Busecon 2

Front 1

Macroeconomics focuses on four groups or units:

Back 1

households

firms (the private sector)

the government (the public sector)

the rest of the world (the international sector).

Front 2

are cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. They include social security benefits, veterans’ benefits, and welfare payments.

Back 2

Transfer payments

Front 3

saving by households is sometimes termed a “_” from the circular flow because it withdraws income, or current purchasing power, from the system

Back 3

leakage

Front 4

T/F

If the government’s revenue is less than its payments, the government is dissaving

Back 4

true

Front 5

One lesson of the circular flow diagram is that

Back 5

"everyone’s expenditure is someone else’s income"

Front 6

is the market value of all final goods and services produced with a country in a given period of time

Back 6

Gross domestic product (GDP)

Front 7

T/F

GDP includes only the value of final goods.

Back 7

True

Front 8

There are three approaches in calculating GDP (Costales, et al, 2000):

Back 8

 Expenditure approach

 Income approach

 Value-added approach

Front 9

is a method of computing GDP that measures the amount spent on all final goods during a given period

Back 9

Expenditure approach

Front 10

GDP formula

Back 10

C + I + G + (X – M)

Front 11

there are also four main categories of expenditure. These are

Back 11

Personal consumption expenditures

Government consumption expenditures (G)

Gross domestic capital information

Net exports (X – M)

Front 12

spending by household on consumer goods

Back 12

Personal consumption expenditures (C)

Front 13

spending by the government

Back 13

Government consumption expenditures (G)

Front 14

spending by firms on new capital (i.e., plant, equipment, and inventory)

Back 14

Gross domestic capital information (I)

Front 15

net spending by the rest of the world (i.e., exports minus imports)

Back 15

Net exports (X – M)

Front 16

is a major component of GDP which consists of expenditures by consumers on goods and services.

Back 16

Personal consumption Expenditures

Front 17

are goods that last a relatively long time such as automobiles, furniture, and household appliances.

Back 17

Durable goods

Front 18

are goods that are used up fairly quickly such as food, clothing, gasoline, etc.

Back 18

Nondurable goods

Front 19

refers to those things that we buy that do not involve the production of physical items such as expenditures for doctors, lawyers, and educational institutions.

Back 19

Payments for services

Front 20

Personal consumption Expenditures categories:

Back 20

Durable and Nondurable goods

Payments for services

Front 21

include expenditures by the national and local government for final goods (from ammunition to office supplies to school buildings) and services (military salaries, congressional salaries, school teachers’ salaries).

Some of these expenditures are counted as government consumption and some are counted as government gross investment.

Back 21

Government Consumption Expenditures

Front 22

T/F

Government transfer payments (i.e., social security benefits, retirement benefits, etc.) are not included in G because these payments are not purchase of anything currently produced

Back 22

TRUE

Front 23

are transfers from tax payers to benefit recipients through the working of the social security system.

Back 23

Transfer payments

Front 24

this represents the investment spending of domestic agents.

Its major components are changes in fixed capital and changes in stocks.

Back 24

Gross Domestic Capital Formation

Front 25

represent the additions to or reductions in firm inventories.

This item is actually an adjustment for the fact that not all goods are brought in the period in which they are produced.

Back 25

Changes in stocks

Front 26

is the total value of all newly produced capital goods (e.g., plant, equipment, housing, and inventory) produced in a given period.

Back 26

Gross investment

Front 27

is a measure of how much the stock of capital changes during a period.

Back 27

Net investment

Front 28

is the difference between exports (i.e., sales to foreigners of domestically produced goods and services)

Back 28

Net Exports

Front 29

(i.e., the country’s purchases of goods and services from other countries).

Back 29

imports

Front 30

T/F

negative if X < M and positive if X > M.

Back 30

TRUE

Front 31

represent the spending of the rest of the world on goods and non-factor services produced in the Philippines.

Back 31

Exports

Front 32

represent the country’s purchases of goods and non-factor services from the rest of the world.

Back 32

Imports