What is the income approach to measuring GDP?
What will be an ideal response?
The income approach measures GDP by focusing on aggregate income. This approach sums all the incomes paid to households by firms for the factors of production they hire. The National Income and Product Accounts divide income into five categories: compensation of employees; net interest; rental income; corporate profits; and proprietors' income. Adding these income components does not quite equal GDP, because it values the output at factor cost rather than the market price and omits depreciation. So, further adjustments must be made to calculate GDP: Indirect taxes and depreciation must be added and subsidies subtracted.
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When the flow of money from the foreign countries to the domestic firms equals the flow of money from the home country to the foreign firms, _____
a. a trade surplus exists b. an equal amount of agricultural and manufactured products are exported c. a trade deficit exists d. an equal amount of goods and services are imported e. the value of net exports is zero
An increase in interest rates will generally lead to a(n) ____ in present investment and a(n) ____ in future income and production
a. decrease, decrease b. decrease, increase c. increase, decrease d. increase, increase
If corn is an input into the production of ethanol, will a decrease in the price of corn increase the supply of ethanol or decrease the supply of ethanol?
When a monopolist charges a low price to drive out competition, then charges a high price, the monopolist is engaging in:
A. a trust agreement. B. a merger. C. duopoly pricing. D. predatory pricing.