Econ 103 Ch 4: Page 88 (page 490 in Economics) 1. Define GDP and distinguish between a final good and an intermediate good. Provide examples. GDP is the market value of all the final goods and services produced within a country in a given time period. A final good or service is an item that is sold to the final user‚ that is‚ the final consumer‚ government‚ a firm making investment‚ or a foreign entity. An intermediate good or service is an item that is produced by one firm‚ bought
Premium Inflation Supply and demand Macroeconomics
1. From the definition of GDP we arrive at the following expression: c + i + g + x-m = y = c + s + t Discuss the three important economic relationships that can be derived from this expression related to the definition of GDP and explain each carefully. The expression above depicts two different ways to come up with real GDP for a country. The left side of the expression explains expenditure side of computing real GDP which can be rewritten as: y = c + i + g +x – m In real terms‚ it could
Premium Investment Macroeconomics
1 Managerial Economics 2010 Answers to All Tutorial Questions Topic 1 : What is managerial economics Questions from Chapter 1 of the Text (McTaggart‚ Findlay & Parkin) Review Question 1 (pp. 4) List some examples of scarcity in Australia today. An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both
Premium Supply and demand
disposable income by $10 billion‚ which also stimulates planned aggregate expenditure by raising consumption spending. However‚ the tax cut raises autonomous (exogenous) planned aggregate expenditure by only $10 billion times the marginal propensity to consume (MPC); since the MPC is less than one‚ the tax cut will increase autonomous (exogenous) planned aggregate expenditure by less than $10 billion. Thus the increase in government expenditure is predicted to have the greater impact on
Premium Taxation in the United States Tax Taxation
A recession occurs when real GDP declines. ( T ) 2) For an economy as a whole‚ income equals expenditure because the income of the seller must be equal to the expenditure of the buyer. ( T ) 3) If the marginal propensity to consume is 0.8‚ the marginal propensity to save will be 0.2. ( T ) 4) When Government totals expenditure greater than total revenue‚ the government budget is in surplus. ( F ) * If Government total expenditure greater than total
Premium Monetary policy Unemployment Inflation
spend‚ borrow and save during a specific period. A high level of consumer confidence will encourage a higher MPC (Marginal Propensity to Consumer). This means that consumers will spend most of their income to consume goods and services rather than save in the bank (MPC greater than MPS). For example‚ if a consumer has a APC of 0.75‚ he or she will spend 75% of their income to consume and the remaining 25% of income to save. In a simple word‚ when a country has high consumer confident‚ it means that
Premium Macroeconomics Economics Aggregate demand
(Krugman‚ 2011)“The good news‚ such as it is‚ is that President Obama has finally gone back to fighting against premature austerity — and he seems to be winning the political battle. And one of these years we might actually end up taking Keynes’s advice‚ which is every bit as valid now as it was 75 years ago AFTER ALL.” The U.S.‚ now the world’s largest debtor‚ embraces the great British economist’s 75-year-old argument (Skidelsky‚ 1996)Born in a total different world of ‘Capitalistic Individualism’
Premium Keynesian economics Macroeconomics Great Depression
means there will be an increase in interest rates. If there is an increase in interest rates then there will be higher repayments on mortgages. There will be lower discretionary income to those with variable rate mortgages so people might decide to consume less. If consumption decreases this means aggregate demand (total expenditure of all goods or services in an economy) will also decrease because consumption is a component of AD. The AD curve will be pushed inwards from AD2 to AD1. As a result‚ this
Premium Inflation Tax Macroeconomics
profits. For example‚ hiring an extra unit of labor increases output and therefore increases revenue; the firm compares this additional revenue to the additional cost from the higher wage bill. The additional revenue the firm receives depends on the marginal product of labor (MPL) and the price of the good produced (P). An additional unit of labor produces MPL units of additional output‚ which sells for P dollars per unit. Therefore‚ the additional revenue to the firm is P × MPL. The cost of hiring
Premium Economics Capital
(Karadimitropoulou 2013) Consumption smoothing is the economic concept used to desire of people to have a stable path of consumption. (Wikipedia) Fisher’s theory argues that consumption decisions are inter-temporal decisions. The reason people consume less than they desire is that their consumption is limited by their income‚ called a budget constraint. When consumers decide how much they spend today versus how much they
Premium Consumer theory