macro midterm 1

Assets minus liabilities equals

net worth

A sole proprietorship is limited to how many owners?

one

Which of the following are not considered part of government purchases?

welfare benefits

Anything owed by a person or a firm is

Asset

Arturo wants to start a business where he is the chief executive officer and the company does issue stock. The type of business Arturo wants to start is a

Corporation

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

GDP will decrease

Which of the following goods is directly counted in GDP?

a 12-inch subway sandwich purchased

indirect finance

a flow of funds from savers to borrowers through financial intermediaries such as banks

What is an outside director?

a member of the board of directors who does not have a direct management role in the firm

Investment, as defined by economists, would not include which of the following?

buys US government bonds

What is the largest component of spending in the United States?

consumption spending

When Twitter sells newly issued shares of stock this is an example of

direct finance in a primary market

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners, you could each stand to lose your personal wealth if the business goes bankrupt. This means a partnership

faces limited liability

A transfer payment is a payment by the government to an individual

for which the government doesn't receive a good or service in return

Gross domestic product understates the total production of final goods and services because of the omission of

household production

Subprime mortgages are

mortgages issued to borrowers with flawed credit histories

Gross national product

production performed by citizens of a nation, including overseas production

Profits that are reinvested in a firm rather than paid to the firm's owners are called

retained earnings

accounting profit =

revenue - explicit costs

Damian wants to start a business where he is the only owner and the company does not issue stock. The type of business Damian wants to start is a

sole proprietorship

Gross domestic product

the market value of all final goods and services produced in a country during a period of time, typically one year

. Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016?

the value of the services of the real estate agent

Corporate governance

the way in which a corporation is structured and the effect that structure has on the corporation's behavior

In many corporations, the managers of the corporation run the corporation, although the shareholders own the corporation. In this situation,

there is separation of ownership from control