Economics GDP and Circular-Flow Quiz

A model showing how money flows within an economy between households and firms.

Goods and services that are sold in a market.

The people in an economy who buy G&S.

The organizations in an economy that produce and sell G&S.

The resources used to produce G&S (labor, land, and capital).

The payments firms make to households for their factors of production.

Money spent by households on G&S.

Money earned by firms from selling G&S.

The total market value of all final goods and services produced within a country during a specific period, usually a year.

GDP includes goods like DVDs, bikes, and beer, as well as services like dry cleaning, concerts, and cell phone service.

GDP only considers goods and services produced within a country's borders, regardless of who produces them.

GDP measures the value of production that occurs within a country’s borders, whether done by its own citizens or by foreigners located there.

GDP considers only goods and services produced in the current period, not those produced in the past.

Gross National Product (GNP) measures the value of production done by a country's nationals, regardless of location.

GDP measures production within a country’s borders, while GNP measures production by a country’s nationals.

The value of a home used by its owner, regardless of whether it is new or old, is included in this category.

This category includes all spending on goods that will be used in the future to produce more goods.

This type of investment includes spending on newly built homes, whether purchased or not.

This type of investment includes spending on things like machines, tools, software, factories, plants, and office buildings.

This type of investment includes goods produced this year but not yet sold.

The purchase of financial assets like stocks and bonds is not considered part of this category.

This category includes spending on services like housing, medical care, and education.

The spending by households on goods and services included in consumption is often referred to by this term.

The total value of all goods and services produced in an economy, calculated using current prices.

The total value of all goods and services produced in an economy, calculated using the prices of a base year.

A year chosen as a benchmark to compare prices over time.

The change in the overall price level of goods and services in an economy.

The difference between nominal GDP and real GDP.

A measure of the overall price level of goods and services in an economy.

A commonly used price index to measure inflation.

Adjusting economic variables for inflation to get a more accurate picture.

A measure of the overall price level in the economy, calculated as the ratio of nominal GDP to real GDP, multiplied by 100.

The GDP deflator is calculated by dividing nominal GDP by real GDP and then multiplying by 100. It reflects the average price level of all goods and services produced in an economy.

The percentage change in the GDP deflator from one year to the next measures the rate of inflation in the economy. A higher GDP deflator indicates higher prices.

Nominal GDP is the value of all goods and services produced in an economy measured at current prices. It is not adjusted for inflation.

Real GDP is the value of all goods and services produced in an economy, adjusted for inflation. It is measured using constant prices from a base year.

A measure of the overall price level in an economy. It is calculated as the ratio of nominal GDP to real GDP.

The quantity of a good or service produced or sold in a specific time period.

The price of a good or service in a specific time period.

Calculating GDP by multiplying the price of each good or service by its quantity, and then adding up the results for all goods and services.

Measuring GDP using prices from the current year.