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Questions and Answers
What amount represents total consumer spending in the circular flow model?
What amount represents total consumer spending in the circular flow model?
Which of the following flows of money is associated with the government in the circular flow model?
Which of the following flows of money is associated with the government in the circular flow model?
Which flow of money would NOT be included in the GDP calculation using the expenditures method?
Which flow of money would NOT be included in the GDP calculation using the expenditures method?
What is the total amount of wages, profit, interest, and rent indicated in the circular flow model?
What is the total amount of wages, profit, interest, and rent indicated in the circular flow model?
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In the context of the circular flow model, what does the amount $50 represent?
In the context of the circular flow model, what does the amount $50 represent?
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Which component in the circular flow model reflects business investment spending on goods and services?
Which component in the circular flow model reflects business investment spending on goods and services?
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What is the total amount of government purchases of goods and services in this economy?
What is the total amount of government purchases of goods and services in this economy?
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What is the total cost of intermediate goods for the Petroleum sector?
What is the total cost of intermediate goods for the Petroleum sector?
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Which sector has the highest profit recorded?
Which sector has the highest profit recorded?
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What flow of money indicates household savings in the circular flow model?
What flow of money indicates household savings in the circular flow model?
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How much total sales are recorded for the Chemicals sector?
How much total sales are recorded for the Chemicals sector?
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What is the total cost of wages in the Industrial Equipment sector?
What is the total cost of wages in the Industrial Equipment sector?
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Which sector has the lowest interest cost?
Which sector has the lowest interest cost?
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What is the total amount of rent paid in the Automotive sector?
What is the total amount of rent paid in the Automotive sector?
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Which sector reports total sales of $95,000.00?
Which sector reports total sales of $95,000.00?
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How much profit is recorded for the Petroleum sector?
How much profit is recorded for the Petroleum sector?
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Based on the employment descriptions provided, who among the following individuals would be considered unemployed due to cyclical unemployment?
Based on the employment descriptions provided, who among the following individuals would be considered unemployed due to cyclical unemployment?
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Which of the following individuals would be classified as having frictional unemployment?
Which of the following individuals would be classified as having frictional unemployment?
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What is the total number of individuals within the labor force if there are 35 million employed out of 50 million labor force?
What is the total number of individuals within the labor force if there are 35 million employed out of 50 million labor force?
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Which individual is likely experiencing structural unemployment?
Which individual is likely experiencing structural unemployment?
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Which of the following statements about Jeff's employment situation is accurate?
Which of the following statements about Jeff's employment situation is accurate?
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How would Alan's situation be categorized regarding unemployment?
How would Alan's situation be categorized regarding unemployment?
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What is the main reason Melissa is currently unemployed?
What is the main reason Melissa is currently unemployed?
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Which statement best describes the labor market conditions for Rebecca?
Which statement best describes the labor market conditions for Rebecca?
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What is the price index for the year 2015 using 2014 as the base year?
What is the price index for the year 2015 using 2014 as the base year?
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Which good experienced a price decrease from 2015 to 2016?
Which good experienced a price decrease from 2015 to 2016?
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What was the rate of inflation from 2014 to 2015?
What was the rate of inflation from 2014 to 2015?
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What was the total cost of the market basket in 2014?
What was the total cost of the market basket in 2014?
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How does the price of orange juice change from 2014 to 2016?
How does the price of orange juice change from 2014 to 2016?
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What percentage change represents the inflation from 2015 to 2016?
What percentage change represents the inflation from 2015 to 2016?
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Which item maintained the same price from 2014 to 2015?
Which item maintained the same price from 2014 to 2015?
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Study Notes
Problem Set 2 - Economics
- Problem sets are open-book and open-note.
- Problem sets are individual assignments.
- Answers are due at the beginning of class on October 21st.
- Answers should be submitted as hard copies.
Circular Flow Model Components
-
Government:
- $80 in government purchases.
- $50 in taxes
- $10 in government direct transfers.
- Government bonds issued: $40.
-
Households:
- $110 in consumer spending.
- $50 in household savings.
- $200 in wages, profit, interest, and rent.
-
Firms:
- $200 in wages, profit, interest, and rent to households.
- $20 in business investment spending.
-
Goods and Services Market:
- Exchange of goods and services between households and firms.
-
Financial Markets:
- Government borrowing through bond sales.
- Loans to firms.
-
Rest of the World:
- $30 in government purchases by other countries.
- $40 in imports.
- $30 in exports.
Additional Information for Diagram
- $50 in taxes.
- $110 in consumer spending.
- $50 in household savings.
- $10 in government direct transfers.
- $80 in government purchases.
- $40 in government bonds.
- $20 in loans to firms.
- $20 in business investment spending.
- $40 in imports.
- $30 in exports.
GDP Calculation (Expenditures Method)
- GDP calculation includes consumer spending, investment, government purchases, and net exports (exports minus imports).
- The relevant flows on the diagram that are included in GDP calculation using the expenditure method should be highlighted.
GDP of the Economy
- GDP = $200.
National Economy (GDP Calculation)
- Costs of intermediate goods are subtracted from the total sales to account for double-counting.
- Calculate the total of all final goods and services produced in the economy. The resulting value is the GDP of the economy.
- Calculation for total production = $710,000.
Unemployment Rate and Labor Force Participation Rate
- Unemployment Rate: The percentage of the labor force that is unemployed. Formula: (Unemployed / Labor Force) * 100. For example, 6%
- Labor Force Participation Rate: The percentage of the working-age population that is in the labor force. Formula: (Labor Force / Working-age Population) * 100. For example, 71.43%
Unemployment Types
- Frictional Unemployment: Unemployment experienced by people who are between jobs or entering the workforce for the first time.
- Structural Unemployment: Unemployment caused by a mismatch between the skills of workers and the requirements of jobs.
- Cyclical Unemployment: Unemployment caused by a downturn in the business cycle.
Money Supply Recommendation
- To achieve a 2% inflation rate, increase the money supply.
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Description
This quiz focuses on the components of the Circular Flow Model in economics. It includes aspects such as government spending, household income, and firm expenditures. Complete the problem set by using the provided data before the due date of October 21st.
