Liberalism As Keynesian liberalism evolved to include more and more state interference in the market‚ a backlash movement grew in the 1950s and 1960s‚ taking the name of conservatism. In the late 1960s‚ President Nixon and others attacked Keynesianism‚ seeking to put more emphasis on economic growth instead of stability. In 1973 the United States replaced its fixed exchange rate system with a flexible exchange rate system‚ which led to increased speculation
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associated with high price causes decline in the value for money. It exists when the amount of money in the country is in excess of the physical volume of goods and services. Explain the reasons for this monetary phenomenon. Ans: Inflation: In economics‚ inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It can be defined as too much money chasing too few goods. When the general price level rises‚ each unit of currency buys fewer
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22. What is the difference between real and nominal? Real = Nominal – Inflation. Real GDP adjusts Nominal GDP for changes in the price level (inflation and deflation). Real GDP = Nominal GDP / Price Index 23. What’s not included in GDP? GDP represents the total market value of all final goods and services produced in a country in one year. Items excluded from GDP include: non-production transactions‚ existing goods or property sold/transferred‚ used
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1. What do you understand by Managerial Economics? Give Definition and meaning of Managerial Economics. Economics is the branch of Knowledge that deals with how the scarce resources can be used to produce valuable goods and services and distribute them efficiently among different classes of people in the society. What is Managerial Economics? Douglas - “Managerial economics is the application of economic principles and methodologies to the decision-making process within the firm or organization
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