Define the four categories of expenditures which comprise GDP
What will be an ideal response?
(1) Personal consumption expenditures including consumer spending on durable goods, nondurable goods, and services; (2) gross private domestic investment which includes business purchases of machinery, equipment and tools, business and residential construction, changes in business inventories; (3) government purchases of goods and services that government consumes in providing goods and services, excluding government transfer payments, and expenditures for publicly owned capital; (4) the value of net exports which is the value of exports of goods and services minus the imports of goods and services.
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When the government controls the price of a product, causing the market price to be above the free market equilibrium price,
A. some, but not all, sellers can find buyers for their goods. B. only consumers gain. C. both producers and consumers gain. D. all producers gain.
Christopher needs to hire an accountant but does NOT know how to find a good one. The accountant can best be regarded as a(n)
A. experience good. B. credence good. C. inferior good. D. search good.
What is moral hazard?
What will be an ideal response?
The political process by which fiscal policy is made
A. is slow and results in a long time lag for fiscal policy. B. is efficient in reaching a decision within a year. C. is relatively rapid, contributing to the effectiveness of fiscal policy. D. requires only that the president approve changes to the budget, a decision that takes several months.