Lesson 5-

44g: The abbreviation DI stands for:

disposable income.

12c: A common denominator for aggregating production when measuring GDP is achieved by:

measuring GDP in terms of market value.

43a: The difference between exports and imports is termed:

net exports.

22i: In the two-sector, three-market circular flow model, the __________ sector is on the demand side of the __________ markets.

household, financial

12g: In the simple two-sector, two-market circular flow, the __________ sector is on the supply side of the __________ markets.

household, resource

44d: An important implication of the investment cause of business-cycle instability is that:

the economy will be unstable if government does nothing.

35c: In the three-sector, three-market circular flow model, gross domestic product is purchased by:

the household, business, and government sectors.

51a: In the complete four-sector, three-market circular flow model, gross domestic product is purchased by:

the household, business, government, and foreign sectors.

22f: If I earn and receive $1000 of income this month, spend $250 for food, $400 for rent on my apartment, $150 for shares of Microsoft stock, $50 for cable television services, and deposit $150 in my savings account, my saving for the month is:

$300.

21g: Selling a legal claim is equivalent to:

borrowing.

33e: The government sector uses taxes for:

transfer payments and purchases.

36a: An economic contraction predicted by leading economic indicators that did not occur was in the mid:

1960s.

24f: If you buy a pizza from a restaurant rather than making the identical product at home:

GDP increases.

31h: The appropriate policy to reduce inflation is to try to induce:

a business-cycle contraction.

51b: One of two important reasons to study the measurement of GDP is:

a way to track economic instability and business cycles.

52c: One of three important qualifications for the measurement of GDP is that it:

also requires a theoretical basis for interpretation.

13a: GDP measures only the value of FINAL goods and services to:

avoid double counting.

42e: On the spectrum of political philosophies, conservative Republicans tend to:

be anti-government.

42a: On the spectrum of political philosophies, liberal Democrats tend to:

be pro-government

11a: Irregular, nonperiodic fluctuations in aggregate economic activity are:

business cycles.

52a: In the complete four-sector, three-market circular flow model, private saving is used by the financial markets for:

business investment and the government deficit.

35b: Gross domestic product can be calculated by adding __________ to net domestic product.

capital consumption adjustment

11c: The basic economic function of the household sector is:

consumption.

31e: A general period of decreasing economic activity is termed a business cycle:

contraction

12a: The bad part of contractionary bad times is a(n):

decrease in production.

13a: The good part of expansionary good times is a(n):

decrease in unemployment.

52b: Expansionary fiscal policy includes:

decreasing taxes.

21e: An example of economic activity on the "paper" side of the economy, in contrast to the "real" side of the economy, is:

depositing money in a bank.

51a: One of two reasons for differing political views is:

different beliefs held by different people.

44a: The total income that can be used by the domestic household sector for either consumption or saving during a given time period is:

disposable income.

17l: The wages earned by a Canadian citizen who is employed in Canada would be:

excluded from both U.S. GDP and U.S. GNP.

24a: The part of a business cycle characterized by several years of rising economic activity is the:

expansion.

33a: Payments made to resource owners in exchange for the use of productive services are:

factor payments.

41e: The two most noted stabilization policies are:

fiscal and monetary.

42d: In the four-sector, three-market circular flow model, exports flow:

from the foreign sector.

15a: The federal, state, and local government rule makers and regulators make up the:

government sector.

14a: In terms of the simple two-sector, two-market circular flow, the revenue the business sector receives from selling production is:

gross domestic product.

12c: Consumption activities are undertaken by the __________ sector.;

household

24a: Productive nonmarket activities that are EXCLUDED from GDP include:

household production.

16e: Goods purchased by the domestic economy that are produced by the foreign sector are:

imports.

34h: Net foreign factor income represents the difference between:

income received by domestic citizens for foreign production and the income foreign citizens receive for domestic production.

33f: A business-cycle contraction can result from a(n):

increase in imports.

43e: A decrease in the total volume of the circular flow results from a(n):

increase in imports.

31d: If I buy a Stuffed Amigo (a popular stuffed animal) for $5, the measurement of GDP from the supply-side:

increases by $5.

52a: Expansionary fiscal policy includes:

increasing government purchases.

24a: A persistent increase in the economy's average price level is:

inflation

13d: Goods that are sold as inputs with plans for further transformation before they are resold are:

intermediate goods.

25b: A concern about the macroeconomy, other than production, unemployment, and inflation, is:

international competition.

43a: The investment explanation of business-cycle instability depends on the notion that:

investment expenditures are sensitive to interest rates.

14c: Spending by the business sector on final goods and services is:

investment expenditures.

34e: An interest rate measure is one of several statistics used as a:

lagging economic indicator.

34a: Seven economic statistics that tend to move up and down a few months after the expansions and contractions of the business cycle are termed:

lagging economic indicators.

32a: Eleven economic statistics that tend to move up and down a few months before the expansions and contractions of the business cycle are termed:

leading economic indicators.

23c: A key problem resulting from unemployed labor is:

lost production.

52a: One of two reasons why competing macroeconomic theories exist to explain the same phenomenon is:

macroeconomic hypotheses are not easily verifiable.

21b: The first step in the measurement of economic production for the economy is by identifying:

market transactions.

15a: The total market value, measured in current prices, of all final goods and services produced in the economy in a given time period is termed:

nominal GDP.

25a: The part of a business cycle characterized by the transition from rising economic activity to declining economic activity is the:

peak.

12c: The flow of factor services from the household sector to the business sector is part of the:

physical flow.

21f: The macro goal of growth is best achieved if:

production capabilities are increased.

14a: GDP is a measure of the production of goods and services over a GIVEN TIME PERIOD because:

production is a flow variable.

21c: Markets, exchanges, and other activity that deal directly with the physical assets is commonly termed the:

real economy.

22i: Another term for a business-cycle contraction is:

recession.

23b: An example of a productive nonmarket activity that is INCLUDED in GDP is:

rent of owner-occupied housing.

12e: In terms of the circular flow, markets in which households supply factors of production demanded by firms are:

resource markets.

43g: Fiscal policy tends to be preferred by people who:

see government as the answer not the problem.

11d: A notable period of economic good times in the United States was the:

the decade of the 1990s.

42c: The investment explanation of business-cycle instability is based on the proposition that:

the volume of the circular flow shrinks when investment declines.

43g: The three common types of income received but not earned are also termed:

transfer payments.

23a: The part of a business cycle characterized by the transition from declining economic activity to rising economic activity is the:

trough.

24c: A key problem resulting from inflation is:

uncertainty of future prices.