Explain the two approaches to calculating GDP
One approach involves adding up the expenditures on goods and services produced during the year. This figure would be the sum of personal consumption expenditures, government consumption and gross expenditures, gross private domestic investment, and net exports to foreigners. The other approach is calculated by adding up the income payments to resource suppliers and the other costs of producing those goods and services. Specifically, this method would sum employee compensation, proprietors' income, interest, rents, corporate profits, indirect business taxes, cost of depreciation, and the net income of foreigners.
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Suppose that the quantity of root beer demanded declines from 103,000 gallons per week to 97,000 gallons per week as a consequence of a 10 percent increase in the price of root beer. The price elasticity of demand is
A) 0.60. B) 1.40. C) 1.66. D) 6.00.
One result of a decrease in aggregate demand and no change in aggregate supply is
A) a recession. B) an increase in employment levels. C) an economic expansion. D) a rise in the price level.
How does an increase in the price level result in higher interest rates?
A) It increases the real money supply. B) It decreases the real money supply. C) It increases the real money demand. D) It decreases the real money demand.
Suppose a competitive market is in equilibrium at price P' and quantity Q'. If the demand curve becomes less elastic, but the same price-quantity equilibrium is maintained, what happens to consumer and producer surplus?
A) Both PS and CS increase B) CS increases and PS decreases C) CS increases and PS remains the same D) Both CS and PS decrease