GE Chapter 05 solutions_fmt

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1、Chapter5

2、TheWealthofNations:DefiningandMeasuringMacroeconomicAggregates53Chapter5TheWealthofNations:DefiningandMeasuringMacroeconomicAggregatesQuestions1.Findandlistthreerecentstoriesinthemediathatwouldtypicallybestudiedinmacroeconomics.(Citethedateandsourceofthestoriesyouchoose.)Discu

3、sswhytheywouldfallwithinthesubjectmatterofmacroeconomics.Answer:Solutionsmayvary.A-head:DEFINITIONOFMACROECONOMICSConcept:Macroeconomicquestions2.Howisgrossdomesticproductdefined?Answer:Grossdomesticproductisdefinedasthemarketvalueofthefinalgoodsandservicesproducedwithinthebordersofaco

4、untryduringaparticularperiod.A-head:NATIONALINCOMEACCOUNTS:PRODUCTION=EXPENDITURE=INCOMEConcept:Grossdomesticproduct3.Whatisanaccountingidentity?ExplaintheaccountingidentityProduction=Expenditure=Income.Answer:Variablesarerelatedbyanaccountingidentitywhentheyaredefinedinawaythatmakesth

5、emmathematicallyidentical.Thecircularflowdiagramdemonstratesthattotalproductionintheeconomyinagivenyear,totalexpenditureongoodsandservicesovertheyear,andthetotalincomereceivedbyallfactorsofproduction,willalwaysbeequal.Hence,GDPcanbemeasuredbyanyofthethree.A-head:NATIONALINCOMEACCOUNTS:

6、PRODUCTION=EXPENDITURE=INCOMEConcept:Grossdomesticproduct4.Usethecircularflowdiagramtoshowhowexpenditure,production,andincomerelatetooneanother.©2015PearsonEducation,Inc.Chapter5

7、TheWealthofNations:DefiningandMeasuringMacroeconomicAggregates53Answer:Theconceptofthecircularflowbetweenho

8、useholdsandfirmshighlightsthefourkindsofflowsthatconnecthouseholdsandfirms—production,factorsofproduction,expenditure,andincome.Householdsprovidethefactorsofproductionthatfirmsneed—laborandcapital.Inturn,firmssupplyhouseholdswithgoodsandservices.Theseflowsofgoodsandservicesarebalancedb

9、yreverseflowsofpayments.Firmsmakefactorpaymentstohouseholdsfortheirlaborandcapital,whichconstituteshouseholds’incomes.Thehouseholdsusethisincometomakepaymentsforthegoodsandservicespurchasedfromthefirms,whichconstitutesaggregateexpenditureongoodsandservices.Therefore,thevalueofproduct