60 Questions
What does GDP stand for in the context of economy?
Gross Domestic Product
What is a limitation of GDP as an indicator of standard of living?
It does not account for the distribution of income among the population
What does GNI measure?
Total income earned by a country's nationals, including production inside and outside the country
What is a key difference between GDP and GNI?
GDP measures income earned within a country, while GNI measures income earned by nationals inside and outside the country
Why might GDP appear more favorable politically, especially in countries with significant foreign debt or asset sales?
Because it includes production by foreign entities within the country
What do both GDP and GNI ignore?
Non-monetary transactions and informal economic activities
What is per capita income used for?
To understand the economic well-being of the average citizen
How is per capita income calculated?
By dividing total GDP or GNI by the population
What does per capita income not address?
Both income and wealth distribution
Why do GDP and GNI require adjustments for inflation?
Because inflation affects the value of money over time
What is the primary function of households in the circular flow model?
To provide labor and receive income
Which of the following is NOT a participant in the circular flow model?
Non-profit Organizations
What is the main purpose of the goods market in the circular flow model?
To exchange goods and services
What is the term for the movement of goods and services in the circular flow model?
Real Flow
What is the formula for calculating GDP using the Expenditure Approach?
GDP = C + I + G + (X - M)
What is the primary purpose of the financial institutions in the circular flow model?
To facilitate savings and provide loans
What is the term for the total market value of all final goods and services produced within a country's borders in each period?
Gross Domestic Product (GDP)
Which of the following is a factor market in the circular flow model?
Factor Market
What is the term for the continuous flows in the economy, affecting stock levels of resources and financial assets?
Production, Income, and Spending
How many approaches are there to calculate GDP?
3
What is the main purpose of businesses in the circular flow model?
To hire labor and produce goods and services
What is the term for the movement of money in exchange for goods, services, and labor in the circular flow model?
Monetary Flow
Which of the following is an example of a public service provided by the government in the circular flow model?
Infrastructure such as roads and bridges
What is the formula for calculating GDP using the Expenditure Approach?
GDP = C + I + G + (X - M)
What represents the total market value of all final goods and services produced within a country's borders in each period?
GDP
Which of the following is a characteristic of the continuous flows in the economy?
Affecting stock levels of resources and financial assets
What is the main purpose of the factor market in the circular flow model?
To trade factors of production
Which of the following is an example of a good exchanged in the goods market?
A car
What is the term for the participants that engage in trade, affecting imports and exports in the circular flow model?
Foreign Sector
What is the relationship between the real flow and the monetary flow in the circular flow model?
They are two separate but interconnected flows
What is a major difference between GDP and GNI in terms of geographical scope?
GDP focuses on production within the country, while GNI focuses on production both inside and outside the country.
What is a common limitation of both GDP and GNI as indicators of standard of living?
They do not account for wealth distribution.
Why might GDP be more favorable politically in certain countries?
Because it appears more favorable in countries with significant foreign debt or asset sales.
What is the purpose of calculating per capita income?
To understand the economic well-being of the average citizen.
What is a common adjustment required for both GDP and GNI?
Adjustment for inflation.
What is the focus of GDP as an indicator of standard of living?
Total income earned from producing goods and services.
What does GNI account for that GDP does not?
Income earned by nationals outside the country.
What is a limitation of GDP as a measure of standard of living?
It does not account for the distribution of income among the population.
What is the primary difference between GDP and GNI in terms of income?
GDP accounts for income earned from producing goods and services, while GNI accounts for all income earned by nationals.
What is a common problem with both GDP and GNI?
They both ignore non-monetary transactions and informal economic activities.
What is the primary role of the government in the circular flow model?
To collect taxes and provide public services and infrastructure
Which market is responsible for the exchange of goods and services?
Goods Market
What is the primary difference between the real flow and the monetary flow in the circular flow model?
The real flow involves the movement of goods and services, while the monetary flow involves the movement of money
What is the purpose of the financial institutions in the circular flow model?
To facilitate savings and provide loans
What is a key characteristic of the continuous flows in the economy?
They affect stock levels of resources and financial assets
Which of the following is an example of a factor of production traded in the factor market?
Land
What is the relationship between the Product Approach and the Expenditure Approach to calculating GDP?
They are alternative approaches that should produce the same value for GDP
What is the purpose of calculating GDP?
To measure the total market value of all final goods and services produced within a country's borders
Which participant in the circular flow model is responsible for hiring labor and producing goods and services?
Businesses
What is the term for the movement of goods and services in the circular flow model?
Real Flow
What is a primary reason why GDP might not accurately reflect a country's standard of living?
It ignores the distribution of income among the population.
Which of the following is a key characteristic of GNI?
It accounts for all income earned by a country's nationals, regardless of where it is earned.
What is a common limitation of both GDP and GNI?
They ignore non-monetary transactions and informal economic activities.
What is the primary purpose of calculating per capita income?
To understand the economic well-being of the average citizen.
Why might GNI be a more accurate indicator of a country's standard of living than GDP?
It measures the total income earned by a country's nationals, regardless of where it is earned.
What is a limitation of GDP as a measure of standard of living?
It does not account for wealth distribution.
What is the primary difference between GDP and GNI in terms of geographical scope?
GDP measures income earned within the country, while GNI measures income earned outside the country.
Which of the following is NOT a limitation of both GDP and GNI?
They account for wealth distribution.
What is a common adjustment required for both GDP and GNI?
Adjustment for inflation.
What is the primary focus of GDP as an indicator of standard of living?
Production within the country.
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