Explain why national income and domestic product must be equal.
What will be an ideal response?
When a firm produces goods and sells them, it uses the sales revenue to pay all the factors of production, such as labor, persons who loaned funds, rent on leased property, and profits to owners of the firm. The total value of production, or total sales revenues, becomes income for someone. This basic identity provides the basis for the circular flow of income and spending between the major sectors of the economy.
You might also like to view...
A demographic trend is that:
a. Individuals increasingly put off marriage and childbirth to later years b. The number of families is decreasing c. Families are the same as they were two decades ago d. Grandparents matter less than they used to
Which of the following statements best describes Social Security benefits?
a. Since the passage of the Social Security Indexing Act of 1972, the level of Social Security benefits increases each year along with the Producer Price Index. b. Since the passage of the Social Security Indexing Act of 1972, the level of Social Security benefits increases each year along with the Consumer Price Index. c. Since the passage of the Social Security Indexing Act of 1972, the level of Social Security benefits increases at a fixed percentage each year. d. Since the passage of the Social Security Indexing Act of 1972, the level of Social Security benefits increases based on the Prime Rate.
In general, we would expect the marginal cost of pollution abatement to be
A. decreasing. B. increasing. C. zero. D. constant.
Refer to Figure 5.1. Observe the three isoquants depicted and determine which of the following statements is true.
A. K and L are substitutes in cases (1) and (2). B. K and L are substitutes in cases (1) and (3). C. K and L are substitutes in each of the three cases. D. K and L are substitutes in cases (2) and (3).