How does the income approach to measuring GDP differ from the expenditure approach? Explain the meaning of value added and its importance in the income approach. What are the leakages from and injections into the circular flow? How are leakages and injections related in the circular flow?
What will be an ideal response?
Answer:
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According to the new classical view, budget deficits will
a. cause real interest rates to rise, which will decrease aggregate demand, output, and employment. b. lead to an expansion in spending, which will stimulate both real output and employment. c. fail to stimulate aggregate demand because people will save more in order to pay the higher future taxes implied by the expansion in government debt. d. lead to inflation because the deficits expand the money supply.
Trevor’s Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor’s Tire Company’s total costs are
a. $7,500. b. $25,000. c. $32,500. d. $67,500.
Assume soybeans are produced in a perfectly competitive industry. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing __________ bushels of soybeans and his profit will be __________.
A) fewer; the same B) fewer; lower C) more; the same D) the same number of; the same
The standard of living rises when population growth exceeds economic growth.
Answer the following statement true (T) or false (F)