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Understanding GDP, Income, and Expenditure Components

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Understanding GDP, Income, and Expenditure Components

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Questions and Answers

What is the relationship between total expenditure and total income?

There is no fixed relationship between total expenditure and total income
Total expenditure is less than total income
Total expenditure is greater than total income
Total expenditure equals total income (correct)

What is the formula for GDP using the Expenditure Approach?

Y = C + I + G + NX (correct)
Y = I + G + NX
Y = C + G + NX
Y = C + S + NT

What is not included in GDP?

Expenditure on used goods (correct)
Consumption expenditure
Investment expenditure
Government expenditure

What is the purpose of the Income Approach in measuring GDP?

To sum the incomes that firms pay households for the factors of production they hire (A) Signup and view all the answers

What is the term for goods or services used as a component of a final good or service?

Intermediate goods (C) Signup and view all the answers

What is the name of the diagram that shows the circular flow of income and expenditure?

Circular Flow of Income (C) Signup and view all the answers

What is the component of GDP that represents the value of goods and services produced by a country but sold to other countries?

Net exports (D) Signup and view all the answers

Why are financial assets not included in GDP?

Households are making loans, not buying goods and services (C) Signup and view all the answers

What is the term for the total value of goods and services produced within a country?

Gross Domestic Product (GDP) (A) Signup and view all the answers

What is the equation that represents the income side of the circular flow of income?

Y = C + S + NT (D) Signup and view all the answers