Define the following terms and explain their importance in the study of macroeconomics:
a. Consumer expenditures
b. Investment spending
c. National income
d. Transfer payments
What will be an ideal response?
a. Consumer expenditures are the total amount spent by consumers of newly produced final goods and services (excluding purchases of new houses, which are included in the investment component of GDP). Consumer expenditures are the largest component of total spending and account for about two-thirds of GDP.b. Investment spending is the sum of purchases by businesses on new plant, equipment, and software plus the purchase of new housing by individuals. Investment also includes inventories, newly produced goods that are not sold but are considered “purchased” by the firms that produce them.c. National income is the total of incomes earned in the production of all final goods and services. Incomes earned include wages, rents, interest, and profits. National income does not include transfer payments because they do not come from the production of goods and services.d. Transfer payments are payments that individuals receive as grants from the government in the form of unemployment benefits, income support for families, etc. The largest type of transfer payments in the United States are Social Security payments.
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Refer to the Article Summary. Labor productivity in the UK was well below the productivity in five of the other G7 nations, only faring better than Japan.. Labor productivity is important for an economy because an increase in labor productivity
A) allows the average consumer to increase consumption. B) will create short-run, but not long-run, economic growth. C) will increase output and decrease wages in the long run. D) will increase the labor force participation rate.
If the costs of negotiating and enforcing contracts are _____ relative to the benefits, buyers and sellers have incentives to make economically efficient arrangements that _____ value
a. high; increase b. low; increase c. high, decrease d. low; decrease
One reason that the Phillips curve "broke down" is that it
a. is unable to explain short-run movements in inflation and unemployment, but does a better job of explaining long-run movements. b. assumes a quick-acting self-correcting mechanism, and the economy has a very slow self-correcting mechanism. c. is a statistical relationship, and some of the points are not sustainable in the long run. d. cannot explain demand-side inflation, and it collapsed when demand-side inflation was predominant in the 1970s.
When the current state of the economy is such that Real GDP is less than Natural Real GDP, the economy is in a(n) ____________________ gap. In this situation, the (actual) unemployment rate is ___________ than the natural unemployment rate, and there is a ________________ in the labor market
A) recessionary; greater; shortage B) inflationary; less; shortage C) inflationary; greater; surplus D) recessionary; greater; surplus E) recessionary; less; shortage