List and briefly describe the 4 categories of expenditures included in GDP
What will be an ideal response?
1. Consumption, or personal consumption expenditures, is the purchase of new goods and services by households.
2. Investment, or gross private domestic investment, is spending by firms on new factories, office buildings, machinery, and additions to inventories, plus spending by households and firms on new houses.
3. Government, or government purchases, is spending by federal, state, and local governments on goods and services.
4. Net exports is the value of all exports minus the value of all imports.
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What does the quantity theory of money imply? If the growth rate of money supply and growth rate of real GDP in an economy are 8% and 6%, respectively, then what is the inflation rate in the economy?
What will be an ideal response?
Refer to the figure above. Which of the following is likely to happen if a price control below the equilibrium price is imposed?
A) Quantity supplied will exceed quantity demanded. B) Quantity demanded will exceed quantity supplied. C) Consumer surplus will decrease. D) Producer surplus will increase.
Consider the perfectly competitive firm in the above figure. At the profit maximizing level of output, the firm is
A) incurring an economic loss equal to $119.00. B) incurring an economic loss equal to $123.50. C) incurring an economic loss equal to $187.00. D) making zero economic profit.
The free rider problem suggests that a producer will tend to:
a. produce more than the optimal quantity of a public good b. produce less than the optimal quantity of a public good. c. produce the optimal quantity of a public good if it is funded out of tax revenue. d. do none of the above.