Econ Chapter #4 Study guide

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Depreciation is the​ _____ in the value of​ _____ that results from its use and from obsolescence.

Decrease; capital

Real GDP per person is real GDP​ _____.

Divided by population

The phases of the business cycle are​ _______. The turning points of the business cycle are​ _______.

expansion and​ recession; peak and trough

Potential GDP per person​ ______.

grows at a steady pace but not at a constant pace

Potential GDP is the value of real GDP when all the​ economy's factors of production​ - _____,​ _____, _____, and​ _____ - are fully​ _____.

labor; capital;​ land; entrepreneurial​ ability; employed

Imports of goods and services are items that​ _____ in the United States​ _____ the rest of the world.

households, firms, and​ governments; buy from

An expansion is a period during which​ _____.

real GDP is increasing

Real GDP is calculated by​ _______.

summing together the value of the​ year's production using the prices of the reference base year

Exports of goods and services are items that firms in​ _____ produce and sell to​ _____.

the United​ States; any other country

National product is​ _______.

the value of goods and services produced anywhere in the world by the residents of a nation

Aggregate income in an economy in 2017 is ​$995 billion. Saving is ​$20 billion and imports are ​$25 billion. What is aggregate expenditure in the economy in​ 2017?

$995 billion

Why does GDP equal aggregate income and also equal aggregate​ expenditure? GDP equals aggregate income and also equals aggregate expenditure because​ _______. A. labor produces final goods and all purchases in the economy are purchases of final goods B. firms pay out as incomes​ (aggregate income) everything they receive from the sale of their output​ (aggregate expenditure) Your answer is correct.C. the Department of Commerce has defined GDP in such a way that it can be calculated by either summing total income or by summing total expenditures D. aggregate income measures profit as net profit and aggregate expenditure measures investment as net investment

B

Net investments equal

Gross investment - Depreciation

The total amount spent​ _____ is called gross investment.

both buying new capital and replacing old capital

Net exports increase when​ ______.

exports increase by more than imports increase

Net exports of goods and services is the value of​ _____ of goods and services​ _____ the value of​ _____ of goods and services.

exports; minus; imports

The business cycle is a​ _____ but​ _____ up-and-down movement of total​ _____ and other measures of economic activity.

periodic; irregular; production

Domestic product is​ _______.

production within a​ country

Real GDP might be an unreliable indicator of the standard of living because​ ______.

the standard of living depends on many​ factors, some of which are not part of real GDP

The amount by which​ _____ is called net investment.

value of capital increases


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