Question: In a simple circular-flow diagram,

Answer: households spend all of their income.

all goods and services are bought by households.

expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production.by households.

Question: In a simple circular-flow diagram, firms use the money they get from a sale to

Answer: pay wages to workers.

pay rent to land lords

pay profit to firms owners

Question: In a simple circular-flow diagram, households buy goods and services with the income they get from

Answer: wages

rent

profit

Question: According to the circular-flow diagram GDP

Answer: can be computed as the total income paid by firms or as expenditures on final goods and services.

Question: GDP is defined as the

Answer: value of all final goods and services produced within a country in a given period of time.

Question: Gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. To do this, GDP makes use of

Answer: market prices.

Question: Suppose that an economy produces 30,000 units of good A which sells at $3 a unit and 60,000 units of good B which sells at $2 per unit. Production of good A contributes

Answer: 3/4 times as much to GDP as the production of good B.

Question: Most goods and services produced at home

Answer: and most goods and services produced illegally are excluded from GDP.

Question: Over time, people have come to rely more on market-produced goods and services and less on goods and services they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has

Answer: caused measured GDP to rise.

Question: A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

Answer: raises GDP.