Ch 26 and 27 Notes
What is the difference between financial investment and economic investment?
Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.
Savings are generated whenever
current income exceeds current spending.
One principle of economic growth is the notion that, to raise living standards over time, an economy must
devote some portion of its current output to increasing its future output.
Government purchases include
federal, state, and local government expenditures
Prices for oil and other commodities tend to be
flexible
There are several ways to measure aggregate output. The one favored by the Bureau of Economic Analysis is
gross domestic product
Government purchases
include direct purchases of resources.
For an economy to increase investment, it must
increase saving.
An increase in the overall level of prices in an economy is called
inflation
A price war
is possible when a firm has just one or two major rivals.
National income accountants define consumer nondurable goods as products that have an expected life of
less than 3 years
A higher rate of investment now will generate
more future production.
The system that measures the economy's overall performance is formally known as
national income accounting
Suppose that Toyota buys a factory previously owned by Chrysler Motors. Economists would
not consider this to be an economic investment, because no new capital is created through the purchase.
The largest expenditure component of GDP is
personal consumption expenditures.
Retailers that attempt to keep prices stable and predictable cause
price inflexibility.
The three statistics that are the main focus for those measuring macroeconomic health are
real GDP, inflation, and unemployment.
When economists refer to "investment," they are describing a situation where
resources are devoted to increasing future output.
The business cycle depicts
short-run fluctuations in output and employment.
Which of the following goods have prices that are least flexible?
soda
Human-made resources that are referred to as "recipes" includes
spending on new writing that increases the flow of entertainment and education.
The National Income and Product Accounts (NIPA) for the United States are compiled by the
Bureau of Economic Analysis.
To signify government purchases, national income accountants use
the symbol G.
Which of the following will be included in U.S. GDP?
the value of the cars produced at a Japanese-owned Toyota factory in Ohio
The average amount of time between price changes for gasoline is
two to three weeks.
U.S. GDP in 2021 was about
$23 trillion.
Answer this question based on the given information for an economy in some year. Dollar value of resource extraction activity = $20 billion Dollar value of production activity = $50 billion Dollar value of distribution activity = $60 billion Dollar value of final output = $110 billion Gross output for this economy equals:
$240 billion.
National income accountants define consumer durable goods as products that have an expected life of
3 years or more
The agency responsible for compiling the National Income and Product Accounts for the U.S. economy is the
Bureau of Economic Analysis
Compensation of employees
All of the answers are correct.
Interest consists of the money households receive on
All of the answers are correct.
The U.S. government agency responsible for compiling the national income accounts is the
Commerce Department's Bureau of Economic Analysis (BEA).
The Industrial Revolution began in
England in the late 1700s.
The Bureau of Economic Analysis compiles the NIPA accounts. The letters NIPA represent
National Income and Product Accounts
Which of the following is an example of economic investment?
New Balance buys a new machine that increases shoe production.
Inflation is defined as
a general increase in the price level.
The period when output and living standards decline is referred to as
a recession
To manage the problem of adding dissimilar items when calculating GDP, the BEA
adds the monetary values of each final good or service produced
For which of the following goods and services are prices least sticky?
airline tickets
Sticky output prices are caused by
all of the above are reasons for sticky output prices.
The two broad categories of the nation's stock of capital
are informally referred to as "tools" and "recipes."
Most retailers try to maintain stable prices as much as they can
because consumers would be annoyed if the price of a product cost one price one day and another price another day.
Buying a new pair of jeans for yourself would increase
consumer NONdurable goods and consequently personal consumption expenditures
Buying new furniture for your home would increase
consumer durable goods and therefore personal consumption expenditures
Transfer payments are not included in government purchases because
such payments generate no production.
Spending that pays for new or improved software is in
the "recipe" category of investment.
In 2020, the three largest economies in the world were (listed in order, from largest)
the United States, China, Japan.
