ECN 211 : ECN 211 Exam 2: ASU ECN 211 Exam 2: Questions & Answers

What two things must be true if total spending rises from one year to the nest? (Ans- 1. the economy is producing a larger output of goods and services 2. goods and services are being sold at higher prices Sally drives an automobile she purchased several years ago. This year she bought gasoline and some parts and spent five hours making repairs. Which of the following is included in this year's GDP? (Ans- *GDP including the purchase of final goods and services, but not the unpaid value of household production* A: the amount she paid to buy gasoline and new parts, but not the value of her time GDP circular-flow diagram (AnsHouseholds buy goods and services from firms Firms use their revenue (GDP) from sales to pay wages to workers, rent to landowners, and profit to firm ownersGDP equals the total amount spent by households in the market for goods and services,as well as, the total wages, rent and profit paid by firms in the markets for the factors of production A farmer produces potatoes, and sells them to a company which uses them all to make potato chips. The potatoes produced by the farmer are called.... (Ans- intermediate goods Inflation (Ans- the rate at which average prices are rising deflation (Ans- the rate at which average prices are falling unemployment (Ans- the percentage of the labor force that is out of work Frictional unemployment (Ans- unemployment that rests because it takes time for workers to search for the jobs that best suit their tastes and skillsSectorial shifts (Ans- changes in the composition of demand among industries or regions. it take time for workers to search for jobs in new sectors What creates frictional unemployment? (Ans- job search and sectorial shifts