Explain how the circular flow diagram illustrates that the total value of spending on goods and services in an economy is equal to the total value of income in that economy
What will be an ideal response?
Firms sell goods and services to households, the government, and the rest of the world, and to produce these goods and services, firms buy factors of production from households. Households receive payment for the factors of production sold to firms. The sum of the payments received by households is total income, which is a measure of GDP. The total value of spending on the goods and services sold by firms is also a measure of GDP, so the total value of spending on goods and services in an economy is equal to the total value of income in the economy because each is a way to measure GDP.
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The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then there are ________ unemployed workers
A) 20,000 B) 40,000 C) 60,000 D) 80,000 E) zero
The amount of frictional unemployment depends on
A) the phase of the business cycle. B) the time of the year. C) international competition. D) demographic factors and unemployment benefits. E) Both answers A and B are correct.
Suppose that a country experiences growth strongly biased toward its export, cloth
A) this will tend to worsen the country's terms of trade. B) this will tend to improve the country's terms of trade. C) this will tend to leave the country's terms of trade unchanged. D) this will tend to worsen the terms of trade for the country's trading partner. E) this will increase the price of cloth relative to the imported good.
Suppose a shortage for good X exists. Given this information, we know that
A) the price of good X will tend to rise toward the equilibrium level. B) the price of good X will tend to fall toward the equilibrium level. C) a government price floor should be imposed above the current price so that the market can work more effectively. D) a government price ceiling should be imposed above the current price so that the market can work more effectively.