All Flashcards
What is the impact of increased government spending on GDP?
Increased government spending directly increases GDP through the expenditure approach (GDP = C + I + G + Xn).
What is the impact of a tax cut on consumer spending and GDP?
A tax cut typically increases disposable income, leading to higher consumer spending and, consequently, a higher GDP.
What is the impact of increased exports on a country's GDP?
Increased exports directly increase net exports (Xn), leading to a higher GDP.
What is the impact of increased imports on a country's GDP?
Increased imports decrease net exports (Xn), leading to a lower GDP.
How would subsidies to businesses for capital investment impact GDP?
Subsidies would increase investment spending (I), leading to a higher GDP.
How would increased infrastructure spending by the government affect GDP?
It would increase government spending (G), leading to a higher GDP.
What is the impact of increased unemployment benefits on GDP?
Unemployment benefits are transfer payments and are not directly included in GDP. However, they can indirectly support consumer spending.
How does a decrease in interest rates affect investment spending and GDP?
Lower interest rates typically encourage businesses to increase investment spending (I), leading to a higher GDP.
What is the effect of tariffs on imports and their subsequent impact on GDP?
Tariffs can decrease imports, potentially increasing net exports (Xn) and GDP, but may also lead to retaliatory tariffs.
How would policies promoting domestic production over imports impact GDP?
Such policies aim to increase net exports (Xn), leading to a higher GDP, but may also lead to trade imbalances.
What are the differences between the product market and the factor market?
The product market is where goods and services are bought and sold, while the factor market is where resources like labor, capital, and land are exchanged.
What are the differences between the expenditure approach and the income approach to calculating GDP?
The expenditure approach sums all spending in the economy (C + I + G + Xn), while the income approach sums all incomes earned in the economy (W + i + r + p).
What is the difference between investment spending in GDP and stock market investments?
Investment spending in GDP refers to purchases by businesses (e.g., machinery), while stock market investments are financial transactions.
What is the difference between exports and net exports?
Exports are goods and services produced domestically and sold abroad, while net exports are exports minus imports.
What is the difference between government spending and transfer payments?
Government spending is purchases of goods and services, while transfer payments are payments without any exchange of goods or services.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current prices, while real GDP is adjusted for inflation.
What is the difference between GDP and GNP (Gross National Product)?
GDP measures the value of goods and services produced within a country's borders, while GNP measures the value of goods and services produced by a country's residents, regardless of location.
What is the difference between final goods and intermediate goods?
Final goods are sold to the end user, while intermediate goods are used in the production of other goods.
What is the difference between GDP and economic well-being?
GDP is a measure of economic output, while economic well-being encompasses broader aspects of quality of life, including health, education, and environment.
What is the difference between economic growth and economic development?
Economic growth refers to an increase in GDP, while economic development involves broader improvements in living standards, poverty reduction, and social progress.
How does the circular flow model illustrate voluntary exchange?
It shows how households and firms engage in mutually beneficial transactions in the product and factor markets, each aiming to maximize their benefit.
How does an increase in consumer spending impact the circular flow?
Increased consumer spending increases revenue for firms, leading to increased demand for resources in the factor market and higher household income.
How does the expenditure approach calculate GDP?
GDP is calculated by summing consumer spending (C), investment spending (I), government spending (G), and net exports (Xn).
How does the income approach calculate GDP?
GDP is calculated by summing wages (W), interest (i), rents (r), and profits (p).
Why are intermediate goods not included in GDP?
To avoid double-counting, as their value is already included in the final goods and services.
Why are transfer payments excluded from government spending in GDP?
Because they do not represent the purchase of new goods or services.
How does an increase in exports affect GDP?
An increase in exports increases net exports (Xn), leading to a higher GDP.
How does an increase in imports affect GDP?
An increase in imports decreases net exports (Xn), leading to a lower GDP.
How would the purchase of new machinery by a company affect GDP?
It would increase investment spending (I), leading to a higher GDP.
How would increased government spending on road construction affect GDP?
It would increase government spending (G), leading to a higher GDP.