ECON100 Final Exam || WITH 100% VERIFIED
ANSWERS!!
Microeconomics correct answers The study of how households and firms make choices, how
they interact in markets and how the government attempts to influence their choices
Macroeconomics correct answers The study of the economy as a whole including topics such
as inflation, unemployment and economic growth
Economic growth correct answers The expansion of society's productive potential, usually
measured by the rate of growth in real GDP
Unemployment rate correct answers The percentage of the labour force that is unemployed
Business cycle correct answers Alternating periods of economic expansion and economic
contraction relative to the trend rate of economic growth
Expansion correct answers The period of a business cycle during which total production and
total employment are increasing above the trend growth
Contraction correct answers The period of a business cycle during which total production and
total employment are falling below the trend growth
Recession correct answers The period of a business cycle during which total production and
total employment are decreasing
Inflation rate correct answers The percentage increase in the general price level in the
economy from one year to the next
Gross Domestic Product (GDP) correct answers The market value of all final goods and
services produced in a country during a period of time
Final good or service correct answers A new good or service which is the end product of the
production process that is purchased by the final user
Intermediate good or service correct answers A good or service that is an input into another
good or service
Value added correct answers The market value a firm adds to a product
Measuring GDP correct answers 1. Production method
2. Expenditure method
3. Income method
Circular-flow diagram correct answers
Transfer payments correct answers Payments by the government to individuals for which the
government does not receive a good or service in return
, Components of GDP correct answers Y = C + I +G + (X-M)
Consumption (C) correct answers Spending by households on goods and services, not
including spending on new houses
Investment (I) correct answers Spending by firms on new factories, office buildings,
machinery and inventories, plus spending by households on new houses
Government purchases correct answers Spending by federal state and local government on
goods and services
Net exports (X-M) correct answers The expenditure on exports minus the expenditure on
imports
Underground economy correct answers Buying and selling goods and services that are
concealed from the government to avoid taxes or regulations or because the good or service is
illegal - these goods are not included in GDP
Nominal GDP correct answers The market value of final goods and services evaluated at
current year prices
Real GDP correct answers A measure of the volume of final goods and services, holding
prices constant
Economic growth rate correct answers
Price level correct answers A measure of the average prices of goods and services in the
economy
GDP deflator correct answers
Long-run economic growth correct answers The process by which rising productivity
increases the average standard of living
Labour productivity correct answers The quantity of goods and services that can be produced
by one worker or by one hour of work
Capital correct answers Manufactured goods that are used to produce other goods and
services; examples include computers, office buildings and machines
Human capital correct answers The accumulated knowledge and skills that workers acquire
from education and training or from their life experiences
Technological change correct answers This is change in the ability of a firm to produce
output with a given quantity of inputs
Potential GDP correct answers The level of GDP attained when all firms are producing at
normal capacity
ANSWERS!!
Microeconomics correct answers The study of how households and firms make choices, how
they interact in markets and how the government attempts to influence their choices
Macroeconomics correct answers The study of the economy as a whole including topics such
as inflation, unemployment and economic growth
Economic growth correct answers The expansion of society's productive potential, usually
measured by the rate of growth in real GDP
Unemployment rate correct answers The percentage of the labour force that is unemployed
Business cycle correct answers Alternating periods of economic expansion and economic
contraction relative to the trend rate of economic growth
Expansion correct answers The period of a business cycle during which total production and
total employment are increasing above the trend growth
Contraction correct answers The period of a business cycle during which total production and
total employment are falling below the trend growth
Recession correct answers The period of a business cycle during which total production and
total employment are decreasing
Inflation rate correct answers The percentage increase in the general price level in the
economy from one year to the next
Gross Domestic Product (GDP) correct answers The market value of all final goods and
services produced in a country during a period of time
Final good or service correct answers A new good or service which is the end product of the
production process that is purchased by the final user
Intermediate good or service correct answers A good or service that is an input into another
good or service
Value added correct answers The market value a firm adds to a product
Measuring GDP correct answers 1. Production method
2. Expenditure method
3. Income method
Circular-flow diagram correct answers
Transfer payments correct answers Payments by the government to individuals for which the
government does not receive a good or service in return
, Components of GDP correct answers Y = C + I +G + (X-M)
Consumption (C) correct answers Spending by households on goods and services, not
including spending on new houses
Investment (I) correct answers Spending by firms on new factories, office buildings,
machinery and inventories, plus spending by households on new houses
Government purchases correct answers Spending by federal state and local government on
goods and services
Net exports (X-M) correct answers The expenditure on exports minus the expenditure on
imports
Underground economy correct answers Buying and selling goods and services that are
concealed from the government to avoid taxes or regulations or because the good or service is
illegal - these goods are not included in GDP
Nominal GDP correct answers The market value of final goods and services evaluated at
current year prices
Real GDP correct answers A measure of the volume of final goods and services, holding
prices constant
Economic growth rate correct answers
Price level correct answers A measure of the average prices of goods and services in the
economy
GDP deflator correct answers
Long-run economic growth correct answers The process by which rising productivity
increases the average standard of living
Labour productivity correct answers The quantity of goods and services that can be produced
by one worker or by one hour of work
Capital correct answers Manufactured goods that are used to produce other goods and
services; examples include computers, office buildings and machines
Human capital correct answers The accumulated knowledge and skills that workers acquire
from education and training or from their life experiences
Technological change correct answers This is change in the ability of a firm to produce
output with a given quantity of inputs
Potential GDP correct answers The level of GDP attained when all firms are producing at
normal capacity
