Chapter 7 macro
A recession occurs when an economy
A decrease in total production
What are the four main categories of expenditures
Consumption, investment, government purchases, and net exports
In the circular flow of expenditures and income, why must the total value of production in an economy equal the total value of income
Every penny spent on a good or service must end up as someone's income
The circular-flow diagram shows that all sources of income are owned by
Households
When examining the circular-flow diagram
Households can use some of their income to purchase goods from foreigners as imports
One major component of GDP that can be negative is
Net exports
Gross domestic product (GDP) is
The market value of all final goods and services produced in a country during a period of time
What is the difference between the value of a firms final product and the value added by the firm to the final product
The value of a firms final product is the sale price; value added is the difference between the sale price and the price of intermediate goods
The circular-flow diagram shows that __ should equal ___
Total expenditure; total income
The business cycle exists because
Total production experiences periods of increases and periods of decreases
What are the four categories of income
Wages, interest, rent, and profit
Which of the following equations sums up the components of GDP
Y=C+I+G+NX