the circular flow model. complicating the model
TRANSCRIPT
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THE CIRCULAR FLOW MODEL
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Complicating the Model
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1. Goods and services flow from • a. firms to households via the factor
market • b. firms to households via the product
market • c. households to firms via the
government• d. households to firms via the factor
market • e. households to firms via the product
market
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2. The factors of production flow from • a. firms to households via the product
market • b. firms to households via the factor
market• c. households to firms via the
government • d. households to firms via the product
market • e. households to firms via the factor
market
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3. The money paid to households via the factor market is called • a. income• b. profit • c. wages • d. taxes • e. revenue
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4. The money paid to firms via the product market is called • a. wages • b. income• c. profit• d. revenue• e. taxes
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5. The money paid by households and firms to the government is called • a. profit • b. income• c. revenue • d. wages • e. taxes
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• 6. When Americans buy foreign goods (import), money flows out of the circular flow. This is called a/an• a. injection• b. leakage• c. consumption• d. tax • e. inflation
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• 7. When foreigners buy American exported goods, money flows into the circular flow. This is called a/an
• a. injection• b. leakage• c. consumption• d. tax • e. inflation .
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• 8. Which of the following are LEAKAGES in the circular flow of goods/services/$ in the product market and the flow resources/$ in the factor market between households and firms(leakages in GDP)?
• a. taxes• b. transfer payments (like social security)• c. imports• d. exports• e. savings
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• 8. All of the following are INJECTIONS into circular flow of goods/services/$ in the product market and the flow resources/$ in the factor market between households and firms (injections in GDP) EXCEPT
• a. subsidies• b. transfer payments (like social security)• c. exports• d. investments• e. savings
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End of Quiz
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VIDEO TUTORIAL: GDP (3:50)
• EPISODE 20: GDP (3:50)
• EPISODE #20 – GDP
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Gross Domestic Product (GDP)
• The value of all final goods and services • Produced within an economy domestically• In a single year• Measured by– Expenditure approach• C + I + G + X
– Income approach
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Video Tutorials: Real GDP and ECONOMIC GROWTH
• EPISODE 21: Real GDP (2:36)• EPISODE #21 – REAL GDP• EPISODE 22: Growth (1:30)• EPISODE #22 - GROWTH
• Don’t worry. You won’t have to work problems with the formulas on the test.
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AVERAGE LABOR PRODUCTIVITY
• a measure of how much the typical worker can produce
• Mathematically, this is the economy’s AVG. LABOR = TOTAL OUTPUT
(GDP)PRODUCTIVITY TOTAL # OF
WORKERS
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What’s NOT counted in GDP?
• Used goods• Intermediate goods• Illicit sales (BLACK
MARKET)• Personal goods and
services• Transfer of assets• Transfer payments
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Counting GDP:
EXPENDITURE METHOD:
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• 1. The value of all final goods and services produced within an economy in a year:
• a. GNP• b. GDP• c. CPI• d. the business cycle• e. the circular flow model
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2. Which of the following is NOT a component of GDP in the expenditure approach?
• a. consumption• b. investment• c. government purchases • d. net exports• e. disposable income
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3. Which category makes up the largest share of the United States’ GDP?
• a. consumption• b. investment• c. government purchases • d. net exports• e. net imports
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4. Which of the following is adjusted for inflation (changes in prices from year to year)?
• a. consumption• b. net exports• c. GNP• d. nominal GDP• e. real GDP
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5. Economic growth is measured by • a. an decrease in nominal GDP.• b. an decrease in real GDP.• c. an increase in nominal GDP.• d. an increase in real GDP.• e. none of these. It’s measured with
GNP.
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6. We don’t count the value of intermediate goods in GDP because
• a. their sale is not legal• b. they are not actually bought or sold• c. they simply represent a transfer of money• d. they would be double counted when we
count the value of final goods• e. all of these
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• 7. Which of the following is not counted in GDP?
• a. the purchase of a haircut• b. the government's purchase of flak
jackets• c. the construction of a power plant • d. the purchase of an I-phone• e. the purchase of ten shares of
Microsoft stock
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• 8. Money is simply moved around and is not used to pay for goods and services (stock transactions, welfare payments, Social Security payments):
• a. Personal goods and intermediate goods• b. Illicit sales• c. Black market• d. Transfer payments and financial transfers• e. None of these
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• 9. Which category of GDP is the government's payment of a Social Security check counted in?
• a. net exports • b. government expenditures • c. investment • d. consumption • e. The government's payment of a Social
Security check is NOT counted in GDP.
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• 10. Which of the following statements is NOT correct? • a. General Motors’ purchase of machinery is
counted in investment.• b. Joe's purchase of a hot car stereo is not
counted in GDP.• c. Gerta the German's purchase of an American
made movie is counted in net exports. • d. The Defense Department's purchase of a flak
jacket is counted in government purchases.
• e. Levi’s purchase of denim material is counted in consumption.
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• 11. Which category of GDP is the purchase of a new home counted in?
• a. net exports • b. government expenditures • c. investment • d. consumption • e. The purchase of a new home is NOT
counted in GDP.
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The Business Cycle (1:07)
• EPISODE 23: Business Cycles (1:07)
• EPISODE #23 – BUSINESS CYCLES
• Paul Solman: THE BUSINESS CYCLE – “The Beer Game”
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• RECESSION– 2 consecutive quarters (6 mo.) of negative growth
in real GDP• DEPRESSION– 8 consecutive quarters (2 yrs.) of negative growth
in GDP
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Online Video Series
• ECONOMICS USA - 30 minute programs which give explain economic concepts, giving historical background and context. Stream free.
• See Program #3: Economic Growth• See Program #4: Booms and Busts for the
Business Cycle.